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 Kontorfunktionærenes 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
3

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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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involving delegation of pay determination and the introduction of pay linked to performance. a 20-point scale for Clerks and a 10-point scale for Principal Clerks and Assistant Secretaries. The Report recommended a move to ‘informed collective bargaining’ and a shift away from incremental pay scales to performance-related pay. Routh5 records that in 1913 there was.     THE HSE PAY STRUCTURES Until 1988. meaning that the level of pay is in some way linked to the time served in the post or pay grade. with pay increases Downloaded from http://ilj. 8 There is an interesting commentary. 2012 G.oxfordjournals. on the recommendation of the Royal Commission on the Civil Service (the Priestley Commission).org/ at 07988000 on January 22. on average a 30 point pay scale for ‘Lower Division’ staff. 2. pp 266–7). 1980). 6 5 384 . 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. Report to the Prime Minister (London: HMSO. 1988). including the view that ‘Megaw’s 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. The level of payment at each point was determined through collective bargaining in the National Whitley Council from 1919.6 Civil Service pay was based on evidence of pay comparisons outside the service produced by a Pay Research Unit.8 The implementation of that recommendation came about as a part of the government’s pay reform programme. or with the employer.Industrial Law Journal Volume 39 the literature and court judgments. 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. Routh. This type of pay structure had been in place at least from the early part of the 20th century. From 1955. Cmnd 9613 (1955). Seniority here refers neither to the differences between levels within hierarchies nor to the age of the employee. 7 Cmnd 8590 (1982). 9 Efficiency Unit. no 4. Improving Management in Government: The Next Steps.9 which required that ‘individual performance would be accorded more weight than in the past. Occupation and Pay in Great Britain 1906-79 (London: Macmillan.

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’. 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. the grade maxima were increased at a lesser rate than what was produced by an equity share increase. A job evaluation study was undertaken which provided the basis of the present grading of posts. 12 For a discussion of this practice in the Employment Service. In 1995. there were a series of agreements which introduced and developed this concept. which produced no pay increase. there was a significant revision of the HSE pay structure. Performance was assessed to give ‘box marks’ A. . ‘What a Performance: Performance Related Pay in the Public Services’.6.13 creating a group of inspectors with personal maxima (that 10 S. ‘Promises vs Performance: Pay Devolution to “Next Steps” Executive Agencies in the British Civil Service’ (1996) 25 Employment Relations 26. Principal Inspectors to Band 2. Also. both to simplify the inherited set of nine pay agreements and to reinforce the linking of pay to performance. 13 For example. HSE has no delegated power to amend these terms and conditions . 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. 19. D. French.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. C which provided for a pay increase in the ratio of 6:5:4 from the equity share ‘pot’: there was a further box. 11 Department for Work and Pensions/Health and Safety Executive Framework Document. which was rarely used. 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]. Pay progression was determined by annual performance assessments.3. Gagnon. in accordance with the Equal Opportunities Commission (EOC) Code of Practice on Equal Pay. The vast majority in each of the grades were marked as ‘box B’. it appears that the Band 3 minimum increased by about 30% from 1993 to 2000 while the grade maximum increased by less than 8%. From the evaluation. as part of their regular three yearly reviews of their pay structures. 2012 385 . seven ‘broad-band’ grades were established. In 1992.org/ at 07988000 on January 22. performance became a requirement for progression within the pay spine. B. when pay determination was delegated. In 1988. see D. as part of the centralised Civil Service pay structure. 1998) at 37–54. . Pay and Conditions of Service states: ‘19. 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’. Marsden and S. a system of pay steps within a range replaced the seniority-based incremental scales. Centre for Economic Performance Special Paper No 10 (London: London School of Economics.11 A condition of delegation placed upon agencies such as HSE was that they should ‘equality proof’ their pay systems.oxfordjournals. Downloaded from http://ilj. Inspectors were allocated to Band 3. For HSE.December 2010  Justifying Service-Related Pay to be based primarily on individual performance’.10 In the case of HSE.

[9] (xxx). This gave rise to concerns from staff that there was no relative progression. 35.16 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 employer conceded that the effect of service on the pay scales had a disproportionate impact on women. 19 Ibid. without the influence of the trade unions . 18 Wilson ET (2003). pay increases were based entirely upon performance.10. In evidence to the Cadman ET. the pay gap might have been reduced earlier’. showing that. HSE stated three objectives: to ensure that staff could see progress through the pay band.19 Downloaded from http://ilj. 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.org/ at 07988000 on January 22. 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. the progression arrangement was revised such that the maximum time for a satisfactory performer to reach the scale maximum would not exceed 10 years. 386 . . in practice ‘considerably opened up opportunities for women’. In 2002. Since then progression has been based on a mix of performance and a negotiated annual increase. [53]. The timing of these developments coincides with the ET decision in Crossley. Case 2404527/01. 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]. .oxfordjournals. and to reward all staff including longer serving staff. 2012 14 Wilson v Health & Safety Executive. subject to performance markings’. 15 Gagnon. Manchester ET (unreported) at [9] (xiii). implemented in 2000.15 although there were additional ‘loyalty’ increments applied to the Inspector grade. paid at a level above the stated grade maximum) described by management as a ‘vociferous group in pay negotiations’. HSE drew up a revised pay structure. above n. 17 Cadman ET.14 Between 1995 and 2000.18 In both these cases.17 The Wilson ET found that had HSE been ‘left to their own devices.Industrial Law Journal Volume 39 is. ‘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. [25]. To some extent. Shrewsbury ET (December 2003) (unreported). reflecting the limits placed by the Treasury on such increases at the outset of this phase. to establish a link between pay and performance. From these influences. Case 2901249/02. 16 Cadman v Health & Safety Executive. That had.

