Industrial Law Journal, Vol. 39, No. 4, December 2010 Industrial Law Society; all rights reserved.

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Justifying Service-Related Pay in the Context of Sex Discrimination Law

DAVID ROWBOTTOM*

ABSTRACT
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This article is concerned with the conflicting perspectives of pay systems and structure that arise between legal opinion and labour economics/industrial relations theory and practice. It considers the progress of two equal pay claims concerning service-related pay involving the same employer, within uncontested work rated as equivalent criteria and on basically similar facts. The article describes the payment systems adopted by the employer that are at the root of the claims and describes the Employment Tribunals principal findings of fact and summarises the judgments of the UK courts and the European Court of Justice. The findings and decisions provide a basis for a discussion of the impacts that bring about conflicts between these perspectives and questions whether the present arrangements for dealing with equal pay claims that challenge a pay structure are appropriate.

1. INTRODUCTION
Many firms, particularly those in the public sector or those in the private sector established by privatisation of a public body, retain a form of pay structure that provides a greater reward according to the length of service. Exactly how this service link applies varies, but it relates to the time served in the job, the work grade or in the establishment. Thus, an inequality in pay arises between employees undertaking the same or similar work relative to service. Where inequality exists between a woman and a man, there is an opportunity to challenge it through the equal pay laws. However, seniority has been accepted as a factor that is not linked to the sex of the employees, permitting unequal pay. In Handels-og Kontorfunktionrenes Forbund i Danmark v Dansk Arbejdsgiverforening, ex parte Danfoss A/S (Danfoss),1 the European Court of Justice (ECJ) stated that seniority goes hand in hand with experience. As such, the employer did not need to show objective justification of the difference. Prior to the litigation that is considered in this article, only one case, Crossley v ACAS,2 concerning seniority had been brought before an Employment Tribunal (ET)
*Manchester Metropolitan University Business School, email: d.rowbottom@mmu.ac.uk 1 [1989] IRLR 532 (ECJ). 2 Case No. 1304744/98 (Birmingham ET) (unreported).

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since the Danfoss decision in 1989. Even so, the gendered effects of senioritybased pay systems and structures were seen as giving rise to issues of concern such as those identified by Morrell et al.: women progress more slowly through salary scales and seldom reach higher points, while men are consistently appointed at higher points on a salary scale than women.3 When faced with a claim for equal pay which extends beyond a straightforward comparison of this woman to that man within a defined pay structure there is a possibility that the decision of the Tribunal will necessitate the alteration of some feature of the structure. Such instances may produce a tension between the application of the law by the Tribunal and the labour economics and industrial relations of pay determination. This article uses two recent cases concerning service related pay involving the same employer and on similar facts to explore these tensions. The background to the claims, involving the recent history of change in pay systems, is explained. Following an outline of the litigation through the Courts, focussing mainly on the findings of the ETs, there is an analysis of the theoretical base and practical application of service-related pay together with a brief commentary of the industrial relations challenges arising in the application of change, and potentially from the outcome of the litigation. Cadman v Health and Safety Executive was a claim for equal pay brought by a Principal Inspector in the Health and Safety Executive (HSE). There have been women Factory Inspectors since 1893 and women have been appointed to managerial roles, managing both men and women inspectors, since the early 1920s.4 The claimant was a woman in the managerial strata of the organisation, working full time, not having taken time out of employment to have and raise children, by all accounts a high-flyer, and enjoying a salary above the national average level of pay. Her claim was about her rate of pay compared to men in similar posts. Hers was not the only such claim to be brought by an HSE employee. A colleague, Mrs Wilson, who was a general inspector and in a grade lower, brought a similar claim a year later than Mrs Cadman, shortly after the initial hearing of that claim. In this article, references to a pay system mean the method by which pay is determined, that is by reference to such variables as time served, output, capability or merit; a pay structure is the particular arrangement of a pay system put in place by an employer for an establishment or category of employee and will extend to the determination and allocation of grades or pay ranges and the internal labour market features of job hierarchies or families. References to seniority pay or service-based pay or service-related pay here are interchangeable, as is the case in
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J. Morrell, M. Boyland, G. Munns and L. Astbury, Gender Equality in Pay Practices (London: EOC, 2001) 9. 4 M. D. McFeely, Lady Inspectors: The Campaign for a Better Workplace 1893-1921 (Oxford: Basil Blackwell, 1988).

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the literature and court judgments, meaning that the level of pay is in some way linked to the time served in the post or pay grade, or with the employer. Seniority here refers neither to the differences between levels within hierarchies nor to the age of the employee.

2. THEHSEPAYSTRUCTURES
Until 1988, HSE pay was determined centrally by Civil Service pay reviews as part of which national bargaining between the Treasury and Civil Service unions set an incremental pay structure based upon length of service in grade and in the establishment. The type of payment system adopted in the Civil Service and many other parts of the public sector for non-manual workers provided for annual incremental advance within a pay scale from the point of entry until reaching the scale maximum, the only limitation being for an increment to be withheld in the event of an adverse report. This type of pay structure had been in place at least from the early part of the 20th century. Routh5 records that in 1913 there was, on average a 30 point pay scale for Lower Division staff, a 20-point scale for Clerks and a 10-point scale for Principal Clerks and Assistant Secretaries. The level of payment at each point was determined through collective bargaining in the National Whitley Council from 1919. From 1955, on the recommendation of the Royal Commission on the Civil Service (the Priestley Commission),6 Civil Service pay was based on evidence of pay comparisons outside the service produced by a Pay Research Unit. The government abandoned the Pay Research Unit in 1980 and commissioned a Report of Enquiry into Civil Service Pay (the Megaw Report)7 whose conclusions were published in 1982. The Report recommended a move to informed collective bargaining and a shift away from incremental pay scales to performance-related pay.8 The implementation of that recommendation came about as a part of the governments pay reform programme, involving delegation of pay determination and the introduction of pay linked to performance,9 which required that individual performance would be accorded more weight than in the past, with pay increases
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G. Routh, Occupation and Pay in Great Britain 1906-79 (London: Macmillan, 1980). Cmnd 9613 (1955). 7 Cmnd 8590 (1982). 8 There is an interesting commentary, including the view that Megaws solution is that the payment system should become an active instrument of management and that collective bargaining should become a reality rather than a ritual in the Reports and Awards section of Industrial Law Journal of December 1982 (vol 11, no 4, pp 2667). 9 Efficiency Unit, Improving Management in Government: The Next Steps, Report to the Prime Minister (London: HMSO, 1988).
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to be based primarily on individual performance.10 In the case of HSE, there were a series of agreements which introduced and developed this concept. In 1988, as part of the centralised Civil Service pay structure, performance became a requirement for progression within the pay spine. In 1992, when pay determination was delegated, a system of pay steps within a range replaced the seniority-based incremental scales. Pay progression was determined by annual performance assessments. For HSE, the delegation of pay bargaining is strictly monitored and limited by its supervising Department and the Treasury to the extent that it has to gain prior approval to any change in pay and a specific requirement to apply performance-related pay.11 A condition of delegation placed upon agencies such as HSE was that they should equality proof their pay systems, in accordance with the Equal Opportunities Commission (EOC) Code of Practice on Equal Pay, as part of their regular three yearly reviews of their pay structures. In 1995, there was a significant revision of the HSE pay structure, both to simplify the inherited set of nine pay agreements and to reinforce the linking of pay to performance. A job evaluation study was undertaken which provided the basis of the present grading of posts. From the evaluation, seven broad-band grades were established. Inspectors were allocated to Band 3; Principal Inspectors to Band 2. The 1995 agreement also replaced the annual cost-of-living pay increase (known in the Civil Service as revalorisation) and the performance pay steps with equity shares.12 This system provided that everyone in each pay band achieving the same performance mark would receive the same cash award regardless of their position within the pay band. Performance was assessed to give box marks A, B, C which provided for a pay increase in the ratio of 6:5:4 from the equity share pot: there was a further box, D, which was rarely used, which produced no pay increase. The vast majority in each of the grades were marked as box B. Also, the grade maxima were increased at a lesser rate than what was produced by an equity share increase,13 creating a group of inspectors with personal maxima (that
10 S. Gagnon, Promises vs Performance: Pay Devolution to Next Steps Executive Agencies in the British Civil Service (1996) 25 Employment Relations 26. 11 Department for Work and Pensions/Health and Safety Executive Framework Document, Pay and Conditions of Service states: 19.3. HSE staff is subject to levels of remuneration and terms and conditions of service (including pensions) within the general pay structure approved by DWP and HM Treasury. HSE has no delegated power to amend these terms and conditions . . . 19.6. HSE shall operate a performance-related pay scheme that shall form part of the annual aggregate pay budget approved by DWP or the general pay structure approved by DWP and HM Treasury whichever is applicable. 12 For a discussion of this practice in the Employment Service, see D. Marsden and S. French, What a Performance: Performance Related Pay in the Public Services, Centre for Economic Performance Special Paper No 10 (London: London School of Economics, 1998) at 3754. 13 For example, it appears that the Band 3 minimum increased by about 30% from 1993 to 2000 while the grade maximum increased by less than 8%. The data are taken from the Agreed Statement of Facts presented to the Cadman ET at [21] and the Wilson (December 2003) ET at [54].

