Distinctly Average: statistics, rate of pay and shifting burden of proof in equal pay claims

Daphne Romney QC

The Court of Appeal in McNeil v Commissioners for herMajesty’s Revenue and Customs has recently held that whendetermining particular disadvantage in non-binary situations, Tribunals shouldlook at male and female average pay, not the distribution of male and femalepay within a band.  DaphneRomney QC, an equal pay specialist, explains Underhill LJ’sjudgment.

Importance of McNeil

WhenSimler J gave judgment in the EAT in McNeil,the primary focus was on her confirmation that the principle in Newcastle NHS Hospitals Trust v Armstrong,[1] was finally pronounceddead. The employer could no longer avoid objective justification where theclaimants had proved particular disadvantage by showing that even though therewas an indirectly discriminatory effect on women, the reason was not tainted withsex.  Simler J applied the judgment ofBaroness Hale in Essop v HomeOffice/Naeem v Department of Justice,[2] who had held that it wasunnecessary to show why there was particular disadvantage; it sufficedto prove that particular disadvantage existed[3].  However, McNeilis also important in its analysis of the proper way to determine particulardisadvantage when looking at comparative pay figures for men and women inclaims of equal pay and indirect discrimination. Simler J’s decision onparticular disadvantage was appealed to the Court of Appeal – the Armstrong point was not.Underhill LJ’s analysis thereforefocuses our attention on the vexed issue of statistics and how to present andinterpret them.[4]As he noted, there was no authority explicitly providing guidance on asituation where claimants argued particular disadvantage in a case of a ‘continuum’ case, namely where the payconstantly changes through a number of variables.

Proving particular disadvantage

It is well established that it for the Tribunal to decide whetherthe statistics advanced by a claimant are sufficient to prove indirectdiscrimination - see Mummery LJ in Haq v Audit Commission.[5]Equally, the Tribunal must selectthe suitable pool for comparison appropriate to the facts of the case. Thereare no hard and fast rules about this and certainly there is no statutoryprescription or formula, save that the pool should consist of those affected bythe question as summarised by Sedley LJ in Grundyv British Airways[6] andby Baroness Hale inNaeem.

Usually,indirect discrimination arises either through a PCP or ‘barrier-type’ claim like Seymour-Smith[7] or through an Enderby[8]-type situation, where menand women work in different occupations which is effectively “female work” and “male work”.

Particular disadvantage in “continuum” cases

InMcNeil, as the claimantsthemselves argued, their case was neither of those situations. The claimantswere female HMRC employees in grades 6 and 7. The grades attracted minimum andmaximum pay, but no fixed spinal points in between. New entrants usuallystarted at the bottom of the band (unless they were assimilated at theirpre-existing salary) and then progressed towards the maximum through pay rises,which were normally made annually, although there had been a freeze for a fewyears, which preserved the status quo. Underhill LJ described the position asfollows:

‘..the amount of salary payable to any particularemployee in the two grades will depend on a number of variables – the point atwhich they entered the grade, how many years they have been in it, the amountof any increase in the minimum and maximum for the band and the amount of anypay awards, and their performance, in those years. The result is that in anyyear there is in each of the pay bands a very wide range of salaries –typically well over a hundred in each band – reflecting different pay historiesin the individual cases.[9]

Theclaimants’ case was the length of service criterion operated to theirparticular disadvantage because the grades 6 and 7 had been historicallymale-dominated, and more women had only recently started to be recruited orpromoted into them; as a result, women were disproportionately clustered at thebottom of those grades and men were disproportionately clustered at the top ofthose grades. It was argued that matters were exacerbated by various otherfactors, including the failure to reduce the length of the grades, the lengthof time it took to progress to the top of the grades and the pay freeze. Theclaimants also contended that the usual method for determining paydifferentials, namely either a mean or a median average, was ‘not a meaningful, logical, or accuratemethod’  of testing the ‘core allegation’in cases such as this, being neither a Seymour-Smithnor an Enderby case. AsUnderhill LJ pointed out in the Court of Appeal, length of service in this casedid not equate to moving up the ladder in specified spinal points, because thatwas not the way that the grades were structured – rather, length of serviceallowed longer-serving employees to get the benefit of more annual payincreases, thereby moving quicker towards the top of the grade in question thansomeone who had been on that grade for a shorter period.