in a protected pay category. .org/ at 07988000 on January 22. in respect of matters such as length of service.December 2010  Justifying Service-Related Pay Mrs Cadman’s claim was presented in June 2001 and was heard by the ET sitting at Manchester in May 2002. the EqPA 1970 is superseded by the Equality Act 2010. If an employer wishes to make additional payment to people employed on like work. Specifically. ‘where the woman is employed on work rated as equivalent to that of a man . merit. in part. 22 Hansard.22 From 1 October 2010. 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. or to other circumstances personal to him in doing that job’. . or gives bigger output or productivity. An appeal against that judgment was heard in June 2003 and determined in October 2003. but resisted the claim through section 1(3) of EqPA—‘an equality clause shall not operate . the Bill will do nothing to hinder him. or has superior skill or qualifications. 20 387 .’. . 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. . House of Commons Debates. 21 [1978] IRLR 263 (CA). provided that the payments are available to any person who qualifies regardless of sex.     THE LEGAL CONTEXT The claims were made under section 1(2) (b) of the Equal Pay Act (EqPA) 1970. HSE accepted that each of the two claimants and their relevant comparators were engaged on work rated as equivalent. its judgment being promulgated in December 2003. or has been placed.oxfordjournals.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. level of output and so on. the ‘material factor defence’ is at s 69. 9 February 1970. Downloaded from http://ilj. 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 . owing to downgrading. Mrs Barbara Castle. Mrs Wilson presented her claim in July 2002 which was heard by the ET sitting at Shrewsbury in May 2003. . must be material difference between the woman’s case and the man’s’. vol 795 c920. 2012 3. ‘work rated as equivalent’ is covered by s 65(1)(b). following that Tribunal reviewing its original decision in the light of the Cadman appeal decision. Lord Denning was following. its judgment promulgated in October 2002. . vividly described as “red-circled”.

since length of service goes hand in hand with experience and since experience generally enables the employee to perform his duties better. 23 24 Hansard. between Mrs Cadman and Mrs Wilson and each of their named comparators.Industrial Law Journal Volume 39 Similarly in the House of Lord.24 Downloaded from http://ilj. . but relied primarily on Danfoss to argue that justification was unnecessary. . For HSE. .oxfordjournals. 25 [1991] IRLR 222 (ECJ).25 concerning the experience gained by parttime workers. merit. such as the employee’s . the employer does not have to provide special justification for recourse to the criterion of length of service. length of service. from Baroness Phillips: . level of output and so on. provided that they also distinguish between a man and a man in the same circumstances. Employers will thus be able to continue to distinguish between a man and a woman on genuine grounds such as seniority. . Danfoss. explicitly permitted by the ECJ in Danfoss. . 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. and Hill & Stapleton v Revenue Commissioners and Department of Finance. . They argued that the difference. was modified by the decision in two cases involving the service implications on pay of atypical workers. . vol 310 c124. that judgment. . for the award of pay supplements systematically works to the disadvantage of female employees . and not to discrimination on grounds of sex. was qualified by later judgments. 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.23 The arguments presented by the claimants in these cases were that the leeway given for service-related pay. . The relevant part of the Danfoss judgment states that: . . the Equal Pay Directive must be interpreted as meaning that where it appears that the application of criteria. the criterion of length of service .26 dealing with movements between job-share and full-time work. In those circumstances . . 5 May 1970. paras 24–5. the claims could not succeed. it was claimed. .org/ at 07988000 on January 22. HSE also argued that the decisions in Nimz and Hill were particular to the circumstances of those atypical workers. Nimz v Freie und Hansestadt Hamburg. House of Lords Debates. Nevertheless. it was argued that if Danfoss remained good law and if the present cases could not be distinguished from it. 388 . 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. 26 [1998] IRLR 466 (ECJ). 2012 However. was genuinely due to a material factor other than sex and was justified.

Prior to that she had worked in hospitals as a medical technician and researcher. or near. she was appointed to a post of Inspector in 1993 and was started at the lowest point of the pay scale for that post. subject to any differences that may be attributable to performance. she was appointed to a post of Inspector and was started at the lowest point of the pay scale for that post. Mrs Cadman was appointed to the Principal Inspector grade at the scale minimum.  Mrs Wilson Christine Wilson joined HSE as a Trainee Inspector in 1990. 2012 B. she claimed equal pay with three named male comparators. In November 1996.     THE CLAIMANTS A.000 above the minimum. progressing to inspector after three years and to the Principal Inspector about 10 years thereafter. 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. all undertaking the same range of duties as her.December 2010  Justifying Service-Related Pay 4.oxfordjournals. she claimed equal pay with four named male comparators who were undertaking jobs rated as equivalent. 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. In 2001. she was promoted to Principal Inspector. and had taken time out of employment to have two children.org/ at 07988000 on January 22.27 By contrast. were due to length of service with HSE and within the grade.  Mrs Cadman Bernadette Cadman joined the Civil Service in 1984 as an Executive Officer in the Department of Social Security. Three years later. As he had been longer in the lower grade. 389 . 27 Cadman ET. In 2002. The difference in the salaries of Mrs Cadman and the four comparators was identified to be due to length of service. [9] (xxvi). he thereby benefited from the pay grade overlaps. As with Mrs Cadman. The other comparator had longer service in the lower Inspector grade. Downloaded from http://ilj. transferring to the HSE as a Trainee Inspector in 1990. The differences in pay. Three of the comparators had joined the predecessor of HSE in the 1960s or 1970s as trainees. and were paid within the same salary range but at a higher level than her. long enough to be at. and who were paid within the same salary range but at a higher level. but was promoted only 13 months before Mrs Cadman. the grade maximum by 1995.