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is, paid at a level above the stated grade maximum) described by management as a vociferous group in pay negotiations.14 Between 1995 and 2000, pay increases were based entirely upon performance, reflecting the limits placed by the Treasury on such increases at the outset of this phase,15 although there were additional loyalty increments applied to the Inspector grade. This gave rise to concerns from staff that there was no relative progression, showing that, for most staff the arrangements in the [1995 Agreement] mean that pay relativities with colleagues in the same pay band are more or less fixed on the day they join the band whether on promotion or via external recruitment, subject to performance markings.16 HSE management were clearly concerned that its pay structure was not compliant with the equal pay requirements and commissioned reports from a firm of personnel consultants in 1999 and from a leading firm of employment lawyers in 2000. The timing of these developments coincides with the ET decision in Crossley. From these influences, HSE drew up a revised pay structure, implemented in 2000, which it was thought would adequately reward longer serving staff and provide a catch-up mechanism for those in the lower levels of the pay grade. Since then progression has been based on a mix of performance and a negotiated annual increase. In 2002, the progression arrangement was revised such that the maximum time for a satisfactory performer to reach the scale maximum would not exceed 10 years. HSE stated three objectives: to ensure that staff could see progress through the pay band, to establish a link between pay and performance, and to reward all staff including longer serving staff. In evidence to the Cadman ET, a witness for HSE indicated that it would have been possible to reduce the gender pay gap more quickly by putting more money into progression pay.17 The Wilson ET found that had HSE been left to their own devices, without the influence of the trade unions . . . the pay gap might have been reduced earlier.18 In both these cases, the employer conceded that the effect of service on the pay scales had a disproportionate impact on women. To some extent, this disparity had been created by a change in the HSE recruitment practices by removing a requirement that applicant should have some background in (male-dominated) science or engineering. That had, in practice considerably opened up opportunities for women.19

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14 Wilson v Health & Safety Executive, Case 2901249/02, Shrewsbury ET (December 2003) (unreported), [53]. 15 Gagnon, above n.10, 35. 16 Cadman v Health & Safety Executive. Case 2404527/01. Manchester ET (unreported) at [9] (xiii). 17 Cadman ET, [9] (xxx). 18 Wilson ET (2003), [17]. 19 Ibid., [25].

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Mrs Cadmans claim was presented in June 2001 and was heard by the ET sitting at Manchester in May 2002; its judgment promulgated in October 2002. An appeal against that judgment was heard in June 2003 and determined in October 2003. Mrs Wilson presented her claim in July 2002 which was heard by the ET sitting at Shrewsbury in May 2003, its judgment being promulgated in December 2003, following that Tribunal reviewing its original decision in the light of the Cadman appeal decision.
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3. THELEGALCONTEXT
The claims were made under section 1(2) (b) of the Equal Pay Act (EqPA) 1970, where the woman is employed on work rated as equivalent to that of a man . . .. HSE accepted that each of the two claimants and their relevant comparators were engaged on work rated as equivalent, but resisted the claim through section 1(3) of EqPAan equality clause shall not operate . . . if the employer proves that the variation [in the term of the contract] is genuinely due to a material factor which is not the difference of sex and that factor . . . must be material difference between the womans case and the mans.20 A material factor was defined in a series of examples referred to as the personal equation presented by Lord Denning MR in Shields v E Coomes (Holdings) Ltd21 which included if he has much longer length of service, or has superior skill or qualifications; or gives bigger output or productivity; or has been placed, owing to downgrading, in a protected pay category, vividly described as red-circled; or to other circumstances personal to him in doing that job. Lord Denning was following, in part, the intention of the legislators. In the House of Commons Second Reading of the Bill that was to become the EqPA the Secretary of State for Employment and Productivity, Mrs Barbara Castle, explained the concept:
The intention of the Bill is not to prohibit differences in pay between a woman and comparable male workers which arise because of genuine differences other than sex between her case and theirs. If an employer wishes to make additional payment to people employed on like work, in respect of matters such as length of service, merit, level of output and so on, the Bill will do nothing to hinder him, provided that the payments are available to any person who qualifies regardless of sex.22

From 1 October 2010, the EqPA 1970 is superseded by the Equality Act 2010. Specifically, work rated as equivalent is covered by s 65(1)(b); the material factor defence is at s 69. 21 [1978] IRLR 263 (CA). 22 Hansard. House of Commons Debates, 9 February 1970, vol 795 c920.