Atthe Tribunal, the HMRC’s expert maintained that the claimants’ approach wasflawed and that the correct methodology was to compare the average pay for menand women across each grade; those figures, which the claimants accepted,showed that the difference in average pay was minimal. Overa seven- year period, they were between 2.3% and 1.2% in grade 7, and 1.9% to1.5% in grade 6. The Employment Judge agreed. Clustering was not thesame as pay and ‘whilst it may provide apartial picture of apparent actual advantage, it says nothing about actual paydifference’. The law called for a comparison of the difference in terms, inthis case, pay, between the claimant and her comparator. The figures showedthat there was no material difference between the average pay for men and women,and the claimants’ expert’s methodology was inappropriate. Basic pay was a termof the contract and could not be divided into sub-elements, namely average payand variable pay. The Employment Judge further noted that the claimants’ methodologymeant, ‘it would never be possible toguard against a complaint that, on this or that selective statistical analysisof a portion of the relevant population, one gender group appeared to enjoy anadvantage over the other’. As a result, an employer could never form a viewas to whether its pay structure was indirectly discriminatory and could beforced to objectively justify differences in pay which it would not otherwisehave to do.

Onappeal, Simler J endorsed the Tribunal’s view and emphasised that basic pay wasan indivisible term, on the principle of Haywardv Cammell Laird,[10]and Brownbill v St HelensHospitals NHS Trust.[11] Just as basic pay cannotbe aggregated with other elements of pay, such as bonus or overtime, so basicpay cannot be subdivided into separate elements, particularly with as manyvariables as here.

Theclaimants’ primary appeal to the Court of Appeal was that both the Tribunal andthe EAT had measured ‘the wrong thing’,namely measuring the average differences in pay relevant to total payinsteadof ‘measuring the disparateimpact on women compared with men caused by the factor of length of service by analysingthe relative distribution of men and women along the pay range in each of therelevant grades’. Underhill LJ pointed out that this was not a typical caseof particular disadvantage, where the non-receipt of a defined benefit affectedone sex more than the other; this could be measured through the use of a pooland a comparison of the proportion of advantaged and disadvantaged groups. Herethe disadvantage was not binary; rather base pay was ‘a semi-continuous variable’ and it was not possible to identify ‘a particular touchstone of disadvantage’.He continued:

‘The application of the concept of particular disadvantage in a "continuum" case of this kind has not been explicitly discussed in any of the authorities, and it has required some careful thinking. But I have come to the clear conclusion that the ET and the EAT were right to reject the approach argued for by [the claimants]. I do not believe that what the statute requires to be measured is the "incidence" of disadvantage. As Simler P points out at paras. 45-46 of her judgment, the distribution of men and women within a pay band only means anything in so far as it represents what sums they are in fact paid. It seems to me necessarily to follow that it is essential to take into account the actual amounts paid to each person in the group; and the only way in which that can be done definitively is by taking an average.’[12]

Heechoed the point made by the Employment Judge – where distribution analysis isused to show indirect discrimination by reference to whatever part of the poolthe claimant may choose to focus on, an employer can never be sure that itssystem was not potentially unlawful.

Theessence of the judgment, therefore, is that in cases such as these, only theaverage pay for each group will give a reliable indication of whether paydiscrimination exists. That is not to say that clustering is always irrelevant– in a case where there is a material difference between male and female pay,it is likely that there would be disproportionate clustering of men at the topend and women at the bottom end. But to start from the distribution angle wherethere is the more reliable test of average pay is the wrong approach.

Theissue was not under appeal, but it is interesting that Underhill J set out thetest for the burden of proof in paragraph 18 of the judgment, which did notmention the Armstrong stage,therefore giving tacit approval to Simler J’s view expressed in the EAT.

[1] [2006] IRLR 124
[2] [2017] IRLR 558
[3] Paras. 71-73
[4] [2019] EWCA Civ 1112
[5] [2013] IRLR 206 at paras. 45-51
[6] [2008] IRLR 817 at para. 27
[7] [1999] 1 AC 554
[8] Enderby v Frenchay Health Authority [1994] ICR 112
[9] Para. 31
[10] [1988] 1 AC 894
[11] R v Secretary of State ex p Seymour-Smith [1999] 2 AC 554
[12] Court of Appeal at para 63.