the ECJ decided that it is permissible to provide ex post facto justification. [24]—this point was rejected on appeal at the EAT. As to performance pay. 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’. [28]. her comparators similarly were marked at box B though two of the three comparators had each achieved an odd box A marking. to promote staff retention.31 Ibid. Subsequently and in a different case. 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. This was paid originally as staged amounts after five and eight years’ service..org/ at 07988000 on January 22. and probably discriminatory. Unlike Mrs Cadman.  In the Tribunals and Courts Both ETs were persuaded that the decision in Danfoss was qualified by the later decisions in Nimz and in Hill and Stapleton. [31]. Downloaded from http://ilj. However.. although the salary point achieved in the lower pay range was influential in determining the starting point in the higher range on promotion. 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.oxfordjournals..28 Moreover. pay system’.. though that reason must fulfil the Bilka test—Schőnheit v Stadt Frankfurt am Main [2004] IRLR 983 (ECJ). 30 Ibid.30 It considered that the employers had not consciously addressed the justification issue and explained it or justified it at the relevant time—‘it was instead a justification after the event’. This grade enjoyed a further element of service-related pay that of an allowance. ‘an incremental system that reflected the general accumulation of experience inside and outside the organisation did not exist in the pay structure’29. reducing to four and six years from 1997. [29]. namely. 2012 C. 29 28 390 .Industrial Law Journal Volume 39 She had experienced the same changes in pay systems as Mrs Cadman. Ibid. she received consistent box B markings. replacing ‘accelerated increments’ in the earlier pay system. the move to performance pay based on equity shares in 1995 and the mix of performance and a negotiated annual increase from 2000. Similarly. Mrs Wilson remained in the ‘career grade’ of Inspector at Band 3. 31 Ibid. The Tribunal found that the ‘reasons given for this differential were historical in that they reflected the previous incremental. 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 HSE’s core business.

Is the scale longer than it need be? Are there good practical reasons for a scale of that length? Downloaded from http://ilj. 35 Wilson ET (2003). 1997). [12]. but estimated that it would take her 11 years to reach the grade maximum.oxfordjournals. 2012 The analysis undertaken by this Tribunal appears to be attuned to identifying the precise elements of the pay differentials of the claimant and comparators. [14]. .org/ at 07988000 on January 22.g. . identifying the nature of the transitions and accepting two elements of the current system to be genuine material factors and justified. work to the detriment of women more than men. [27].34 (not considered in the Cadman proceedings) which it stated ‘played an influential part in our deliberations’35 and had ‘a profound effect upon our . it separated the periods of the distinct payment systems. e.December 2010  Justifying Service-Related Pay It decided that the difference between Mrs Cadman and her near-contemporary comparator arose from the difference in time spent in the lower grade. 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. Are these clearly understood? Does any particular criterion.36 In particular. It also noted how the differential between Mrs Wilson and her comparators had reduced over time. decision’. [33]. 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. If so.. 34 EOC. In so doing. 391 . 36 Ibid. These were the differences arising from ‘box markings’ between Mrs Wilson and her comparators and any difference arising from the ‘loyalty’ allowance.33 A year later. Ibid.32 while the difference between her and the other three comparators was said to be a mix of service in both grades. whereas two of the three 32 33 Cadman ET. length of service.. it referred to paragraph 28(c) of the Code: Problem Women progress more slowly through incremental salary scale and seldom reach higher points. The Tribunal referred to the EOC Code of Practice on Equal Pay. 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’. Code of Practice on Equal Pay (London: EOC. Recommended action Investigate the criteria applied for progression through the scales.

. 2012 37 38 Wilson ET (2003). . concluded its decision on 22 July 2003. [23]. it decided that ‘.40 The Wilson ET. 41 Cadman v Health & Safety Executive [2004] IRLR 971 (CA). Mrs Wilson’s claim was dismissed. It recognised that they were bound by the decision of the higher court. 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. . 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’. . . . It also commented that as ‘the reasons given for the differential were historical only . It went on to find that ‘experience . 42 Cadman CA. The ECJ restated its view that length of service can be a proxy for better performance and is a legitimate way of rewarding experience. [121]. [79].42 from which the question of the influence of service on unequal pay was referred to the ECJ. Danfoss remains good law’39 and upheld the appeal. and indeed the empirical truth of the reasoning in Danfoss’. The Wilson ET met again on 21 November 2003 and with the benefit of the EAT judgment reviewed its earlier decision. but not without some reservations about the ‘generality.oxfordjournals. An appeal against that decision was stayed until the conclusion of the Cadman proceedings. is of value to HSE such as would justify some form of differential payment’. Meanwhile.Industrial Law Journal Volume 39 comparators had achieved that point after six years. beyond the initial appointment .. Health & Safety Executive v Cadman [2003] IRLR 29 (EAT). 392 . having heard evidence and argument in May and July 2003.38 However.37 In analysing the ‘correlation of seniority in band with the value to HSE’. 40 Ibid. to the extent that Mrs Wilson would be treated as if she had progressed to the scale maximum after five years in post. . It was made aware that the EAT had upheld the opinion that Danfoss remained good law. 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. [66]. It decided that in order to initiate a claim. an employee seeking to argue that a service-based pay Downloaded from http://ilj. 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’.org/ at 07988000 on January 22. . 39 Cadman EAT. 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.