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Similarly in the House of Lord, from Baroness Phillips:

. . . the onus of proof is then on the employer to show that any difference in treatment between the woman and the men concerned is due to a genuine material difference between their cases, and not to discrimination on grounds of sex. Employers will thus be able to continue to distinguish between a man and a woman on genuine grounds such as seniority, merit, level of output and so on, provided that they also distinguish between a man and a man in the same circumstances.23

The arguments presented by the claimants in these cases were that the leeway given for service-related pay, explicitly permitted by the ECJ in Danfoss, was qualified by later judgments. The relevant part of the Danfoss judgment states that:
. . . the criterion of length of service . . . may involve less advantageous treatment of women than of men in so far as women have entered the labour market more recently than men or frequently suffer an interruption of their career. Nevertheless, since length of service goes hand in hand with experience and since experience generally enables the employee to perform his duties better, the employer is free to reward him without having to establish the importance it has in the performance of specific tasks entrusted to the employee. In those circumstances . . . the Equal Pay Directive must be interpreted as meaning that where it appears that the application of criteria, such as the employees . . . length of service, for the award of pay supplements systematically works to the disadvantage of female employees . . . the employer does not have to provide special justification for recourse to the criterion of length of service.24

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However, that judgment, it was claimed, was modified by the decision in two cases involving the service implications on pay of atypical workers; Nimz v Freie und Hansestadt Hamburg,25 concerning the experience gained by parttime workers, and Hill & Stapleton v Revenue Commissioners and Department of Finance,26 dealing with movements between job-share and full-time work. For HSE, it was argued that if Danfoss remained good law and if the present cases could not be distinguished from it, the claims could not succeed. HSE also argued that the decisions in Nimz and Hill were particular to the circumstances of those atypical workers. They argued that the difference, between Mrs Cadman and Mrs Wilson and each of their named comparators, was genuinely due to a material factor other than sex and was justified, but relied primarily on Danfoss to argue that justification was unnecessary.
23 24

Hansard. House of Lords Debates, 5 May 1970, vol 310 c124. Danfoss, paras 245. 25 [1991] IRLR 222 (ECJ). 26 [1998] IRLR 466 (ECJ).

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4. THECLAIMANTS A. MrsCadman
Bernadette Cadman joined the Civil Service in 1984 as an Executive Officer in the Department of Social Security, transferring to the HSE as a Trainee Inspector in 1990. Three years later, she was appointed to a post of Inspector and was started at the lowest point of the pay scale for that post. In November 1996, she was promoted to Principal Inspector. In 2001, she claimed equal pay with four named male comparators who were undertaking jobs rated as equivalent, and were paid within the same salary range but at a higher level than her. The difference in the salaries of Mrs Cadman and the four comparators was identified to be due to length of service. HSE accepted that the jobs of Mrs Cadman and the comparators were of equal value and as such had been allocated into the same pay band by the job evaluation exercise. The differences in pay, subject to any differences that may be attributable to performance, were due to length of service with HSE and within the grade. Three of the comparators had joined the predecessor of HSE in the 1960s or 1970s as trainees, progressing to inspector after three years and to the Principal Inspector about 10 years thereafter, long enough to be at, or near, the grade maximum by 1995. The other comparator had longer service in the lower Inspector grade, but was promoted only 13 months before Mrs Cadman. As he had been longer in the lower grade, he thereby benefited from the pay grade overlaps. Also a small retention allowance payable at a given length of service in the lower grade and an arrangement then in place for rewarding substitution (covering a vacancy at a higher grade) accounted for him entering the higher grade at about 6,000 above the minimum.27 By contrast, Mrs Cadman was appointed to the Principal Inspector grade at the scale minimum.

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B. MrsWilson
Christine Wilson joined HSE as a Trainee Inspector in 1990. Prior to that she had worked in hospitals as a medical technician and researcher, and had taken time out of employment to have two children. As with Mrs Cadman, she was appointed to a post of Inspector in 1993 and was started at the lowest point of the pay scale for that post. In 2002, she claimed equal pay with three named male comparators, all undertaking the same range of duties as her, and who were paid within the same salary range but at a higher level.

27

Cadman ET, [9] (xxvi).

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She had experienced the same changes in pay systems as Mrs Cadman, namely, the move to performance pay based on equity shares in 1995 and the mix of performance and a negotiated annual increase from 2000. As to performance pay, she received consistent box B markings; her comparators similarly were marked at box B though two of the three comparators had each achieved an odd box A marking. Unlike Mrs Cadman, Mrs Wilson remained in the career grade of Inspector at Band 3. This grade enjoyed a further element of service-related pay that of an allowance, replacing accelerated increments in the earlier pay system, to promote staff retention. This was paid originally as staged amounts after five and eight years service, reducing to four and six years from 1997.

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C. IntheTribunalsandCourts
Both ETs were persuaded that the decision in Danfoss was qualified by the later decisions in Nimz and in Hill and Stapleton. The Cadman Tribunal applied the Bilka test to look at the explanation put forward by the employer who sought to persuade the Tribunal that length of service did provide greater experience which was necessary for the delivery of HSEs core business. However, it was shown in evidence that nothing in the 1995 Agreement stated such an intent nor had there been any attempt to measure the impact of experience to assess whether it added value to the core business. Similarly, although the salary point achieved in the lower pay range was influential in determining the starting point in the higher range on promotion, no evidence was produced to show that the skill derived from the lower grade added value to the management skills required in the higher grade. The Tribunal found that the reasons given for this differential were historical in that they reflected the previous incremental, and probably discriminatory, pay system.28 Moreover, an incremental system that reflected the general accumulation of experience inside and outside the organisation did not exist in the pay structure29; and it had not been demonstrated that it was necessary to perpetuate these discriminatory pay differentials based on the historic system to avoid senior staff leaving or being demotivated.30 It considered that the employers had not consciously addressed the justification issue and explained it or justified it at the relevant timeit was instead a justification after the event.31

Ibid., [28]. Ibid., [29]. 30 Ibid., [31]. 31 Ibid., [24]this point was rejected on appeal at the EAT. Subsequently and in a different case, the ECJ decided that it is permissible to provide ex post facto justification, though that reason must fulfil the Bilka testSchnheit v Stadt Frankfurt am Main [2004] IRLR 983 (ECJ).
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It decided that the difference between Mrs Cadman and her near-contemporary comparator arose from the difference in time spent in the lower grade,32 while the difference between her and the other three comparators was said to be a mix of service in both grades.33 A year later, the Wilson ET not only identified the difference in the salaries of Mrs Wilson and her comparators to be partly due to length of service but also considered it relevant that she did not benefit as they had from the incremental pay system that operated to 1995. The Tribunal observed that at that point the main differences in pay became due to historical service and effectively stalled progression through the pay range until the arrangements were modified in 2000. The Tribunal referred to the EOC Code of Practice on Equal Pay,34 (not considered in the Cadman proceedings) which it stated played an influential part in our deliberations35 and had a profound effect upon our . . . decision.36 In particular, it referred to paragraph 28(c) of the Code:
Problem Women progress more slowly through incremental salary scale and seldom reach higher points. Recommended action Investigate the criteria applied for progression through the scales. Are these clearly understood? Does any particular criterion, e.g. length of service, work to the detriment of women more than men. If so, can the use of that criterion or the extent to which it is relied on be objectively justified? Review the length of the incremental scale. Is the scale longer than it need be? Are there good practical reasons for a scale of that length?

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The analysis undertaken by this Tribunal appears to be attuned to identifying the precise elements of the pay differentials of the claimant and comparators. In so doing, it separated the periods of the distinct payment systems, identifying the nature of the transitions and accepting two elements of the current system to be genuine material factors and justified. These were the differences arising from box markings between Mrs Wilson and her comparators and any difference arising from the loyalty allowance. It also noted how the differential between Mrs Wilson and her comparators had reduced over time, but estimated that it would take her 11 years to reach the grade maximum, whereas two of the three

32 33

Cadman ET, [27]. Ibid., [33]. 34 EOC, Code of Practice on Equal Pay (London: EOC. 1997). 35 Wilson ET (2003), [12]. 36 Ibid., [14].

