Equal Pay Claims - EAT Reconsiders Material Factor Defence

An employer will be able to defeat an equal pay claim under the Equality Act 2010 if it can show that the difference in pay is due to a 'material factor' other than the employee's sex. The Employment Appeal Tribunal (EAT) recently shed light on what is – and is not – required to establish such a defence (Scottish Water v Edgar).

A woman brought an equal pay claim before the Employment Tribunal (ET). Her comparator was a male employee who had been appointed after her, who was within the same pay band as she was but was paid at a higher level within that band. Her employer, a water company, contested the claim on the grounds that she and the comparator did not do like work or work of equal value, and that the pay difference was due to material factors that were not tainted by sex discrimination, including the comparator's skills, experience and responsibility. The former issue was held over while the ET considered the material factor defence.

The ET concluded that the employer had failed to identify the decision-maker responsible for deciding the comparator's starting salary, and that the material factor defence therefore failed. The ET also concluded that evidence comparing the woman's skills with those of the comparator following his appointment was irrelevant.

The employer appealed to the EAT, arguing that if the ET had asked the correct question – why the comparator was paid more than the woman – it would have recognised that there was ample evidence explaining the reasons for the difference in pay. The employer also claimed that the ET was wrong to refuse to consider evidence of the two employees' skills that post-dated the comparator's appointment.

The EAT upheld the appeal. The ET had misdirected itself in deciding that the employer was required to identify the decision-maker, and had erred in law in concluding that a failure to do so inevitably meant that the material factor defence failed. Whilst providing evidence of the thought process involved might aid the ET in its deliberations, it is not essential. The EAT also ruled that the evidence regarding the employees' respective skills had a bearing on the comparator's skills at the date of his appointment, and thus was plainly relevant to a material factor defence. The case was remitted to a differently constituted ET for rehearing.