That is so. 47 Wilson ET (2007).44 Downloaded from http://ilj.oxfordjournals. 44 43 393 . in particular. enables the worker to perform his duties better’. .47 Cadman v Health & Safety Executive [2006] IRLR 969 (judgment). and it fell to the latter to first consider the ECJ decision. in setting out its original decision and reasoning. Although initially inclined to opt for the arguments presented by the claimant it found in favour of the HSE.45 This addition serves to clarify that where such a collective grading system is in operation. para 40. [24]. The serious doubts exception seems to us only to be likely to apply in the case of a relatively unskilled worker.. . 46 Wilson v Health & Safety Executive. where the worker provides evidence capable of giving rise to serious doubts as to whether recourse to the criterion of length of service is. Cadman ECJ. the assessment of service and required experience should be considered across the appropriate group rather than upon the individual. that the exception provided by the ‘serious doubts’ proviso is of theoretical rather than practical significance. That was not to be so. the chances of ‘serious doubts’ being raised are negligible. . 45 Ibid. appropriate to attain the above-mentioned objective [of enabling the worker to perform his duties better]. 2012 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. paras 37 and 38. The Tribunal viewed the ECJ judgment as ‘sparse’. and not at all at a professional / managerial level. In a professional-grade case like the present one. there should be sufficient finding of fact for this case to be decided without further hearing.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. Case 2901249/02. summarised thus: It seems on careful analysis. had anticipated that whatever was eventually determined in Cadman. Shrewsbury ET (October 2007) (unreported). para 39. in the circumstances. . . 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’. . Although the CA had decided that the conclusion of the Cadman ECJ should be referred back to a differently constituted ET.org/ at 07988000 on January 22. forcing the parties ‘to go to considerable lengths to interpret this enigmatic judgment’. That ET.46 It set out the arguments presented with clarity and explained its own decision. or that of Mrs Cadman.December 2010  Justifying Service-Related Pay system is discriminatory must show ‘evidence capable of raising serious doubts’ that ‘rewarding experience acquired . with reference to 34. the Wilson claim had been referred back to the same ET. [21].

.49 However. basically a filter to weed out the frivolous or trivial claim. 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.50 The Court of Appeal51 looked afresh at what the ECJ intended by ‘serious doubts’ and decided that this provided a relatively low test. it cannot impose added hurdles upon their claims. still presented an employee with a high burden of proof but once established. 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.. these would not necessarily have been serious doubts as to the justification for the 10-year period. 394 . however. it had serious doubts whether the ten year period which HSE had adopted was justified. 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. if not virtually all. that being the period within which the necessary experience would be gained to fulfil the requirements of the job. was to ask itself whether in the light of the evidence adduced by the employee. [46]. 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’. 2012 That. EAT.Industrial Law Journal Volume 39 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. it suggested. 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. 51 Wilson v Health and Safety Executive [2010] IRLR 59. [49]. .oxfordjournals. at [47]. That might possibly suggest that if the period were a bit longer then whilst it would have had doubts. Were there serious doubts whether experience would not improve job performance for the whole of this period?48 Downloaded from http://ilj. What the Tribunal did not do. Wilson EAT. . CA. ‘no doubt in many.org/ at 07988000 on January 22. the Court observed that while EC law can improve the rights of workers over those stated in UK law. 48 49 Wilson v Health and Safety Executive [2009] IRLR 282. More importantly. 50 Ibid.

Furthermore. [83]. . A fundamental question tackled by the Tribunal was the length of the incremental scale that can be justified. ‘.oxfordjournals. ‘loyalty’ allowances had been introduced for inspectors stretching beyond five years. but having as an opening point the salary level achieved by each employee under the service-based structure. the pay structure was changed. which suggests attention to ‘whether unjustifiably long pay scales are inadvertently discriminating against women’.53 shared Wilson ET (2003).52 Its judgment was in the face of evidence that even though service increments had been abolished. . . the possibility of an alternate reason was not canvassed or considered by this Tribunal. 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. 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. specifically for reasons of retaining these now fully trained inspectors. Seniority is not necessarily proportional or “hand in hand with” experience. experience is not always proportional to performance. the service progression being replaced by pay linked to performance. It decided that a 10-year incremental scale was unjustifiably long and substituted a five-year scale.org/ at 07988000 on January 22. Wilson ET (2003) at [6]. . An inevitable consequence where a service-based pay structure exists.  Both claimants came into the employment of HSE in the wake of changes in its recruitment criteria. is that there will be a cluster of the newly appointed women at the lower end of the pay scale. 2012 395 . Further.December 2010  Justifying Service-Related Pay 5. 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. 52 Downloaded from http://ilj. .     WHEN LABOUR LAW MEETS LABOUR ECONOMICS . . now mandatory for public bodies. as it did at the time. and only since 2002 has there been a clear progression path in place. introduced specifically to increase the number of women in the inspector grades. 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. it is not axiomatic in the labour market generally that loyalty should be rewarded’. This was in spite of that Tribunal’s own observation. quite a strong indicator that the inspector’s skills had reached their fruition at around the five year mark’. This was assessed primarily on evidence that it was after this period that other employers sought to ‘poach’ inspectors from HSE. we found evidence that inspectors become more vulnerable to be poached at the 6 year mark and after. . Between 1995 and 2000. which may pass its peak and deteriorate. a challenge about the inequality of pay could arguably be justified by the transition of the new appointees up the scale. the only way in which the newcomers could catch up with their longer serving colleagues was consistently to outperform them. Had that pay structure remained unchanged. However. 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.