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comparators had achieved that point after six years. It went on to find that experience . . . beyond the initial appointment . . . is of value to HSE such as would justify some form of differential payment.37 In analysing the correlation of seniority in band with the value to HSE, it drew its own conclusions on what it admitted to be somewhat anecdotal unscientific and imprecise evidence as to the justifiable length of a pay scale for this class of worker. The Tribunal decided that the claim should succeed in part, to the extent that Mrs Wilson would be treated as if she had progressed to the scale maximum after five years in post. The Cadman EAT was not wholly convinced that length of service in a job necessarily and in every case does carry with it greater valuable experience which would in practice automatically justify higher pay.38 However, it decided that . . . Danfoss remains good law39 and upheld the appeal. It also commented that as the reasons given for the differential were historical only . . . the Tribunal failed to appreciate and consider the continuing effect of length of service as a factor in levels of pay on a year-by-year basis in the case of every Band 2 Inspector (whatever his or her pre-1992 or pre-1995 experience) and failed to consider the difficulties of eliminating the pre-1995 differentials at a stroke or more quickly.40 The Wilson ET, having heard evidence and argument in May and July 2003, concluded its decision on 22 July 2003. The EAT heard the Cadman appeal in June 2003 and delivered its judgment on 22 October 2003 at which point the Wilson ET judgment had not been promulgated. It was made aware that the EAT had upheld the opinion that Danfoss remained good law. The Wilson ET met again on 21 November 2003 and with the benefit of the EAT judgment reviewed its earlier decision. It recognised that they were bound by the decision of the higher court, but not without some reservations about the generality, and indeed the empirical truth of the reasoning in Danfoss. Mrs Wilsons claim was dismissed. An appeal against that decision was stayed until the conclusion of the Cadman proceedings. Meanwhile, the Cadman claim went to the Court of Appeal41 which was of the view that Nimz could be seen to be second thoughts on the part of the ECJ and at least have cast doubt on the authority of Danfoss,42 from which the question of the influence of service on unequal pay was referred to the ECJ. The ECJ restated its view that length of service can be a proxy for better performance and is a legitimate way of rewarding experience. It decided that in order to initiate a claim, an employee seeking to argue that a service-based pay

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Wilson ET (2003), [66]. Health & Safety Executive v Cadman [2003] IRLR 29 (EAT). 39 Cadman EAT, [79]. 40 Ibid., [121]. 41 Cadman v Health & Safety Executive [2004] IRLR 971 (CA). 42 Cadman CA, [23].

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system is discriminatory must show evidence capable of raising serious doubts that rewarding experience acquired . . . enables the worker to perform his duties better.43 In arriving at this decision the Court reflected that in Danfoss it was stated that:
there may be situations in which recourse to the criterion of length of service must be justified by the employer in detail. That is so, in particular, where the worker provides evidence capable of giving rise to serious doubts as to whether recourse to the criterion of length of service is, in the circumstances, appropriate to attain the above-mentioned objective [of enabling the worker to perform his duties better].44

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In a second leg to its judgment the ECJ stated that where a job classification system based on an evaluation of the work to be carried out is used in determining pay, there is no need to show that an individual worker has acquired experience during the relevant period which has enabled him to perform his duties better.45 This addition serves to clarify that where such a collective grading system is in operation, the assessment of service and required experience should be considered across the appropriate group rather than upon the individual. Although the CA had decided that the conclusion of the Cadman ECJ should be referred back to a differently constituted ET, the Wilson claim had been referred back to the same ET, and it fell to the latter to first consider the ECJ decision. That ET, in setting out its original decision and reasoning, had anticipated that whatever was eventually determined in Cadman, there should be sufficient finding of fact for this case to be decided without further hearing. That was not to be so. The Tribunal viewed the ECJ judgment as sparse, forcing the parties to go to considerable lengths to interpret this enigmatic judgment.46 It set out the arguments presented with clarity and explained its own decision. Although initially inclined to opt for the arguments presented by the claimant it found in favour of the HSE, summarised thus:
It seems on careful analysis, that the exception provided by the serious doubts proviso is of theoretical rather than practical significance. In a professional-grade case like the present one, or that of Mrs Cadman, the chances of serious doubts being raised are negligible. The serious doubts exception seems to us only to be likely to apply in the case of a relatively unskilled worker, and not at all at a professional / managerial level, . . . .47

Cadman v Health & Safety Executive [2006] IRLR 969 (judgment), para 40. Cadman ECJ, paras 37 and 38, with reference to 34. 45 Ibid., para 39. 46 Wilson v Health & Safety Executive, Case 2901249/02, Shrewsbury ET (October 2007) (unreported), [21]. 47 Wilson ET (2007), [24].
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The case again came to the attention of the EAT which decided that the ET had adopted an interpretation of the ECJ that was too narrow as it:
looked at the question of serious doubts only by reference to whether the job was in principle one which could justify some differential based on length of service. . . . What the Tribunal did not do, however, was to ask itself whether in the light of the evidence adduced by the employee, it had serious doubts whether the ten year period which HSE had adopted was justified. Were there serious doubts whether experience would not improve job performance for the whole of this period?48
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That, it suggested, still presented an employee with a high burden of proof but once established, no doubt in many, if not virtually all, such cases the employer will have real difficulty in justifying the application of the criterion but the ECJ has held that the employer must have that opportunity.49 However, a new Tribunal that was to reconsider the case was advised to treat the periods it found appropriate for the accumulation of experience against the span of the incremental pay scale with some flexibility. It cited the analysis of the earlier Tribunal:
if the period [of gaining experience] were perhaps seven or eight years it would not have found the [10 year span of pay increments] period unjustified. That might possibly suggest that if the period were a bit longer then whilst it would have had doubts, these would not necessarily have been serious doubts as to the justification for the 10-year period.50

The Court of Appeal51 looked afresh at what the ECJ intended by serious doubts and decided that this provided a relatively low test, basically a filter to weed out the frivolous or trivial claim. It upheld the decision of the EAT that the scope of enquiry when considering justification should extend to the use of as well as to the implementation of service-related pay. More importantly, the Court observed that while EC law can improve the rights of workers over those stated in UK law, it cannot impose added hurdles upon their claims. It determined therefore that Mrs Wilson succeeded in her claim on liability and endorsed the original (2003) decision of the ET that the service increments applying should extend only to five years, that being the period within which the necessary experience would be gained to fulfil the requirements of the job.

48 49

Wilson v Health and Safety Executive [2009] IRLR 282, EAT, at [47]. Wilson EAT, [46]. 50 Ibid., [49]. 51 Wilson v Health and Safety Executive [2010] IRLR 59, CA.

