ON APPEAL FROM THE EMPLOYMENT APPEAL TRIBUNAL
HHJ PETER CLARK
Strand, London, WC2A 2LL
B e f o r e :
LORD JUSTICE STANLEY BURNTON
LORD JUSTICE PATTEN
| MS ANDREA HOSSO
|- and -
|EUROPEAN CREDIT MANAGEMENT LIMITED
Robin Allen QC and Oliver Isaacs (instructed by Berry Smith LLP) for the Respondent
Hearing date: 3 November 2011
Crown Copyright ©
Lord Justice Stanley Burnton (at the invitation of Lord Justice Mummery):
"(a) Subject to Schedule 5 and subject to these Rules, the Board, acting for an on behalf of ECM, may grant any Eligible Employee an Option over such number of Shares at such Option Price and with such conditions of exercise as they may determine.
(b) An Option shall be granted in accordance with the provisions of Schedule 5.
(c) Options shall only be granted to individuals who are Eligible Employees."
"(c) that the individual to whom it is granted is an eligible employee in relation to that company …,
(d) that the option is granted to the employee by reason of the employee's employment—
(i) with that company, or
(ii) if that company is a parent company, with that company or another member of the group, …"
"… The Respondent was under a statutory duty to operate the [share option] scheme in a non discriminatory manner and to ensure, in particular, that disproportionate awards of share options were not made to those carrying out work of a broadly similar nature to the Claimant.
In breach of its duty the Respondent in fact operated the Scheme in a discriminatory manner …"
The decisions of the Tribunal and EAT
"(2) It is unlawful for a person, in the case of a woman employed by him at an establishment in Great Britain, to discriminate against her-
(a) in the way he affords her access to opportunities for promotion, transfer or training, or to any other benefits, facilities or services, or by refusing or deliberately omitting to afford her access to them, or
(b) by dismissing her, or subjecting her to any other detriment.
(6) Subsection (2) does not apply to benefits consisting of the payment of money when the provision of those benefits is regulated by the woman's contract of employment."
"… Assuming in the Claimant's favour that the allocation of share options is a benefit, with a monetary value, amounting to deferred pay provided to the Claimant by virtue of her eligibility for the scheme as a result of her employment with the Respondent, the question still remains whether the provision of that benefit is regulated by her contract of employment. In that respect, her case fails on two grounds, each of which is fatal to her contention that this claim is properly brought under the Equal Pay Act. First, the share option scheme was not, on the Employment Tribunal's findings of fact, incorporated into the Claimant's contract of employment. However, even if it was so incorporated, the scheme was genuinely discretionary as to the number of shares, if any, which the relevant director decided to allocate to her in any one year. The position here is wholly different from the bonus scheme in Hoyland. There, the facts found by the Employment Tribunal, recited at para 12 of the judgement of Bean J, indicate a clear entitlement to a fixed amount by way of bonus for all eligible employees, including the claimant. That is not the case here. On this Employment Tribunal's findings this was a wholly discretionary scheme. We agree with the Employment Tribunal's statement of the law at para 6.3 of their Reasons. This was a genuinely discretionary element of 'pay' which was not covered by the Equal Pay Act, since it was not, on any view, regulated by the contract of employment."
The parties' contentions before us
(1) Her contract of employment was a pre-requisite of entitlement under the scheme, and in this sense her right was regulated by the contract.
(2) Her contract of employment regulated her eligibility under the scheme and the duration of options granted under it: the duration of the options was regulated by the duration of her contract of employment. The options expired 40 days after the termination of the employment contract.
(3) The implied term of trust and confidence, implied in her contract of employment, required the discretion conferred by the scheme to be exercised in a non-discriminatory manner, and thus regulated the benefits she received under the scheme.
