Is Equal Pay In The Private Sector A Ticking Time Bomb?

Over the past decade or so, many public sector employers have been faced with huge liabilities that have arisen from equal pay claims.  These claims have come about primarily due to the implementation of job evaluations schemes - Single Status in local authorities and Agenda for Change in the NHS.  But will these claims find their way in to the private sector.  I would suggest that this is very likely for the following reasons.
 
Evidence - One of the biggest hurdles for employees challenging pay differences is the lack of evidence available to them.  In the public sector, the implementation of job evaluation schemes has been the main source of evidence used to back claims up and identify comparators.  From 1 October 2014, subject to certain exceptions, Employment Tribunals will be required to order employers in breach of equal pay legislation to undertake and publish findings of equal pay audits.  This would highlight any pay gaps to employees and where there is a gender imbalance, this could be strong evidence to support equal pay claims. 
 
It is worth noting that the Liberal Democrats recently published in its manifesto that any employer with more than 250 staff would be legally required to publish the extent of their gender pay gap – irrespective of any findings.  The party said large companies would be expected to reveal the difference between the average pay of men and women in their employment or be fined for non-compliance.  A requirement for all large organisations to publish pay details across genders is likely to open the floodgates for equal pay claims into the private sector.

No Win-No-Fee Lawyers - The introduction of employment tribunal fees has clearly deterred employees from bringing employment claims.  However, a number of claimant solicitors have recently set up to specifically target equal pay claims in the private sector.  In particular, they are offering their services on a no- win no-fee basis.  These lawyers are using various means to highlight potential claims to employees’ and recruit clients.  This is likely to be a strong catalyst for equal pay claims.
 
Media - The media has played its part by highlighting significant equal pay settlements in the public sector.  With successful claimants getting up to six years of back pay (plus interest), it is easy to see how potential awards can be appealing and this could also encourage those in the private sector to bring claims.
 
Time Limits – For those who have left employment, the time limit to bring an equal pay claim in the employment tribunal is six months.  However, the recent landmark ruling of the Supreme Court in Birmingham City Council v Abdulla and others in 2012 means that Claimants now have up to six years from leaving employment to bring a claim in the civil courts.  This has also opened up the floodgates for additional claims.  In addition, those who are no longer employed may be more likely to bring a claim against their former employer, especially if they did not leave on good terms. 
 
Gender Imbalance - Any industry where there are predominantly male or female workers carrying out roles of similar value is at risk of equal pay claims.  There will undoubtedly be roles that fit this profile in numerous industries including the manufacturing and airline industries.  Indeed, recently a rail union launched a multi-million pound claim against a well known rail operator in respect of managerial pay differences between its female and male employees.  It has been reported that the liability could amount to £10million per year.  However, this may only be the tip of the iceberg. 
 
What Types Of Equal Pay Claims Might Arise?
 
There is a potential for like work claims where there is a male comparator who is paid more favourably than a female claimant in the same or similar role.  If, however, an organisation has a compliant job evaluation scheme, this could lead to being rated as equivalent claims.  If not, there is the scope for costly ‘equal value’ claims, which can take a significant period of time to conclude and are expensive to defend. 
 
Can Pay Differences Be Justified?
 
They can if there is a gender neutral reason for the difference in pay.  This could be, for example, due to market increments, location or shift allowances.  If there is a gender imbalance between the claimants and their comparators, employers will have to objectively justify any differences in pay.  As many public sector organisations have found to their detriment, that is not an easy task!
 
What To Do Next?
 
If you suspect that there may be a gender imbalance and differential in pay between roles of the same value in your organisation, then it is strongly advisable to obtain specialist advice to gauge whether you have an underlying equal pay risk.  Steps can be taken to mitigate any risk that does exist.  The potential liability is too large to ‘brush under the carpet’.
 
Jawaid Rehman is a Partner in the Employment and Pensions team at Weightmans LLP, based in Birmingham.  He specialises in equal pay, implementing pay schemes and advising on major change/ restructure projects. His recent experience includes:
 
 - Assisting a local authority  in implementing a Job Evaluation Scheme for 5000 employees;
 - Changing terms and conditions for 13,000 employees;
 - Defending over 1500 equal pay claims for a local authority;
 - Getting several equal pay claims struck out at the employment appeal tribunal by running a novel abuse of process argument.