ON APPEAL FROM THE EMPLOYMENT APPEAL TRIBUNAL
(MRS JUSTICE COX)
REF: UKEAT007410CEA, BAILII:  UKEAT 0074_10_0608
Strand, London, WC2A 2LL
B e f o r e :
(Vice President of the Court of Appeal, Civil Division)
LADY JUSTICE HALLETT
LORD JUSTICE TOULSON
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Ms Karon Monaghan QC and Mr Richard Stubbs (instructed by Thompsons) for the Respondent
Hearing date : 13 July 2011
Crown Copyright ©
Lord Justice Maurice Kay :
The terms of the Claimants' and the comparators' contracts
The statutory provisions
"1(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 there 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 –
(c) where a woman is employed in work which, not being work in relation to which paragraph (a) or (b) above applies, is, in terms of the demands made on her (for instance under such headings as effort, skill and decision), of equal value to that of 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 the man is employed, the 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 the 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."
Hayward v Cammell Laird Shipbuilders Limited.
"The issue is whether in terms of the Equal Pay Act 1970, as amended, the woman who can point to a term of her contract which is less favourable than a term of a similar kind in the man's contract is entitled to have that term made not less favourable irrespective of whether she is as favourably treated as the man when the whole of her contract and the whole of his contract are considered … "
Addressing the meaning of "term" in this context, he said:
"… I am of the opinion that the natural meaning of the word 'term' in this context is a distinct provision or part of the contract which has sufficient content to make it possible to compare it from the point of view of the benefits it confers with similar provision or part in another contract."
"If a contract contains provisions relating to (1) basic pay, (2) benefits in kind such as the use of a car, (3) cash bonuses, and (4) sickness benefits, it would never occur to me to lump all these together as one 'term' of the contract, simply because they can all together be considered as providing for the total 'remuneration' for the services to be performed under the contract. In truth, these would include a number of different terms; and in my opinion it does unacceptable violence to the words of the statute to construe the word 'term' … as embracing collectively all these different terms …
Again, in my opinion, the words mean precisely what they say. You look at the two contracts: you ask yourself the common sense question – is there in each contract a term of a similar kind, ie a term making a comparable provision for the same subject-matter; if there is, then you compare the two, and if, on that comparison, the term of the woman's contract proves to be less favourable than the term of the man's contract, then the term in the woman's contract is to be treated as modified so as to make it not less favourable."
Degnan v Redcar and Cleveland Borough Council
"Our view is that it does relate to the same subject-matter as basic hourly pay and the bonus and is an element of a distinct part of the contract and not itself a distinct part. It is part of the monetary payment for performance of the contract, by attending at work and working during normal working hours."
"The Employment Appeal Tribunal did not (to use Lord Goff's words) 'lump together' or engage in 'overall comparison' of different terms. Rather it applied its collective mind to the reality of the contractual provisions in the circumstances of the particular case and analysed them. I do not understand Lord Goff to have considered that, for example, basic pay and cash bonuses are always and forever dissimilar provisions. Indeed, it is common ground in the present case that the bonus payments are to be treated as part of basic pay."
"A number of common pay practices … pose risks in terms of potential non-compliance with an employer's legal obligations:
Different non-basic pay, terms and conditions for different groups of employees (for example, attendance allowances, overtime or unsocial hours payments)."
The decision of the Employment Tribunal
"The term in the claimants' and comparators' contracts of employment for unsocial hours is a term relating to their respective basic pay allowing an increase in basic pay if each qualifies for an unsocial hours payment. The claimants are not able to rely on the comparators' formula for increase of basic pay for unsocial hours."
"35. …There is a term in the claimants' and the comparators' contracts of employment which can be compared. Each of the terms are distinct provisions with sufficient content to make it possible to compare it with those of others so that the benefits that are conferred by the provision can be contrasted …
36. I am satisfied that the provision of the unsocial hours terms, both in the claimants' and the comparators' contracts, are provisions for monetary payment for the performance of the contract by the employee during normal working hours.
37. … I do not accept that it is permissible for the formula of the comparators' uplift to be transposed to the claimants. It would of course increase the difference between their pay and the comparators' pay even more … enhancements form part of their normal working hours and are part of their basic pay as the EAT and the Court of Appeal decided in Degnan."
Mr Bowers submits that this is a sustainable legal analysis.
The decision of the Employment Appeal Tribunal
"The term of the contracts of these Claimants and their comparators, providing for payment of enhanced rates if unsociable hours are worked during normal working hours, is a discrete term of the contract and is capable of being compared for the purposes of section 1 of the Act."
She was untroubled by the fact that this might result in the women increasing the extent to which their ultimate pay exceeded that of the male comparators.
"For the same work or for work to which equal value is attributed, direct and indirect discrimination on grounds of sex with regard to all aspects and conditions of remuneration shall be eliminated."
"… the question [posed by the reference] raises an additional problem, in so far as it suggests that, in the event of Article 119 being applicable, the principle of equal pay contained therein is not infringed provided that the total value of the benefits is the same, even though it is made up of components which differ according to sex but are mutually compensating. In my view the principle of equal pay implies equality at the level of each component of remuneration. If it were otherwise, the enforceability of that principle by the courts would be seriously jeopardized. The courts would then have to evaluate and compare the most diverse advantages which employers confer on their employees. That may call for a complex factual analysis which would not guarantee the equality of total pay as effectively as the equality of each component separately, which is easier to verify. I therefore suggest supplementing the answer given to the previous question as follows: the principle of equal pay implies equality at the level of each component of remuneration."
"It follows that genuine transparency, permitting an effective review, is assured only if the principle of equal pay applies to each of the elements of remuneration granted to men or women."
Lady Justice Hallett:
Lord Justice Toulson: