Pushed to the limits

The Supreme Court, by a majority of three to two, recently ruled that a group of former employees could bring equal pay claims in the High Court, where the time limits are considerably longer than those in the employment tribunals. Matthew Wort and Chris Plumley look at the impact of the judgment.

The UK Supreme Court recently made a landmark ruling in regard to equal pay. The ruling came about in response to a group of 174 women who brought a case against Birmingham City Council for paying them less than their male counterparts. The decision in their favour set a precedent and extended the time period that an employee can bring a claim for equal pay compensation from six months to six years.

The women, who worked for the council as cooks, cleaners and care staff, had previously been denied bonuses worth up to 160% of their basic salaries, which had been given to male staff who did work rated as equivalent to theirs. Birmingham City Council had already paid tens of thousands of pounds in compensation to ex-employees in 2007, and currently has an estimated 20,000 claims still awaiting an outcome.

The ruling is the biggest change in equal pay law since it was introduced in 1970, and is likely to affect many more councils across the country. The potential liability for local authorities could be significant - it is estimated that the 174 claimants in the recent case against Birmingham are entitled to around £2m in compensation. Faced with this potential pay-out, it would be prudent for other authorities to consider whether they too are vulnerable to further equal pay claims in light of this decision and if so, to budget accordingly.

With the ruling extending the time limit to make a claim against an employer from six months to six years, ex-employees who left the organisation long ago could start to bring claims. In addition, unions that have previously advised members not to bring claims against ex-employers due to time restraints may now advise to the contrary, particularly since if they fail to do so they may be at risk of negligence claims.

It is of course essential that local authorities have robust job evaluation processes in place for all posts. The BBC have reported that at the time that these women were working for Birmingham City Council, the annual salary of a female manual grade 2 worker was £11,127, while the equivalent male salary was £30,599, plus an additional bonus of up to £15,000 per year. Nowadays, such blatant pay discrimination is unlikely following the implementation of Single Status. This saw the implementation of a new payment structure and introduced a pay grade system to define jobs of equivalent standard in order to ensure equal pay. Even though job evaluation will have eradicated many past inequalities, it would still be wise for local authorities to conduct a thorough investigation into their own payroll to ensure that any remaining hidden pay inequalities, perhaps from pay practices that have developed over time within particular directorates or teams, however minor, are rectified.

What is key about the recent ruling is that the extension of the time limit for claims may mean that authorities that have made every effort to improve their pay processes in the last few years could still be held accountable for past inequalities they thought had been resolved. The impact is such that many local authorities that thought they had "closed the book" on past claims, could now find that claims are issued against them in the civil courts. The cases against Birmingham City Council relate to employees who left the council between 2004 and 2008.

The fear of being forced to enter into costly court proceedings comes at a difficult time given the considerable financial pressure that local authorities are under to cut costs across their services. An unsuccessful party in the civil courts is likely to be liable for the opponent’s legal costs as well as their own. Therefore, the risk for local authorities in defending claims is heightened where there is a chance that they may lose. To avoid additional costs, it may be wise to try to agree early out of court settlements with claimants where there is a known risk of the claims succeeding.

Whilst the situation is not ideal for local authorities, what is important is that they use this as an incentive to review their equal pay risks, take advice from legal experts and be prepared to respond appropriately should claims arise.

Matthew Wort is a Senior Associate and Chris Plumley is a Partner at Anthony Collins. Chris can be contacted on 0121 214 3576.