on the evidence. at [79].59 The view of the Wilson ET.58 that the length of the pay scale should not extend beyond a five-year period. ‘length of service goes hand in hand with experience and . is too simplistic. 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.org/ at 07988000 on January 22. 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.oxfordjournals. Cadman CA. 56 Cadman ECJ. [66]. a view that the CA criticised as lacking ‘the minimum. From that. . 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. The award of these allowances was clearly aimed at staff retention.60 that progression should end when reaching full competence. being an integral part of the employer’s retention strategy. at [22].. . 58 Ibid.Industrial Law Journal Volume 39 to some extent by the Cadman EAT.56 that the Danfoss formulation. A contemporaneous internal HSE paper showed a cost of £2m per annum in replacement cost for this staff turnover. ‘the Respondents had not identified problems in relation to retention of experienced staff or problems with regard to staff turnover’. experience generally enables the employee to perform his duties better’. [29]–[33]. 59 Cadman CA.57 Downloaded from http://ilj. CA at [29]. . [50]. However. 55 54 396 . Cadman EAT. 2012 It appears to be these two elements that led the Tribunal to its decision. The Tribunal noted ‘the main recorded reason for leaving was lack of pay progression and lack of promotion’. based on information concerning the time taken to reach proficiency together with evidence concerning the poaching of newly competent staff. It seems not to have considered that pay progression had extended beyond the point of ‘poaching’. . 57 Wilson ET (2003).54 the Cadman CA55 and in the AdvocateGeneral’s opinion. 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. 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. critical evaluation’. at [34] quoting Allonby v Accrington and Rossendale College [2001] IRLR 364. 60 The EAT decision in Wilson was supportive of this approach requiring a Tribunal to judge what it considers. The Cadman ET did look to an alternative explanation by way of the employer’s difficulties in recruiting and retaining suitably qualified staff but found that.

any additional time may be counted as an appreciation of the ‘asset’. it will need to offer a pay and benefits package that at least matches the norm in those industries. the time in that employment can bring further value through development and further experience of the job. particularly when these are newcomers to the profession rather than incoming specialists from other industries.December 2010  Justifying Service-Related Pay Second. If the employee remains in that employment beyond the depreciation period. look to acquire the services of those with specific knowledge of the industries it regulates. but will extend beyond the point of the ‘achievement of a standard level of experience to fulfil the duties of the post satisfactorily’.org/ at 07988000 on January 22. is free to leave that employment.S. HSE recruitment practice will. the Tribunal would have it halt. According to the pay policy of the organisation that may be at or higher than the median.61 The Tribunal’s assessment of the length of the scale covers only the first part of this arrangement. Similarly. Becker62 refined the theory of human capital to identify its general components. the training is vested in the employee who. Hence. in addition to seeking newcomers to train as general inspectors. 2012 M. However. 62 G. If the employee leaves within the period the remaining ‘value’ of the employee is written off. Rather than have a decelerating line of progression extending beyond achieving competency. The practice of using seniority in pay systems is considered in labour economics theory in the models presented by Becker and Lazear. Armstrong and H. Rather than continually train and develop staff at considerable cost only to see the human Downloaded from http://ilj. knowledge and skill that are of value to those relevant industries. 61 397 . Reward Management: A Handbook of Remuneration Strategy and Practice. it may be assumed that the central or reference point in the grade represents the market value of fully competent people. the positive and increasing value of the employee to the employer at a particular point in the employment period will vary. Human Capital: A Theoretical and Empirical Analysis (New York: Columbia University Press. that which relates to the work of the particular employer. both through the substantial initial training and in-service development. namely the knowledge and skills that a worker holds not only in his current job but also can take from one job to another. To obtain that knowledge. 5th edn (London: Kogan Page. The employer would expect a return on its investment envisioning that cost as a depreciating asset over the expected period of the employee’s tenure. Becker. An employer such as HSE invests a high cost in providing training for new recruits. Murlis. and to offer opportunity of further progression. wholly excluding the development phase of a pay system. subject to any contractual restraint which is likely to be minimal. those trained within HSE will gain. and the specific component.oxfordjournals. Also. 1964). 2004) at 289.