" In seeking to resolve this matter we consider that the important word in section 6(6) is "regulated". While we recognise that the word "discretionary" is used by the employer in referring to the bonus scheme, that can be construed as relating only to the amount being paid in any one year and we recognise that the Tribunal found, as a matter of fact, that every employee received a bonus. We have no doubt that that entitlement, if it be such in law, arose out of the contract of employment and is regulated by it in the sense that but for the existence of the contract of employment the bonus would not be paid and it is therefore being paid as a consequence of its very existence. It does not seem to us to be necessary for section 6(6) to have any application in a given situation that the entitlement in question should be part of the formal contract of employment. This conclusion reflects the dichotomy between equal pay and equal treatment, and avoids an employer being exposed to double jeopardy.
 We are therefore in no doubt that the employment tribunal and the Employment Appeal Tribunal reached the correct decision in construing the arrangements for bonus payments in respect of the appellant as falling within the terms of section 6(6) and thus excluding any claim for sex discrimination under the 1975 Act."
"As to the suggestion that the bonus was a non-contractual payment, [the ET] said at para 27:-
'In the present case the decision about whether the applicant should receive her bonus in full was regulated by the bonus scheme. If the applicant complied with the rules of the bonus scheme she was entitled to be paid the bonus. This was not a matter left to the discretion of the employers. In addition, the amount of bonus to be paid was not discretionary within the terms of the scheme. For the purposes of work undertaken during 2002, the bonus scheme formed part of her contract of employment. The claimant appeared to acknowledge the contractual status of the bonus by referring to it as a right connected with her employment contract and by comparing her right to a bonus with other contractual rights such as annual leave and accrual of occupational pension rights, as in the case of Boyle v Equal Opportunities Commission (Case C-411/96)  ICR 360'"
"1. Requirement of equal treatment for men and women in same employment.
(1) If the terms of a contract under which a woman is employed at an establishment in Great Britain do not include (directly or by reference to a collective agreement or otherwise) an equality clause they shall be deemed to include one.
(2) An equality clause is a provision which relates to terms (whether concerned with pay or not) of a contract under which a woman is employed (the "woman's contract"), and has the effect that—
(a) where the woman is employed on like work with a man in the same employment—
(i) if (apart from the equality clause) any term of the woman's contract is or becomes less favourable to the woman than a term of a similar kind in the contract under which that man is employed, that term of the woman's contract shall be treated as so modified as not to be less favourable, and
(ii)if (apart from the equality clause) at any time the woman's contract does not include a term corresponding to a term benefiting that man included in the contract under which he is employed, the woman's contract shall be treated as including such a term;
(b) where the woman is employed on work rated as equivalent with that of a man in the same employment—
(i) if (apart from the equality clause) any term of the woman's contract determined by the rating of the work is or becomes less favourable to the woman than a term of a similar kind in the contract under which that man is employed, that term of the woman's contract shall be treated as so modified as not to be less favourable, and
(ii)if (apart from the equality clause) at any time the woman's contract does not include a term corresponding to a term benefiting that man included in the contract under which he is employed and determined by the rating of the work, the woman's contract shall be treated as including such a term. [Subsection (c) omitted]
(3) An equality clause shall not operate in relation to a variation between the woman's contract and the man's contract if the employer proves that the variation is genuinely due to a material factor which is not the difference of sex and that factor—
(a) in the case of an equality clause falling within subsection (2)(a) or (b) above, must be a material difference between the woman's case and the man's; and
(b) in the case of an equality clause falling within subsection (2)(c) above, may be such a material difference.
2. Disputes as to, and enforcement of, requirement of equal treatment
(1) Any claim in respect of the contravention of a term modified or included by virtue of an equality clause, including a claim for arrears of remuneration or damages in respect of the contravention, may be presented by way of a complaint to an employment tribunal.
(1A) Where a dispute arises in relation to the effect of an equality clause the employer may apply to an employment tribunal for an order declaring the rights of the employer and the employee in relation to the matter in question.
Lord Justice Patten
Lord Justice Mummery: