Court of Appeal hears ‘material factor’ defence

The Court of Appeal has ruled in the case of Walker v Co-operative Group that, when considering a ‘material factor’ defence within an equal pay claim, employers need to explain pay disparity, not justify it.

The claimant in this case was promoted in February 2014 when the respondent was in financial crisis, which was labelled as essential to its survival. She, along with her colleagues on the executive team, were offered increased salaries, but her salary was lower. As time passed, the crisis was resolved, and a decision was made to downsize her role and pay her less.

In February 2015, a Job Evaluation Study (JES) was conducted. It concluded that the claimant was paid substantially less than others whose work was of at least equal value to hers – ie her ‘comparators’. Following a later dispute which took place in April 2017, she was dismissed from her role and later brought numerous claims to the Employment Tribunal (ET), including equal pay.

When faced with an equal pay claim, it is open for employers to point towards a material factor not connected to gender which explains the difference in pay. The respondent sought to rely on a number of material factors.

The ET determined that the material factors which related to her pay as it was originally set in February 2014 were sufficient justification. These were as follows:

• the claimant’s comparators were vital to the immediate survival of the company as they formed part of a core team, whilst the claimant was not part of this team
• the claimant was newly promoted and unproven at executive level
• there was a more significant risk that the claimant’s comparators would leave the organisation
• one of the comparators was a ‘top’ corporate lawyer and therefore paid at a higher market rate.

However, the ET then assessed the impact of the JES outcomes as outlined in February 2015. They concluded that, at some stage in the 12 months leading up to this study, the claimant’s comparators’ roles had been shown to have declined and had become more comparable to her own. Therefore, the ET was of the view that the material factors present in February 2014 were no longer material by the time of the study. The claimant was entitled to equal pay.

The respondent appealed to the Employment Appeal Tribunal (EAT), arguing that the ET should not have decided that the non-discriminatory factors that applied in 2014 did not continue to apply when the JES was carried out in 2015. The EAT agreed. They outlined that a material factor defence continues to be in place until there is a reason for it not to be e.g. a further pay review is carried out.

The claimant appealed to the Court of Appeal but this was dismissed; the EAT’s finding stands.

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