HSE argued that shortened pay scales would result in more Inspectors leaving. (‘Is SeniorityBased Pay Used as a Motivational Device? Evidence from Plant Level Data’.org/ at 07988000 on January 22. The Tribunal responded.P. London School of Economics. Discussion Paper dp0620 (London: London School of Economics. At the Wilson ET.L. he is paid at a level higher than the simple economic norm for that job. If E. The firm gains considerable advantages from this. and more recently in Spain by Bayo-Morionese et al. Economic. and Labor Contracts’.64 Downloaded from http://ilj. 153–170). Marsden.65 it is argued that the theory stands firm for non-manual workers whom the employer wishes to maintain a high standard of performance. See also E. The employer gains by avoiding recruitment and training costs. One method of devising such a pay structure is to apply Lazear’s theory63 of the ‘implicit incentive of deferred benefits’ or ‘delayed payment contracts’. The theory has been tested empirically by Hutchens in the USA (‘A Test of Lazear’s Theory of Delayed Payment Contracts’ (1987) 5 Journal of Labor Economics. and Legal’. not a large number of increments. 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. employees reap the return on this investment as their pay exceeds their productivity. This model suggests that workers’ effort and productivity are positively influenced by the anticipation of future improvements in pay. 2004) at 11. 2012 Although Lazear’s theory is based around the benefit of avoiding ‘shirking’ amongst manual workers.P.646 (London: Centre for Economic Performance. HSE must set its remuneration at a level that will minimise staff’s propensity to leave. From each of these perspectives. As Marsden observed on this practice: In their late careers. ‘Why Is There Mandatory Retirement?’ (1979) 87 Journal of Political Economy 1261–1284. 63 398 . There is therefore a need for the employer to ensure that retention is kept at a manageable level. The benefit to the employee is that having become established with an employer. the pay at HSE must be set to achieve a level at least to match that of potential competitors. ‘Incentives. as it provides incentives to undertake training that the firm needs. one strategy being to adopt a salary structure that holds a promise for more than the market rate. and in doing so import a further training cost cycle. Moore.oxfordjournals. 64 D. It presents workers paid initially below the productivity optimum wage but rising above that level. Productivity. by pay rising above a ‘reference point’ as described by Armstrong and Murlis.Industrial Law Journal Volume 39 capital in which it has invested leave its service. and therefore provides a worker with opportunities beyond the immediate workplace. Lazear. ‘The “Network Economy” and Models of the Employment Contract: Psychological. to work flexibly and loyally for the firm’s benefit. Lazear and R. (1984) 99 Quarterly Journal of Economics 275–296. 65 Lazear’s 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. ‘we would have thought inspectors wanted more money sooner. Discussion Paper No. 2004).

However. there may well be other factors introduced into the progression formula such as performance. ‘commitment’ observed in one year will necessarily carry over to the next. The employer must identify at what point this is likely to occur and provide some incentive to remain. In short. Armstrong and Murlis note that although pay related to service is in itself contingent pay. contribution or skill. if such an exercise is undertaken by a Tribunal unfamiliar with the interplay of these 66 67 Downloaded from http://ilj. Most performance-related pay systems look not only at productivity but also combine more than one of these criteria. [83]. above n.61. Ibid. Many pay structures that are fundamentally service based now include limitations to progression at certain levels. can be wrapped into a deferred benefit. that is it is a grade in which the majority end their working careers. say. For example. a target-based performance scheme may also include a number of competency thresholds. but the employee recognising that this career is likely to go no further and seeking opportunities elsewhere.December 2010  Justifying Service-Related Pay upward movement was thwarted that would be a promotion issue rather than a money issue’. competence and performance now typical in Universities’ pay systems. 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. which may comprise other elements as well as ongoing pay improvement. the productivity element is likely to build improvement year-on-year rather than to attain a standardised level of output. 68 Armstrong and Murlis. for example the ‘gateways’ in the NHS Agenda for Change scheme. Similarly. 399 . 2012 Wilson ET (2003).oxfordjournals.67 It is likely therefore that much of the turnover will not be from ‘poaching’ of experienced employees.68 Whatever the nature of the periodic assessment. Also. or ‘contribution points’ that are linked to skill. 283. can the behavioural aspects in both competence and performance appraisals be included? It is difficult to envisage that a particular level of..66 The Tribunal also recognised that the grade in question is the ‘career grade’. but this is a feature that is likely to be built over time. 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’. a decision about the validity of a particular incremental/cumulative pay structure will necessitate its unpicking to analyse its equality compliance. competence. the consolidation of pay arising from the fulfilment of periodically set production/project targets is less evident. yearon-year advancement is dependent upon the consolidation into the employee’s standard pay of the increment awarded. That incentive. [51].org/ at 07988000 on January 22. Hence. There are many variations within payment systems whereby employees advance through a pay grade.

In certain circumstances that may be correct. 2012 ‘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. HSE lodged a “protective” appeal to allow for cross-Whitehall consideration’. HSE Annual Accounts 2008-9. p6. TU side will undoubtedly take forward substantial numbers of additional cases if the decision goes against HSE. 71 At [54] and [79]: staff numbers are 2002.000 pa. a reference to these cases has been included in each HSE Annual Report since 2002–03 under the heading of ‘Contingent Liabilities’. HSE unlikely to be able to meet costs of fighting cases or deal with impact on pay system from within own resources’. For example. 3 July 2002. by what is described as a “ratchet effect” all Band 2 Inspectors.3%. while in the lowest two grades (5 and 6) women Downloaded from http://ilj. (at 2000–01 costs) or about 3. . 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. Also as noted above. whatever their seniority.Industrial Law Journal Volume 39 factors.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. it is possible that each factor is taken in isolation rather as a component of the system as a whole. . The gender pay gap within the grade would decrease from about 4. Serious threat of additional Equal Pay cases—this may be in the order of over 200 cases pending. Health and Safety Executive Board Paper B/02/033.72 Although these cases have been portrayed as a means by which the gender pay gap will be reduced.69 and latterly for other government departments and agencies. pay scale is at 2000. seek to compare themselves hereafter with Mrs Cadman on the basis that they do like work to hers and that. 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. para 22. Men are in a clear majority in the upper three grades (‘SCS’ 1 and 2) in a ratio of 3:1. . p 22. but not always. . that may not be so. 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. ‘Business Risk Management’ Annex F. 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.oxfordjournals. Lazear argues that payment in anticipation of high productivity is a key motivational device.5m pa. 72 This possibility was canvassed in the Cadman EAT at [6]. 70 ‘As [the decision of the Wilson EAT] has implications for other departments and agencies.5–3. HSE employs approximately the same number of women as men. . 69 400 .org/ at 07988000 on January 22. will become entitled to the same pay as the highest earning such inspector’. 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. ‘Perhaps of wider significance to HSE is the obvious danger that male Principal Inspectors who are paid less than Mrs Cadman’s top earning comparator will . Also. and subject to differences in performance.6%.