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5. WHENLABOURLAWMEETSLABOURECONOMICS...
Both claimants came into the employment of HSE in the wake of changes in its recruitment criteria, introduced specifically to increase the number of women in the inspector grades. An inevitable consequence where a service-based pay structure exists, as it did at the time, is that there will be a cluster of the newly appointed women at the lower end of the pay scale. Had that pay structure remained unchanged, a challenge about the inequality of pay could arguably be justified by the transition of the new appointees up the scale. However, the pay structure was changed, the service progression being replaced by pay linked to performance, but having as an opening point the salary level achieved by each employee under the service-based structure. Between 1995 and 2000, the only way in which the newcomers could catch up with their longer serving colleagues was consistently to outperform them, and only since 2002 has there been a clear progression path in place. The Wilson ET looked to the detail of the pay systems and structures applied in HSE and to what it saw as a practical resolution of the claim. A fundamental question tackled by the Tribunal was the length of the incremental scale that can be justified. It referred to the EOC 1997 Code of Practice on Equal Pay and drew attention to the more recent Gender Equality Duty Code of Practice 2007, now mandatory for public bodies, which suggests attention to whether unjustifiably long pay scales are inadvertently discriminating against women. It decided that a 10-year incremental scale was unjustifiably long and substituted a five-year scale. The Tribunal based its judgment on this period of time being the norm for the achievement of a standard level of experience to fulfil the duties of the post satisfactorily. This was assessed primarily on evidence that it was after this period that other employers sought to poach inspectors from HSE.52 Its judgment was in the face of evidence that even though service increments had been abolished, loyalty allowances had been introduced for inspectors stretching beyond five years, specifically for reasons of retaining these now fully trained inspectors. Although there were doubts raised about the implication in Danfoss that only the relationship of experience to performance can be the reason for incremental pay scales, the possibility of an alternate reason was not canvassed or considered by this Tribunal. This was in spite of that Tribunals own observation,53 shared
Wilson ET (2003), [83]. . . . we found evidence that inspectors become more vulnerable to be poached at the 6 year mark and after, quite a strong indicator that the inspectors skills had reached their fruition at around the five year mark. 53 Most explicitly setting out its reservations It is not a universal truth that seniority will reflect well in the performance of tasks in every job. Seniority is not necessarily proportional or hand in hand with experience. . . . Further, experience is not always proportional to performance, which may pass its peak and deteriorate. Furthermore, it is not axiomatic in the labour market generally that loyalty should be rewarded. Wilson ET (2003) at [6].
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to some extent by the Cadman EAT,54 the Cadman CA55 and in the AdvocateGenerals opinion,56 that the Danfoss formulation, length of service goes hand in hand with experience and . . . experience generally enables the employee to perform his duties better, is too simplistic. However, the Tribunal quotes a passage from the Megaw Report:
Incremental scales reflect the fact that individuals take time to become proficient in all their work of their grade and make it possible to recognise increasing experience and provide some incentive for staff to stay in an organisation.57
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It appears to be these two elements that led the Tribunal to its decision, based on information concerning the time taken to reach proficiency together with evidence concerning the poaching of newly competent staff,58 that the length of the pay scale should not extend beyond a five-year period. It seems not to have considered that pay progression had extended beyond the point of poaching, being an integral part of the employers retention strategy. The Cadman ET did look to an alternative explanation by way of the employers difficulties in recruiting and retaining suitably qualified staff but found that, the Respondents had not identified problems in relation to retention of experienced staff or problems with regard to staff turnover, a view that the CA criticised as lacking the minimum. . . critical evaluation.59 The view of the Wilson ET,60 that progression should end when reaching full competence, is not that shared by remuneration practitioners. As Armstrong and Murlis explain:
Pay progression in a graded structure is typically planned to decelerate through the grade for two reasons. First it is argued in line with learning curve theory that pay increases should be higher during the earlier period in a job when learning is at its highest rate.

Cadman EAT, at [79]. Cadman CA, at [22]. 56 Cadman ECJ, [29][33]. 57 Wilson ET (2003), [66]. 58 Ibid., [50]. The award of these allowances was clearly aimed at staff retention. A contemporaneous internal HSE paper showed a cost of 2m per annum in replacement cost for this staff turnover. The Tribunal noted the main recorded reason for leaving was lack of pay progression and lack of promotion. 59 Cadman CA, at [34] quoting Allonby v Accrington and Rossendale College [2001] IRLR 364, CA at [29]. 60 The EAT decision in Wilson was supportive of this approach requiring a Tribunal to judge what it considers, on the evidence, would be the length of time an employee should gain sufficient experience such that any further experience would not add significantly to her performance to merit an addition to her pay. From that, it must judge whether that period and the existing span of the pay increments are of a reasonably similar duration (7 or 8 years compared with 10) as not to create serious doubts that would require justification.
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Second, it may be assumed that the central or reference point in the grade represents the market value of fully competent people. According to the pay policy of the organisation that may be at or higher than the median.61

The Tribunals assessment of the length of the scale covers only the first part of this arrangement. Rather than have a decelerating line of progression extending beyond achieving competency, the Tribunal would have it halt, wholly excluding the development phase of a pay system. The practice of using seniority in pay systems is considered in labour economics theory in the models presented by Becker and Lazear. Becker62 refined the theory of human capital to identify its general components, namely the knowledge and skills that a worker holds not only in his current job but also can take from one job to another, and the specific component, that which relates to the work of the particular employer. An employer such as HSE invests a high cost in providing training for new recruits, particularly when these are newcomers to the profession rather than incoming specialists from other industries. The employer would expect a return on its investment envisioning that cost as a depreciating asset over the expected period of the employees tenure. However, the training is vested in the employee who, subject to any contractual restraint which is likely to be minimal, is free to leave that employment. If the employee leaves within the period the remaining value of the employee is written off. If the employee remains in that employment beyond the depreciation period, any additional time may be counted as an appreciation of the asset. Also, the time in that employment can bring further value through development and further experience of the job. Hence, the positive and increasing value of the employee to the employer at a particular point in the employment period will vary, but will extend beyond the point of the achievement of a standard level of experience to fulfil the duties of the post satisfactorily. HSE recruitment practice will, in addition to seeking newcomers to train as general inspectors, look to acquire the services of those with specific knowledge of the industries it regulates. To obtain that knowledge, it will need to offer a pay and benefits package that at least matches the norm in those industries, and to offer opportunity of further progression. Similarly, those trained within HSE will gain, both through the substantial initial training and in-service development, knowledge and skill that are of value to those relevant industries. Rather than continually train and develop staff at considerable cost only to see the human

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M. Armstrong and H. Murlis, Reward Management: A Handbook of Remuneration Strategy and Practice, 5th edn (London: Kogan Page, 2004) at 289. 62 G.S. Becker, Human Capital: A Theoretical and Empirical Analysis (New York: Columbia University Press, 1964).

