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27.02.14

Equal Pay Claims: the unintended consequences

Source: Public Sector Executive Feb/Mar 2014

Catriona Aldridge, associate at Dundas & Wilson CS LLP, considers the negative impact of Birmingham’s famous equal pay case.

Birmingham City Council (BCC) hit the headlines in January when it was reported that it was considering selling off property, including the NEC, to help fund equal pay compensation. It is unlikely that many (if any) of the hundreds of thousands of claimants who have lodged equal pay claims against local authority employers over the last decade or so envisaged that this would result in the sale of a national landmark.

Most equal pay claims raised against local authorities stem from historic pay practices with origins in the 1970s and 1980s. Workers in male-dominated jobs often received enhanced wages after bonuses. For example, a basic annual wage of £12,000 may have been supplemented by an attendance allowance of £7,000 and overtime. In many cases, no equivalent bonuses were paid to workers in female-dominated jobs (such as care work and catering). Upon closer examination, many of the allowances paid to the male workers were not justifiable, and were paid for non-specific historic reasons. In essence, this was exactly the type of situation that the Equal Pay Act 1970 (now in the form of the Equality Act 2010) was designed to combat.

Since 1997, local authorities in England, Wales and Scotland have been working to address historic pay discrimination and to ensure compliance with the legislation. Under what is known as the ‘Single Status Agreement’, authorities undertook to evaluate manual and administrative roles and to place workers in these categories onto one pay and grading scale. BCC, for example, implemented a new pay and grading structure following single status in 2008.

Despite these remedial steps taken by councils, hundreds of thousands of local authority employees have raised claims in the employment tribunal, claiming back pay to compensate for historic pay discrimination.

The litigation has been complex. There have been numerous permutations of the claim described above; for example, male claimants piggy-backing onto the claims of female colleagues, claims regarding pay protection, claims lodged in the civil courts, and claims based on sex discrimination legislation rather than equal pay. The employers have also sought to defend the claims on various grounds, leading to multiple preliminary hearings. Owing to the sheer number of claims and the complexity of the litigation, the tribunal has often struggled to keep the claims’ momentum going.

Much of the litigation is therefore concluding only now. For example, in October 2012 the Supreme Court ruled against Birmingham City Council, ordering a pay-out of at least £757m to 174 claimants (Birmingham City Council v Abdulla and others). Local authorities are also becoming more open to settling the remaining equal pay claims. This is for several reasons, including the fact that some of the legal arguments have now been resolved meaning that the way ahead is clear. Councils are also increasingly keen to avoid further, lengthy and, most importantly, costly litigation so that they can free up equal pay provisions to be spent elsewhere if possible. For example, it was reported in January that BCC are to settle 11,000 equal pay claims after the
Abdulla decision.

Clearly, where discrimination has occurred, claimants are entitled to compensation and employers must face the financial consequences. Although the apparent pay discrimination happened years ago, since the claims have taken so long to resolve, local authorities must deal with the cost of that discrimination now, in an age of austerity. There are also consequences that the employees and the unions who supported them probably never intended.

The sale of the NEC is a prime example. Selling off property could potentially trigger the transfer of employees working at those properties from the local authority to the purchaser, under the Transfer of Undertakings (Protection of Employment)

Regulations 2006 (TUPE) (more on TUPE on page 21). While TUPE provides some protections against dismissal in these circumstances, it is not hard to envisage potential redundancies. As well as selling off property, BCC has also referred to a review of spending on services to fund the equal pay liabilities. Any cut in services is likely to lead to further job losses. This could impact claimants directly if they work in the services affected and, if not, it may affect their families and friends who work for the local authority, or use the venues or services.

Despite initial celebrations from claimants in receipt of pay-outs, the equal pay litigation is a no-win situation. The claimants have cash in hand but may suffer because of the steps taken by their employer to fund the pay-outs. The unions who supported the claims will doubtless come under fire for driving forward claims at a cost to other groups. The councils, of course, feel the impact on their budgets.

Hindsight is a wonderful thing, but, if anything is to be learned, the Birmingham case shows that proper formulation and implementation of employment policy now could save a huge amount of money in the long run.

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