Draft Equal Pay (Amendment) Regulations

The government has published draft Regulations to amend the Equal Pay Act (EPA). The Regulations amend sections of the EPA dealing with the time limits for bringing claims and the period of time in respect of which arrears may be awarded. They extend the six-month time limit in certain circumstances, and change the back pay limitation in the Act from two years to six years. They also modify the procedure for bringing equal value claims by giving tribunals greater discretion to disregard the findings of an employer's job evaluation scheme.

Back pay limited to six years

The most controversial proposal in the draft Regulations would amend the period in respect of which back pay can be awarded to a successful equal pay complainant, and limit it to six years in England and Wales and five years in Scotland.

Section 2(5) of the EPA limits arrears of pay to two years from the date of the application. Doubt was first cast on s.2(5) by the European Court of Justice (ECJ) in Levez v TH Jennings (Harlow Pools) Ltd (EOR 83). This decision held that EU law does not allow a rule which limits an employee's entitlement to arrears of remuneration in respect of equal pay to a period of two years if this is in breach of the principle of equivalence: the principle that procedural rules under EU law must be no less favourable than those applicable to similar domestic actions.

When the case returned to the EAT (Levez v TH Jennings (Harlow Pools) Ltd (No.2) and Hicking v Basford Group Ltd, (EOR 88)), it confirmed that the two-year limit on back pay was indeed a breach of the principle of equivalence, in that it is less favourable than those governing similar claims such as for unlawful deduction from wages and unlawful discrimination on grounds of race or disability. The EAT held that the two-year limit must be set aside, and ruled that the Statute of Limitations is the only limit on the arrears of pay that can be awarded to successful EPA applicants. This is six years from the date of commencement of proceedings in England and Wales (five years in Scotland and Northern Ireland).

This is the approach which has been followed by the government in the draft Regulations. The current two-year limit is replaced by a limit of six years in England and Wales and five years in Scotland. In deciding on a six-year limitation, the government also can draw support from the decision of the House of Lords in Preston and others v Wolverhampton Healthcare NHS Trust and others (No.2) (EOR 96) that a claim for breach of contract is a domestic law action which is similar to a claim for infringement of Article 141, so as to allow a comparison to be made for the purpose of the principle of equivalence.

In proposing a six-year limitation, however, the government has tacitly decided that such a limit does not breach the Community law principle of "effectiveness", whereby national procedural rules must not be framed in such a way as to render the exercise of rights conferred by Community law "impossible in practice". This is despite the ruling of the ECJ in the Preston case (EOR 92), which challenged the exclusion of part-time workers from access to occupational pension schemes, that "Community law precludes a national procedural rule which provides that a claimant's pensionable service is to be calculated only by reference to service after a date falling no earlier than two years prior to the date of claim." The ECJ's reasoning was that the two-year limit rendered any action by individuals relying on Community law impossible in practice because, even though it did not totally deprive the claimants of access tomembership of pension schemes, the procedural rule prevented the employee's "entire record of service" from being taken into account for the purposes of calculatingpension benefits.

When Preston returned to the House of Lords, it did not confine the period in respect of which part-time workers could claim membership of a pension scheme to six years. Instead, it held that they could claim membership right back to the date of commencement of their employment, or to 8 April 1976, the date of the decision of the ECJ in Defrenne (No.2), which held that the Community law right to equal pay is directly enforceable.

The government's proposal to limit arrears of pay under the EPA to six years will, in some cases, prevent the successful claimant's entire record of service, during all of which they may have been discriminated against in respect of unequal pay, from being taken into account. This is certain to be subject to challenge under EU law in an appropriate case.

There are, however, two exceptions proposed by the government itself to the six-year principle. The most important of these is "where the employer deliberately concealed from the woman any fact relevant to the contravention of a term modified or included by virtue of an equality clause to which the proceedings relate". The classic example of this would be the Levez-type case where the employer deceived the potential applicant as to the pay of her prospective comparator. In such a case, provided that she brings her proceedings within six years of the date when she discovered the concealed fact (or could with reasonable diligence have discovered it), arrears can be awarded in relation to the entire period for which the concealed fact is relevant and for which there was unequal pay.