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capital in which it has invested leave its service, and in doing so import a further training cost cycle, HSE must set its remuneration at a level that will minimise staffs propensity to leave. From each of these perspectives, the pay at HSE must be set to achieve a level at least to match that of potential competitors. One method of devising such a pay structure is to apply Lazears theory63 of the implicit incentive of deferred benefits or delayed payment contracts. This model suggests that workers effort and productivity are positively influenced by the anticipation of future improvements in pay. It presents workers paid initially below the productivity optimum wage but rising above that level, by pay rising above a reference point as described by Armstrong and Murlis. The benefit to the employee is that having become established with an employer, he is paid at a level higher than the simple economic norm for that job. The employer gains by avoiding recruitment and training costs. As Marsden observed on this practice:
In their late careers, employees reap the return on this investment as their pay exceeds their productivity. The firm gains considerable advantages from this, as it provides incentives to undertake training that the firm needs, to work flexibly and loyally for the firms benefit.64

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Although Lazears theory is based around the benefit of avoiding shirking amongst manual workers,65 it is argued that the theory stands firm for non-manual workers whom the employer wishes to maintain a high standard of performance. These theories have a clear relevance to an employer such as HSE which has to provide a considerable amount of training some of which is employer specific but much is portable, and therefore provides a worker with opportunities beyond the immediate workplace. There is therefore a need for the employer to ensure that retention is kept at a manageable level, one strategy being to adopt a salary structure that holds a promise for more than the market rate. At the Wilson ET, HSE argued that shortened pay scales would result in more Inspectors leaving. The Tribunal responded, we would have thought inspectors wanted more money sooner, not a large number of increments. If
E.P. Lazear, Why Is There Mandatory Retirement? (1979) 87 Journal of Political Economy 12611284. See also E.P. Lazear and R.L. Moore, Incentives, Productivity, and Labor Contracts, (1984) 99 Quarterly Journal of Economics 275296. 64 D. Marsden, The Network Economy and Models of the Employment Contract: Psychological, Economic, and Legal, Discussion Paper dp0620 (London: London School of Economics, 2004) at 11. 65 Lazears argument is based around the productive levels of manual workers who will be discouraged from shirking or wrongdoing from which they risk dismissal and forego the advantage of being paid above the value of their marginal product. The theory has been tested empirically by Hutchens in the USA (A Test of Lazears Theory of Delayed Payment Contracts (1987) 5 Journal of Labor Economics, 153170), and more recently in Spain by Bayo-Morionese et al. (Is SeniorityBased Pay Used as a Motivational Device? Evidence from Plant Level Data, Discussion Paper No.646 (London: Centre for Economic Performance, London School of Economics, 2004).
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upward movement was thwarted that would be a promotion issue rather than a money issue.66 The Tribunal also recognised that the grade in question is the career grade, that is it is a grade in which the majority end their working careers.67 It is likely therefore that much of the turnover will not be from poaching of experienced employees, but the employee recognising that this career is likely to go no further and seeking opportunities elsewhere. The employer must identify at what point this is likely to occur and provide some incentive to remain. That incentive, which may comprise other elements as well as ongoing pay improvement, can be wrapped into a deferred benefit. There are many variations within payment systems whereby employees advance through a pay grade. Armstrong and Murlis note that although pay related to service is in itself contingent pay, there may well be other factors introduced into the progression formula such as performance, competence, contribution or skill.68 Whatever the nature of the periodic assessment, yearon-year advancement is dependent upon the consolidation into the employees standard pay of the increment awarded. Hence, pay structures built around these factors fall to be considered as service related even though the description may be performance related or competency/skill based. While it may be argued that the development of skill sets that are accounted within competencies amount to a cumulative factor that should be rewarded by incremental advance within a pay range, the consolidation of pay arising from the fulfilment of periodically set production/project targets is less evident. Similarly, can the behavioural aspects in both competence and performance appraisals be included? It is difficult to envisage that a particular level of, say, commitment observed in one year will necessarily carry over to the next, but this is a feature that is likely to be built over time. Most performance-related pay systems look not only at productivity but also combine more than one of these criteria. For example, a target-based performance scheme may also include a number of competency thresholds. Also, the productivity element is likely to build improvement year-on-year rather than to attain a standardised level of output. Many pay structures that are fundamentally service based now include limitations to progression at certain levels, for example the gateways in the NHS Agenda for Change scheme, or contribution points that are linked to skill, competence and performance now typical in Universities pay systems. In short, a decision about the validity of a particular incremental/cumulative pay structure will necessitate its unpicking to analyse its equality compliance. However, if such an exercise is undertaken by a Tribunal unfamiliar with the interplay of these
66 67

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Wilson ET (2003), [83]. Ibid., [51]. 68 Armstrong and Murlis, above n.61, 283.

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factors, it is possible that each factor is taken in isolation rather as a component of the system as a whole. For example, the assessment of performance may be seen to be reward for the actual achievement within a set period and not to be consolidated into standard pay. In certain circumstances that may be correct, but not always. Also as noted above, Lazear argues that payment in anticipation of high productivity is a key motivational device. The intervention of the UK government in the ECJ proceedings seems to have been motivated by the potential cost of the removal of seniority-based pay rather than support in principle for such a reward structure. HSE identified at the outset of these proceedings that there was a collective dimension and that a finding against it would have serious financial consequences for itself,69 and latterly for other government departments and agencies.70 A very rough estimate of the cost to HSE of applying the Wilson outcome of a 5-point scale in place of a 10-point scale to the population of Band 3 using information in the Wilson ET judgment71 suggests an increase of about 500,000 pa, (at 200001 costs) or about 3.3%. The gender pay gap within the grade would decrease from about 4.53.6%. The possibility of a direct transition to a singlepoint scale at the grade maximum of Grade 3 that would have applied from the Cadman ET could have cost about 2.5m pa.72 Although these cases have been portrayed as a means by which the gender pay gap will be reduced, that may not be so. HSE employs approximately the same number of women as men. Men are in a clear majority in the upper three grades (SCS 1 and 2) in a ratio of 3:1, while in the lowest two grades (5 and 6) women

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Risk: Loss/Disruption Arising From Adverse Equal Pay Judgements: likely to increase to high if the decision in the recent Equal Pay Tribunal goes against HSE and in favour of the applicant. TU side will undoubtedly take forward substantial numbers of additional cases if the decision goes against HSE. . . . Serious threat of additional Equal Pay casesthis may be in the order of over 200 cases pending. HSE unlikely to be able to meet costs of fighting cases or deal with impact on pay system from within own resources. Health and Safety Executive Board Paper B/02/033, Business Risk Management Annex F, p6, 3 July 2002. Also, a reference to these cases has been included in each HSE Annual Report since 200203 under the heading of Contingent Liabilities. 70 As [the decision of the Wilson EAT] has implications for other departments and agencies, HSE lodged a protective appeal to allow for cross-Whitehall consideration. HSE Annual Accounts 2008-9, para 22. Also Prospect [the union that supported these two claims] will use the [Wilson CA] judgment in another 80 Tribunal claims: Profile (the members magazine of Prospect) October 2009, p 22. 71 At [54] and [79]: staff numbers are 2002, pay scale is at 2000. 72 This possibility was canvassed in the Cadman EAT at [6]; Perhaps of wider significance to HSE is the obvious danger that male Principal Inspectors who are paid less than Mrs Cadmans top earning comparator will . . . seek to compare themselves hereafter with Mrs Cadman on the basis that they do like work to hers and that, by what is described as a ratchet effect all Band 2 Inspectors, whatever their seniority, and subject to differences in performance, will become entitled to the same pay as the highest earning such inspector.