Downloaded from http://ilj. The Safety & Health Practitioner. Whether a company faced with a competitive market or as in this case a government funded body. but there appears to a reduction in the range of 10–15% since 2002. it suggests that ‘left to their own devices. 2012 6.77 Guidance for dealing with civil service pay for 2010–11 (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. The initial Wilson judgment states explicitly that some of the responsibility lay with the trade unions—as we have seen.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. [17].     . ..oxfordjournals. p 2.73 Whether the employer will realign its whole grading structure based on the Wilson judgment remains to be seen. the pay gap might have been reduced earlier’. it is likely to seek to recover the level of its pay bill to a market or forecasted norm. . . 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. vol 22. 74 73 401 .76 the ‘influence’ likely emanating from the ‘vociferous group’ cited above. 77 Ibid. it is difficult to gauge the change in staff numbers.org/ at 07988000 on January 22.74 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’. There are more than twice as many men in the lowest two grades than there are women in the top upper three.December 2010  Justifying Service-Related Pay outnumber men in a ratio of 2:1. [53]. without the influence of the trade unions. 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). August 2004.8. 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. 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. . 75 ‘Pay row rumbles on’. ‘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’. Because of transfers into and out of HSE. HSE appears to have taken such actions in anticipation by realigning its salary structure and staff numbers. 76 Wilson ET (December 2003). AND LABOUR RELATIONS 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. The view of the union was that. .

Kessler and J. Purcell.81 A move to ‘enterprise’ or single table Downloaded from http://ilj.79 If this observation is correct. Gagnon identifies a number of factors seen to be constraints on the reform of the change to performance pay under a devolved agency status. Management were not any more enthusiastic in view of the additional burden an problems it generated’. In 1992. 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. 81 Gagnon. 80 I. In 1992 and 1995. consistently opposed to performance related pay.oxfordjournals. 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. which includes lack of resources to deal with the changes. In 1995. single table bargaining was applied and pay was related entirely to performance. para 6. 39–44. and are.78 Put simply. pay bargaining was delegated and ‘pay steps’ introduced. Wilson ET (December 2003). agency lack of resources and trade union reluctance. Industrial Relations: Theory and Practice in Britain. ‘imposed change and agency reluctance’. but solely by direction of the supervising Department to implement a performance-based system.10. [32].org/ at 07988000 on January 22. ‘Individualism and Collectivism in Theory and Practice’ in P Edwards (ed). 2012 H M Treasury. there was a paradigm shift in both the arrangements for collective bargaining and in the pay system and structure.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. Kessler and Purcell suggest that ‘there are strong grounds for suggesting that in general terms performance pay schemes constitute a challenge to collectivism. (Oxford: Blackwell. above n. These include the Treasury need for financial control. The Wilson Tribunal noted that ‘the unions were. 1995) at 350. 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’. the matter must be resolved within budget.Industrial Law Journal Volume 39 to affordability constraints.13. particularly the new pay structures and the move to a multiplicity of bargaining units. it is hardly surprising that the equal pay pitfalls were not identified and dealt with at an early stage. 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. 79 78 402 . that both parties to the pay agreement operated it without enthusiasm. Performance pay can be seen as a means by which a union’s part in the joint regulation of pay is weakened. Civil Service Pay Guidance 2010-11.

org/ at 07988000 on January 22. supported the earlier litigation. para 6. The management view (in the form of Treasury Guidance) is clear: When equality proofing reward policies. 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. Although these claims were supported by the claimants’ union Prospect. 83 82 403 . Civil Service Pay Guidance 2010-11. There are impacts throughout the bargaining process. Hence from a union perspective. para 84. brought a year apart by employees a pay grade apart. 85 H M Treasury. and giving rise to potential conflict between those interests. could bring confusion if the outcomes are expected to influence the pay structure. Gagnon considers that the trade unions ‘had a tangible impact on the rate of change. one by straightforwardly awarding the pay of the comparator. it is noted that there is single table bargaining where another of the constituent unions.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. 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 Wilson ET (December 2003). if not the content’.12. in developing a claim strategy that will satisfy all. 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.December 2010  Justifying Service-Related Pay bargaining also brings challenges for the unions simply by extending the number of interest groups within a bargaining unit. PCS.85 Downloaded from http://ilj. 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. Crossley v ACAS. Although the two Tribunals determined the legal question in the same direction.oxfordjournals. Two claims. Departments should be wary of arguments that five years must be the appropriate length for any pay range.82 perhaps arising from a preoccupation with preventing the implementation of an unwanted scheme rather than dealing adequately with the consequences of implementation. and the other by producing a proportionate revision to the pay scale. 2012 Ibid. each brought a different approach to the resolution of the claim. 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.

