The Equality Act’s hidden equal pay trap | Employment Law Advocates

Most of the Equality Act is going to be coming into force on 1st October. One of the more controversial provisions, relating to equal pay audits, will be put on hold while the coalition government considers its impact. However, there is one innocent-looking change that has received little publicity but which could have just as radical an effect on the field of gender pay equality. It is section 71, which allows employees to bring sex discrimination claims, relying on hypothetical comparators, in circumstances in which it is impossible to identify actual comparators for the purpose of equal pay claims. An option which was considered during the consultation was for hypothetical comparators to be introduced into equal pay itself and so this solution might appear to be something of a compromise. However, there are reasons for thinking that the outcome may be the same, if not worse, for employers.

According to an article in HR Magazine, a claimant may now be able to “secure a pay rise to plug the gap between her pay and the notional pay of the hypothetical comparator, plus potentially thousands of pounds in compensation for the injury to her feelings”. This sounds alarming but it could well be understating the case. It is plausible and indeed probable that she can also claim the difference in pay between herself and her hypothetical comparator, dating back to the start of her employment. After all, sex discrimination is a tort, and this means that ”the applicant must be put into the position she would have been in but for the unlawful conduct”, as the Employment Appeal Tribunal confirmed in the case of Ministry of Defence v Cannock. The difference in earnings would surely form part of a claimant’s loss.

As was noted by HR Magazine, one objection to this is that it is a speculative exercise to decide what a hypothetical comparator would have been paid. On the other hand, tribunals are generally permitted to take a “rough and ready” approach to determining compensation, while the case of Scope v Thornett obliges them to speculate. Although it concerned unfair dismissal, Scope v Thornett has also been applied to claims of discrimination as well, and the sex discrimination case of Bentwood v Shepherd leaves no doubt that a “broad brush” approach can be taken. The clincher is the decision of President Elias in Walton v Bewley in which, hypothetically discussing hypothetical comparators, he conceded the possibility, at paragraph 57 of his judgment, that “a rough and ready remedy is better than none at all”.

The next question is whether a claimant would be prevented from getting compensation in relation to historical pay differences, even if they pre-date three months before the bringing of the claim. The intuitive answer is that she would not, because the discrimination would amount to a continuing act, as is supported by the first instance decision in a famous City sex discrimination case, Bower v Schroder. The employee complained about discretionary bonuses, which were not covered by the Equal Pay Act, and was awarded the bonuses it was found that she would have been paid, had she not been discriminated against, going back four years. Not only was the tribunal prepared to speculate about the payments that her hypothetical comparator would have received, it was also willing to backdate her claim.

This produces an odd result. In equal pay claims, arrears of pay can only be awarded for up to six years. If brought as sex discrimination claims with a hypothetical comparator, there appears to be no limit as to how far back a difference in salary can be compensated. Also, injury to feelings is not available in the former case but it is in the latter so it seems that an employee is actually better off if there is no actual comparator for equal pay purposes. This raises the absurd possibility of an employer defending a sex discrimination claim about pay by trying to show that there is a comparator who is paid more than the claimant. During the consultation, employer organisations were rarely willing to support the idea of hypothetical comparators in equal pay law. It might not be long before they begin to wish that they had.