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outnumber men in a ratio of 2:1. There are more men at the higher salary points of the upper three grades and more women at the higher points of the lowest two grades. There are more than twice as many men in the lowest two grades than there are women in the top upper three.73 Whether the employer will realign its whole grading structure based on the Wilson judgment remains to be seen. If it does there is likely to be a benefit for the men in the lower grades as well as the women in the higher grades which may neutralise the overall effect on the gender pay gap within the organisation. HSE has meanwhile acted to reduce the number of incremental steps in the scale from 10 to 8 in collective agreements in 2005 and 2008.

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6. ...ANDLABOURRELATIONS
An employer faced with a step change in its pay bill of what may appear to be a modest amount is unlikely to leave the matter there. Whether a company faced with a competitive market or as in this case a government funded body, it is likely to seek to recover the level of its pay bill to a market or forecasted norm. HSE appears to have taken such actions in anticipation by realigning its salary structure and staff numbers.74 A change in the pay structure in 2003 without a negotiated settlement with the unions in the face of industrial action was made because it had to take action to resolve equal pay issues by giving larger increases to lower-paid staff. The view of the union was that, the HSE board has brought this damaging action on itself by proposing that experienced staff take pay cuts to bail HSE out of its equal pay problems.75 There is evidence in both the Cadman and Wilson ET judgments that progress in rectifying the inequality created by the 1995 pay structure could have been speedier. The initial Wilson judgment states explicitly that some of the responsibility lay with the trade unionsas we have seen, it suggests that left to their own devices, without the influence of the trade unions, . . . the pay gap might have been reduced earlier,76 the influence likely emanating from the vociferous group cited above.77 Guidance for dealing with civil service pay for 201011 (which is little different in this regard from recent past guidance) anticipates action where inequality is identified within a pay structure and advises:
Where Departments have identified a potential pay inequality, they will need to provide evidence of its extent and propose ways to tackle this in a cost-effective manner subject

These data are taken from the HSE Equality Schemes Framework (December 2006). Because of transfers into and out of HSE, it is difficult to gauge the change in staff numbers, but there appears to a reduction in the range of 1015% since 2002. 75 Pay row rumbles on, The Safety & Health Practitioner, August 2004, vol 22.8, p 2. 76 Wilson ET (December 2003), [17]. 77 Ibid., [53].
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to affordability constraints. Departments may need to prioritise within the constraints of the remit and strike an appropriate balance between general pay increases for staff and addressing issues arising from equal pay/age discrimination legislation.78

Put simply, the matter must be resolved within budget. The Wilson Tribunal noted that the unions were, and are, consistently opposed to performance related pay. Management were not any more enthusiastic in view of the additional burden an problems it generated.79 If this observation is correct, that both parties to the pay agreement operated it without enthusiasm, but solely by direction of the supervising Department to implement a performance-based system, it is hardly surprising that the equal pay pitfalls were not identified and dealt with at an early stage. In 1992 and 1995, there was a paradigm shift in both the arrangements for collective bargaining and in the pay system and structure. In 1992, pay bargaining was delegated and pay steps introduced. In 1995, single table bargaining was applied and pay was related entirely to performance. Performance pay can be seen as a means by which a unions part in the joint regulation of pay is weakened, as the actual distribution of a pay increase is determined not by the collective agreement but by the outcome of an appraisal by the manager. Kessler and Purcell suggest that there are strong grounds for suggesting that in general terms performance pay schemes constitute a challenge to collectivism. These schemes rely upon mechanisms for uprating pay which lie beyond the scope of collective bargaining and are often dependent upon the exercise of managerial discretion.80 This tends to localise conflict about pay into the managerial structure and the resolution of such conflict is directed to an individual grievance procedure rather than a collective disputes procedure. This approach is part of the change from a pluralist ideology of employment relations developed over a half century to the 1980s to the unitary approach prevalent since then which views differences solely through the individual employee to employer lens. Gagnon identifies a number of factors seen to be constraints on the reform of the change to performance pay under a devolved agency status. These include the Treasury need for financial control; imposed change and agency reluctance; agency lack of resources and trade union reluctance, which includes lack of resources to deal with the changes, particularly the new pay structures and the move to a multiplicity of bargaining units.81 A move to enterprise or single table

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H M Treasury, Civil Service Pay Guidance 2010-11, para 6.13. Wilson ET (December 2003), [32]. 80 I. Kessler and J. Purcell, Individualism and Collectivism in Theory and Practice in P Edwards (ed), Industrial Relations: Theory and Practice in Britain, (Oxford: Blackwell, 1995) at 350. 81 Gagnon, above n.10, 3944.
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bargaining also brings challenges for the unions simply by extending the number of interest groups within a bargaining unit, and giving rise to potential conflict between those interests. There are impacts throughout the bargaining process; in developing a claim strategy that will satisfy all, in developing compromises or adjustments that do provide gain for one group but not for others (and certainly not at the expense of others) and in the event of a failure to reach agreement on gaining unity for industrial action. Hence from a union perspective, the changes require a reallocation of resources not only to meet the need for direct bargaining with the employer on the institutional arrangements for bargaining and getting to grips with a new pay system but also to refocus on dealing with conflict relating to pay not only within the internal management structure but also across a wider range of interest groups some of whom will be beyond its direct influence. Gagnon considers that the trade unions had a tangible impact on the rate of change, if not the content,82 perhaps arising from a preoccupation with preventing the implementation of an unwanted scheme rather than dealing adequately with the consequences of implementation. Two claims, brought a year apart by employees a pay grade apart, could bring confusion if the outcomes are expected to influence the pay structure. Although the two Tribunals determined the legal question in the same direction, each brought a different approach to the resolution of the claim, one by straightforwardly awarding the pay of the comparator, and the other by producing a proportionate revision to the pay scale. Is the employer now to amend its pay structure and if so which of these does it apply? HSE asserted in the Wilson ET that the unions83 were looking to a five-year-based pay structure and seeking to achieve through the law what had not been achievable through collective bargaining.84 It could be that the unions hope that a success at law will produce added finance which is being withheld at the bargaining table. The management view (in the form of Treasury Guidance) is clear:
When equality proofing reward policies, Departments should be wary of arguments that five years must be the appropriate length for any pay range. Departments should consider whether their pay range lengths are suitable and make a proper assessment of the pay arrangements for different groups/roles within each responsibility level.85