87 Sir John Wood. . 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. 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 309–23. 90 Wilson EAT at [67]. 404 . Wainwright. 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’. We do not find it persuasive. the unions are faced with the imposition of an unsatisfactory solution or to engage in industrial action. Equal Pay for Work of Equal Value: Law and Practice (London: TMS Management Consultants. ‘Last Offer Arbitration’ (1983) 23 British Journal of Industrial Relations 415–24. If the Treasury remit falls short of what the unions find acceptable. Such arms-length arrangements of the institutions of collective bargaining do not lend themselves to straightforward voluntary settlement.Industrial Law Journal Volume 39 The way in which collective bargaining is structured does not appear to assist when dealing with such intractable issues. Lester and D.oxfordjournals.org/ at 07988000 on January 22. Another eminent arbitrator. John Gennard.86 Wood describes the ‘arbitrator’s 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. Downloaded from http://ilj. 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. . 89 Cadman ECJ (judgment). Section 1(2) of the Equal Pay Act focuses on “a contract under which a woman is employed”’. Where there is likely to be insufficient leverage from any possible industrial action. 88 Cadman CA at [38]. subject to any iterative process between HSE and the Treasury. there is a tendency to see an action through the Tribunals and Courts to be an alternate method of unilateral arbitration. 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. . 2012 86 A.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 LJ’s analogy of Cinderella’s slipper90) nowhere is there any means for a Tribunal or Court to identify or guard against the equivalent of the arbitrator’s nightmare in order to avoid introducing change beyond that presented in the individual claim. 1984) at 17. para 40.

’. (2007) 45 British Journal of Industrial Relations 463.oxfordjournals. there were efforts to bring the parties to an acceptable solution.93 Downloaded from http://ilj. As Dickens has recently commented. 2012 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.91 Until 1986. 93 CAC Annual Report 1979. at 483. 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. 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. Employment Disputes and the Third Party (London: Macmillan. 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. . Rather than adjudicate simply on whether equal pay did or did not apply in a given situation. rather than rely on the superficial description in the collective agreement or the apparent intent of the pay structure. 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. Above all it has been keen to obtain the participation of the parties in the way defects are remedied. ‘The Road Is Long: Thirty Years of Equality Legislation in Britain’. 91 405 . Dickens. 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 ‘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’. at p 13.December 2010  Justifying Service-Related Pay Inevitably appeals in the higher courts concentrate on the proper interpretation and application of the law.92 The CAC brought a different approach to equal pay than that applied by the Tribunals.org/ at 07988000 on January 22. The provision was removed by the Sex Discrimination Act 1986. 92 P Lowry. As it described in a CAC Annual Report: [The Committee] has been determined to discover and evaluate the actual position. Only in this way is it felt that an acceptable solution can be reached. 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 . 1990).

down the path of seeking to resolve the issue of whether Danfoss continues to apply as was understood 20 years ago. ‘The Central Arbitration Committee and Equal Pay’ [1980] Current Legal Problems 165. The litigation has gone. Equal Pay for Work of Equal Value (September 1982) through to Just Pay (2001). 95 94 406 . What astonishes this non-lawyer R v Central Arbitration Committee.91. See also Dickens. . ‘Reforming Equal Pay Laws’ (2008) 37 ILJ 193–217. To some extent. 2000) (at recommendation 29. 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. P. 2012 7. The prime responsibility for that situation lies with management though it would appear that the unions’ inability to help resolve the difficulty was complicit. M. 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. basically that the use of service as a factor of a pay system should not be challenged subject to the structure being transparent. Coussey and T. L. Equality—A New Framework. indeed. at 188: ‘. Hepple. Such an approach has since been proposed at various times by the EOC.Industrial Law Journal Volume 39 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. at length. 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.96 and by a number of leading commentators. 75). Downloaded from http://ilj. ex parte Hy-Mac Ltd [1979] IRLR 461 (QBD). of the former system being in place for so long that whatever the reason for its application would be beyond memory. Fredman. S. and of the bargaining arrangements and the means of dispute resolution. Davies.oxfordjournals. The outcome. Report of the Independent Review of the Enforcement of UK Anti-Discrimination Legislation (Oxford: Hart. in reality. Choudray. is shifted in effect to minimise the limitation on a challenge.org/ at 07988000 on January 22. . The Court of Appeal sought and received an opinion on this contested issue from the ECJ.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. 97 B. The ETs were not helped by the uncertainty in which HSE sought to justify the structure. 96 For example.     CONCLUSIONS These cases were. the way forward would seem to lie in the amendment to section 3 so as to give legislative underpinning to the Committee’s current practice’. above n. though that may be due to the new arrangements being imposed upon them without adequate explanation and.

The circumstances in which these claims were brought were undoubtedly discriminatory. 2012 407 . and may call into question the underlying method of pay progression in some pay structures. The re-interpretation of the law opens the possibility of further challenges of pay systems linked to service. seemingly not an issue in these cases. Transparency. and to question whether the present arrangement by which challenges are made through the ET is the most appropriate and effective. 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. the pay structure challenged in these claims was not that which a remuneration specialist would recognise as service based. Downloaded from http://ilj. However. is now a requirement imposed by the Equalities Act 2010.December 2010  Justifying Service-Related Pay is that on receipt of that opinion the Court of Appeal did not directly put that opinion into a UK context. even if not intentionally so.oxfordjournals. and this article has sought to outline the issues that arise when viewed from non-legal perspectives. but allowed a further three years and attempts by two lower courts to provide that context before determining the matter. broadly ‘output’ or ‘merit’ criteria may have caused a structure to become opaque.org/ at 07988000 on January 22.