Blog: Equal pay – how far can you defend unequal pay?

In our fifth blog on equal pay, here’s a little bit of good news for employers.  Equal pay legislation does allow some common sense and sensible commercial factors to be taken into account, under the ‘material factor’ defence.  However, be warned!  This defence only goes so far, and often expires far sooner than you might expect.

Material factor defence

Back to that good news: the fact that a woman can point to a male comparator who is doing equal work but being paid more than her does not automatically mean that she has a good equal pay claim. In such a situation, an employer may be able to rely on a ‘material factor’ defence.  To do so, it has to show that a significant factor, other than the gender difference, can explain the pay gap.

A ‘material factor’ must be:

• genuine and not a sham or pretence;
• a significant, material factor which definitely caused the whole of the pay differential; and
• not itself tainted with any sex discrimination.

Common examples of legitimate ‘material factor’ defences are:

• ‘market rate for the job’ (so long as the employer has solid evidence and refreshes that evidence annually to justify any continuing difference year on year)
• a bonus genuinely linked to personal performance/productivity
• ‘red circling’ (so long as the reason for the red circling still applies and the original pay was not itself a case of unequal pay)
• comparator’s role involves supervision of others, unsocial hours, heavy lifting, complex machinery, extremes of temperature or other similar factors making it different to the claimant’s role.

Unequal pay scenario

The ‘material factor’ defence operates in two ways, aligning with the principles of direct and indirect discrimination.

First, if the ‘material factor’ relied on has nothing to do with gender, then the defence succeeds. Let’s take the case of a small chain of restaurants where a female branch manager seeks to compare herself to a better paid male branch manager. There could be any number of reasons for the pay gap between them.  Perhaps his restaurant is bigger or busier, or he has more experience, or he got a better appraisal rating, or the HR Advisor made a mistake and offered him £2k too much in the offer letter, or he was TUPE’d in when the store was bought and his pay is therefore protected.

Any of these factors could provide a material factor defence for the company.  If the female branch manager is the only person affected in the pay comparison, or it impacts on other males and females in the company equally, then that is likely to be the end of the story and the end of any viable claim.

However, if our female branch manager can show that she and other female colleagues are put at a ‘particular disadvantage’ by any of the factors that the company relies upon to explain the pay gap, then the employer will have to objectively justify its actions, in exactly the same way as indirect sex discrimination must be objectively justified. So, let’s say that the bigger, better-paid manager roles are only available to managers prepared to do night shifts. The female branch manager may well be able to show that this inhibits female managers from taking those roles. Is it justified? The company would have to show evidence about the necessity of branch managers working at night and why they need to be paid more to do so.

Beware the evaporating defence! 

In our next equal pay blog, we will look at how some of the key material factor defences your organisation is likely to rely on are less strong than you might think and often expire – or evaporate – much sooner than you might like.

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Jenni Andrews
Menzies Law

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