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Ibid. Although these claims were supported by the claimants union Prospect, it is noted that there is single table bargaining where another of the constituent unions, PCS, supported the earlier litigation, Crossley v ACAS, which raised the same issues as here in the context of a broadly similar transition from an annual increment pay structure to performance related pay. 84 Wilson ET (December 2003), para 84. 85 H M Treasury, Civil Service Pay Guidance 2010-11, para 6.12.
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The way in which collective bargaining is structured does not appear to assist when dealing with such intractable issues. Here the remit for bargaining is set by the Treasury which determines not only the value envelope within which bargaining may take place but also the payment system to be applied. HSE management may have to some degree to be the messenger of unions or staff dissatisfaction through its business case to the Treasury in order to gain approval to attend to these issues. If the Treasury remit falls short of what the unions find acceptable, subject to any iterative process between HSE and the Treasury, the unions are faced with the imposition of an unsatisfactory solution or to engage in industrial action. Such arms-length arrangements of the institutions of collective bargaining do not lend themselves to straightforward voluntary settlement. Where there is likely to be insufficient leverage from any possible industrial action, there is a tendency to see an action through the Tribunals and Courts to be an alternate method of unilateral arbitration. Lester and Wainwright observed that equal pay claims are brought on behalf of individuals or groups of individuals and the results of those claims will not always have collective consequences. But often a decision about an individual case against a large or medium-sized employer will have important repercussions for collective agreements and wage structures.86 Wood describes the arbitrators nightmare of unforeseen consequences when faced with a simple grading claim [which] may represent an attempt not merely to remedy the grade of an individual: it may be an attempt to change the rules of the grading system by means of a decision in that individual case which is expected to change the overall system.87 That collective dimension is often ignored as in the Cadman CA judgment: What the employer is seeking to justify is the appropriateness of the pay system as a whole. . . . We do not find it persuasive. Section 1(2) of the Equal Pay Act focuses on a contract under which a woman is employed.88 Although there is a mention in the ECJ judgment of how to deal with inequalities within collective pay structures that are based on job evaluation,89 (though that might be lost in Arden LJs analogy of Cinderellas slipper90) nowhere is there any means for a Tribunal or Court to identify or guard against the equivalent of the arbitrators nightmare in order to avoid introducing change beyond that presented in the individual claim.

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86 A. Lester and D. Wainwright, Equal Pay for Work of Equal Value: Law and Practice (London: TMS Management Consultants, 1984) at 17. 87 Sir John Wood, Last Offer Arbitration (1983) 23 British Journal of Industrial Relations 41524. Another eminent arbitrator, John Gennard, refers to this passage in a discussion of disputes of rights and disputes of interest: Voluntary Arbitration: The Unsung Hero (2009) 40 Industrial Relations Journal 30923. 88 Cadman CA at [38]. 89 Cadman ECJ (judgment), para 40. 90 Wilson EAT at [67].

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Inevitably appeals in the higher courts concentrate on the proper interpretation and application of the law. These interpretations give rise to directions and guidance that may limit the scope of enquiry and actions of an ET in its efforts to present a solution that will be practical in its implementation. Even if a Tribunal possesses the background and skills to deconstruct a pay structure to identify those elements that cause or contribute to unequal pay, it will not and cannot look beyond the claim as presented to identify what (direct and indirect) effects a decision it may make might have on the pay structure in its entirety. The employer who faces such claims may well meet an outcome that an element of its pay structure is arbitrarily shifted bringing unforeseen and unintended consequences. As Dickens has recently commented, the current legal framework risks setting up conflicts between legal regulation and that achieved via collective bargaining rather than seeking to exploit potential complementarities and develop mutually re-enforcing strategies.91 Until 1986, the EqPA (at section 3) contained a provision that enabled the Central Arbitration Committee (CAC) to consider references made by a party to a collective agreement where the agreement appeared to contain a provision specifically to men only or to women only. This took a form of unilateral arbitration from which the CAC were able to make amendments to an entire pay structure where it was found to apply unequal pay. The provision was removed by the Sex Discrimination Act 1986. Lowry comments that the demise of this facility removed one route of enforcement leaving the second and possibly more tortuous option of references of individual complaints through the industrial tribunal procedure . . ..92 The CAC brought a different approach to equal pay than that applied by the Tribunals. Rather than adjudicate simply on whether equal pay did or did not apply in a given situation, there were efforts to bring the parties to an acceptable solution. As it described in a CAC Annual Report:
[The Committee] has been determined to discover and evaluate the actual position, rather than rely on the superficial description in the collective agreement or the apparent intent of the pay structure. Above all it has been keen to obtain the participation of the parties in the way defects are remedied. Only in this way is it felt that an acceptable solution can be reached.93

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The reference of claims of unequal value that are concerned with some element of the design or application of the pay structure could be better judged

L. Dickens, The Road Is Long: Thirty Years of Equality Legislation in Britain, (2007) 45 British Journal of Industrial Relations 463, at 483. 92 P Lowry, Employment Disputes and the Third Party (London: Macmillan, 1990). 93 CAC Annual Report 1979, at p 13.

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by the CAC were it given the authority for a wider jurisdiction sought in the wake of the Hy-Mac judgment in 197994 by Davies95 and to use their problemsolving abilities to gain an acceptable and lasting solution. Such an approach has since been proposed at various times by the EOC,96 and by a number of leading commentators.97 That would not wholly preclude cases being heard by ETs who could attend to the cases where there are individual concerns not likely to have repercussions throughout the pay structure.
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7. CONCLUSIONS
These cases were, in reality, not issues of the validity of pay based upon service but of a pay structure that had gone badly wrong by a new structure being imposed on an old structure without adequate attention to the consequences. The prime responsibility for that situation lies with management though it would appear that the unions inability to help resolve the difficulty was complicit. To some extent, the ability of the parties to reconcile any difference is substantially hindered by collective bargaining taking place at arms length from the real decision makers. The ETs were not helped by the uncertainty in which HSE sought to justify the structure, though that may be due to the new arrangements being imposed upon them without adequate explanation and, indeed, of the former system being in place for so long that whatever the reason for its application would be beyond memory. The focus of both management and unions seems at the time of change to have been diverse in dealing with a paradigm shift of both a pay system and structure, and of the bargaining arrangements and the means of dispute resolution. The litigation has gone, at length, down the path of seeking to resolve the issue of whether Danfoss continues to apply as was understood 20 years ago. The outcome, basically that the use of service as a factor of a pay system should not be challenged subject to the structure being transparent, is shifted in effect to minimise the limitation on a challenge. The Court of Appeal sought and received an opinion on this contested issue from the ECJ. What astonishes this non-lawyer

R v Central Arbitration Committee, ex parte Hy-Mac Ltd [1979] IRLR 461 (QBD). P. L. Davies, The Central Arbitration Committee and Equal Pay [1980] Current Legal Problems 165, at 188: . . . the way forward would seem to lie in the amendment to section 3 so as to give legislative underpinning to the Committees current practice. 96 For example, Equal Pay for Work of Equal Value (September 1982) through to Just Pay (2001). 97 B. Hepple, M. Coussey and T. Choudray, EqualityA New Framework. Report of the Independent Review of the Enforcement of UK Anti-Discrimination Legislation (Oxford: Hart, 2000) (at recommendation 29, 75). See also Dickens, above n.91; S. Fredman, Reforming Equal Pay Laws (2008) 37 ILJ 193217.
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is that on receipt of that opinion the Court of Appeal did not directly put that opinion into a UK context, but allowed a further three years and attempts by two lower courts to provide that context before determining the matter. Transparency, seemingly not an issue in these cases, is now a requirement imposed by the Equalities Act 2010, and may call into question the underlying method of pay progression in some pay structures. The developments in pay structures in the last 30 years, such that the use of a sole service criterion for incremental advance having been overlaid with other, broadly output or merit criteria may have caused a structure to become opaque, even if not intentionally so. The circumstances in which these claims were brought were undoubtedly discriminatory. However, the pay structure challenged in these claims was not that which a remuneration specialist would recognise as service based. The re-interpretation of the law opens the possibility of further challenges of pay systems linked to service, and this article has sought to outline the issues that arise when viewed from non-legal perspectives, and to question whether the present arrangement by which challenges are made through the ET is the most appropriate and effective.

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