The second exception applies if the woman was "under a disability" at the time when she was first paid unequally. This is narrowly defined as meaning "if she is a minor or of unsound mind". In such a case, provided that she brings her proceedings within six years of the date when she ceased to be under a disability, arrears can be awarded in relation to the entire period of unequal pay.

Time limit extended

Section 2(4) of the EPA provides that a claim in respect of the operation of an equality clause must be brought during employment, or within six months of the end of the employment to which the claim relates. The government is proposing several modifications to this in light of the Preston decision.

The first is to make clear that, where there was a "stable employment relationship between the woman and the employer", the relevant limitation date for bringing an equal pay claim is six months after the date on which the "stable employment relationship" ended. This implements the principle enunciated by the ECJ and the House of Lords in the Preston litigation. The point is of particular relevance to education, where a term-time series of contracts for teachers and lecturers is common. No further definition of "stable" is given in the Regulations, al though the ECJ referred to "a succession of short-term contracts concluded at regular intervals in respect of the same employment". It will be up to an applicant, who would otherwise be outside the six-month time limit from the end of their employment, to establish in the employment tribunal that their employment relationship is "stable" for this purpose.

As with the limit on arrears of pay discussed above, there are also exceptions proposed in respect of the six-month time limit where the woman was "under a disability", or where the employer deliberately concealed any fact relevant to the claim from the woman, and the woman did not discover the fact (or could not reasonably have discovered it) during the employment. In this case, the six-month period will not start to run until the woman has either discovered the fact, or could have discovered it with reasonable diligence.

Equal value procedure

The draft Regulations propose to amend the rules in s.2A of the EPA concerning the procedure to be followed in claims of equal pay for work of equal value.

At present, an employment tribunal can strike out an equal value complaint under s.2A(1) where it is satisfied that there are "no reasonable grounds" to determine that the work of the woman and that of the man are of equal value. The government is proposing to remove this rule, which would mean that in all cases the parties will be able to put evidence before the tribunal as to whether the jobs are of equal value. In its consultation document in December 2000, Towards equal pay for women (EOR 98), the government explained that: "This defence has been criticised as perpetuating stereotyped assumptions about the apparent value of traditionally 'female' jobs.It should be noted that tribunals already have overriding powers for dealing with weak cases."

Section 2A(2) currently deems there to be "no reasonable grounds" for determining that work is of equal value where the work has been given different values under a job evaluation study and "there are no reasonable grounds for determining that the evaluation contained in the study was . . . made on a system which discriminates on grounds of sex." Section 2A(3) then goes on to define a discriminatory system as "where a difference, or coincidence, between values set by that system on different demands under the same or different headings is not justifiable, irrespective of the sex of the person on whom those demands are made."

The government is proposing to replace s.2A(2) to provide that, if the work has been given different values under a job evaluation study, the tribunal shall determine that the work of the woman and that of the man are not of equal value "unless the material before it causes the tribunal to have a reasonable suspicion that the evaluation contained in that study" was made on a system which discriminates on grounds of sex within the meaning of s.2A(3), or "is otherwise unsuitable to be relied upon". This is an important change, which will give the tribunal much greater discretion to consider the case on its merits, notwithstanding that work has been evaluated by the employer under its own job evaluation scheme as of unequal value.

In accordance with this change, the role of the independent expert is broadened by the draft Regulations so that the tribunal can ask the expert to prepare evidence on whether a job evaluation scheme was made on a system which discriminates on the grounds of sex or is otherwise unsuitable to be relied upon.

Timetable

It is intended that the final changes will come into force in July 2003, except for the changes dealing with the procedure before the employment tribunal in equal value claims, which will come into force in December 2003.

With the exception of the change to the six-month time limit, the changes will apply to proceedings that have been instituted before the employment tribunal but that are still pending before the tribunal on the date that the Regulations come into force. The amendments to the six-month rule are intended to apply to those proceedings which had not already been instituted at the date that the Regulations come into force, but would not have been time-barred under the previous rules on that date.