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Equal pay - material factor defence could be established without direct evidence from pay decision-maker

on Friday, 22 March 2024.

In a recent case, the Employment Appeal Tribunal (EAT) has clarified that respondents defending equal pay litigation are not required to produce evidence from a pay decision-maker.

The challenge of defending equal pay litigation

Equal pay claims can often be complicated and costly to defend, not least because the period of claim can span many years and persuasive evidence can sometimes be difficult to produce. Under equal pay law, claimants and comparators must be employed to do either the same work as each other, work that is rated as equivalent, or work of equal value. However, if the difference between claimant and comparator pay can be explained by a "material factor", an employer might successfully defend a claim.

In the case of Scottish Water v Edgar, the EAT has issued guidance on how employers might evidence a pay disparity between a claimant and comparator.

The claim

In this case, the claimant was in a 'band C' Corporate Affairs Officer employed by Scottish Water. She applied unsuccessfully for a Corporate Affairs Specialist 'band B' role. One of the other unsuccessful applicants for the more senior role was an external candidate who had scored just one point less than the successful candidate. This unsuccessful external candidate was ultimately recruited into a band C Corporate Affairs Officer role alongside the claimant. His salary was higher than the claimant's and the claimant brought an equal pay claim.

Material factor defence

A preliminary hearing took place to determine Scottish Water's material factor defence to the claim. Scottish Water argued that the difference in the claimant and comparator's skills, experience and responsibility explained the pay differential between them. However, it did not produce evidence from the pay decision-maker as part of its submissions.

The Tribunal found that without evidence from the pay decision-maker, it would need to speculate as to that person's reasoning and this would be inappropriate for a fact-finding Tribunal. It found that the evidence submitted by Scottish Water pertaining to the respective skills, experience and potential of the claimant comparator following the comparator's appointment was irrelevant. On this basis, the Tribunal found that the material factor defence failed.

Scottish Water appealed to the EAT.

EAT allows appeal

The EAT allowed the appeal and remitted the case for the material factor defence to be determined by a fresh Tribunal.

The EAT found that evidence of an employer's subjective thought process might help the Tribunal in its deliberations, but is not essential to establish a material factor defence. What is key is that a sufficient causal link can be shown between the pay differential and a genuine point of difference between the claimant and comparator which is unrelated to their sex. The Tribunal's error was to find that it was essential to identify the decision-maker.

The EAT also found that the evidence submitted by Scottish Water relating to the time after the comparator's appointment was not irrelevant, as it demonstrated differences between the claimant and comparator at the time of the comparator's appointment and thereafter.

Learning points

Whilst this is a helpful point for employers seeking to defend equal pay litigation, it also acts as a useful reminder to carefully consider what evidence is available to defend pay decisions. Employers should keep contemporaneous and thorough records in order to record pay decisions over time. These records might help identify key people who might act as witnesses, and may also be valuable documentary evidence in the claim.

For more information or advice, please contact Jessica Scott-Dye in our Employment team on 0117 314 5652, or complete the form below.

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