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Lucy Bone writes on common terms and conditionals in equal value claims: The court of appeal decision in Asda V. Brierley

In Asda v. Brierley, the Court of Appeal upheld the ET and EAT decisions that the claimant shop workers could compare themselves to men working in the distribution centre. In doing so, the CA considered in detail the question of ‘common terms’ and the appropriate analysis of this aspect of an equal value claim.

The Claims

30,000 claimant shop workers (out of Asda’s total workforce of 133,000) have brought equal pay complaints asserting that their work is of equal value to male distribution workers. None of the distribution centres is located on the same site as any of the stores. In 2012, Asda concluded an agreement with the GMB union covering all employees at distribution centres, prescribing model terms and conditions for all but with pay rates negotiated separately and locally. As a subsidiary of Wal-Mart, Asda’s principal decisions as regards pay had to be approved by Wal-Mart.

At the ET and EAT, they were successful in arguing that these workers were proper comparators.

Equal Value

For a claimant seeking to argue equal pay, there are three routes to do so: where a woman is employed on like work with a man in the same employment; where she does work rated as equivalent with a man in the same employment; or she does work of equal value with a man in the same employment. In essence, an equal value complaint allows a comparison to be made to workers doing different roles.

The Equal Pay Act 1970 provided at s.1(6):

“…men shall be treated as in the same employment with a woman if they are employed by her employer or any associated employer at the same establishment or at establishments in Great Britain which include that one and at which common terms and conditions of employment are observed either generally or for employees of the relevant classes”.

The Equality Act 2010 reproduces the same scheme as the 1970 Act but with some differences in drafting. The comparator is defined as “B” rather than “a man in the same employment”. Section 79 provides:

“Comparators

1. This section applies for the purposes of this Chapter.
2. If A is employed, B is a comparator if subsection (3) or (4) applies.
3. This subsection applies if—
   1. B is employed by A’s employer or by an associate of A’s employer, and
   2. (A and B work at the same establishment.
4. This subsection applies if—
   1. B is employed by A’s employer or an associate of A’s employer,
   2. B works at an establishment other than the one at which A works, and
   3. common terms apply at the establishments (either generally or as between A and B).”

The Court of Appeal’s decision

The CA dismissed the appeal and held, as had EJ Ryan at first instance and Kerr J in the EAT, that the Claimants were entitled under s. 79(4)(c) of the Equality Act 2010 to compare themselves with distribution workers in other establishments.

Underhill LJ gave the unanimous judgment of the court. His judgment begins with a deep consideration of the key cases, all decided by reference to the 1970 Act:

• The House of Lords judgment in Leverton v. Clwyd County Council [1989] AC 706 is considered in detail, and in identifying the ratio, Underhill LJ said: “The essential concept conveyed by the reference to common terms and conditions being observed at two establishments is that no distinction is made between the establishments as regards what terms and conditions apply”. The essence of the test was to ask whether the terms and conditions differ according to the establishment at which that person is employed; “in other words, are the terms and conditions applicable to the relevant jobs irrespective of the establishment at which the employees work?” [paragraph 34].

• It followed from this that it is not necessary that any employees in the comparator’s class should actually be employed in the claimant’s establishment. If the employer has negotiated a collective agreement providing for terms and conditions of its employees at all its establishments, then common terms and conditions will necessarily apply at those establishments irrespective of who actually works there [paragraph 36].

• In British Coal v. Smith [1996] ICR 515, the claimants were cleaners and canteen workers seeking the same pay as surface mineworkers. Some worked at the same sites and some did not. The claimants’ terms and conditions were governed by a single national collective agreement, but the mineworkers’ terms were supplemented by bonuses which were negotiated pit-by-pit. The House of Lords held that did not matter; these local variations did not destroy the centralised, industry-wide nature of the entitlement. Underhill LJ held that the ratio of Smith is that “in considering whether common terms and conditions are observed as between employees in the comparator’s class at two establishments, it is not necessary that all the terms are common. Broad commonality is enough”. [paragraph 41].

• Further, the comparison is between the terms applicable at the two establishments, not between the terms applicable to the claimant and comparator [paragraph 43].

• In North v. Dumfries and Galloway Council [2013] UKSC 45, there were separate collective agreements for the claimants’ class and the comparators’ class. However, the Supreme Court found that made no difference; what matters is that the terms under both agreements apply wherever employees of the relevant classes are employed [paragraph 46].

• The Supreme Court rejected the Council’s argument that terms could not be said to be “observed” at an establishment if, in practice, the employee of the relevant class would never actually be employed there. It held that it had to at least be feasible that a comparator could be employed at the claimant’s establishment. A hypothesis is to be applied, and the question is whether in the event, however unlikely, that the comparator was transferred to do his present job in a different location, he would remain on the same or broadly similar terms and conditions to those applicable in his current place of work [paragraph 47]. This has become known as the North Hypothetical

•  Underhill LJ noted the policy objectives that underpinned this conclusion, and quoted extensively from Lady Hale’s speech. It was not just a matter of preventing employers from organising their workplaces so that the women work in one place and the men in another. It also ensured that where jobs could not be carried out in the same workplaces may nevertheless be assessed as having equal value. The fact that of necessity their work has to be carried on in different places is no barrier to equalising the terms on which it is done. [paragraph 51].

From these cases, a number of principles were established [paragraphs 66-73]:

1. First, the question whether common terms apply at X and Y depends on whether they apply irrespective of which particular establishment a relevant employee is employed at. The test will be satisfied whether that is so “generally” (i.e. for all employees) or only for employees in the relevant classes – that is, the classes to which A and B respectively belong.
2. Second, that question entails comparing the terms applying as between the two establishments, not as between the claimant and the comparator: the tribunal needs to ask either “do common terms of employment apply at X and at Y for all employees?” (the “generally” alternative) or “do common terms of employment apply for cleaners at X and at Y and for manual workers at X and at Y ?” (the “relevant classes” alternative).
3. Third, common terms apply at X and Y not only where they apply to actual employees in the relevant classes working there but where they would apply, even if a manual worker would never in practice be employed at X or a cleaner at Y (“the North hypothetical”).
4. Fourth, even where it is helpful expressly to consider the North hypothetical, doing so does not involve working out a detailed scenario under which someone in the comparator’s class might be employed at the claimant’s establishment. The North hypothetical is, to repeat, simply a way of asking whether the terms for the relevant employees apply irrespective of where they work.
5. Fifth, it will be straightforward to answer the North hypothetical question in the claimant’s favour if there is a collective agreement governing the terms of the two classes without reference to where they work. But although that is the paradigm case it is not the only basis on which it may be possible to find that common terms and conditions apply (or, more particularly, that the North hypothetical is satisfied). It would equally be the case, for example, if an employer “imposed” terms on an across-the-board basis; or, simply, if it could be seen that as a matter of fact employees in the relevant classes enjoyed the same terms and conditions wherever they were employed.
6. Sixth, the requirement that common terms apply as between the establishments does not mean that all the terms of the relevant employees at both must be common. It is enough that terms of cleaners at X and cleaners (actual or hypothetical) at Y and of manual workers at Y and manual workers (actual or hypothetical) at X are “broadly” common, taking a common sense approach.
7. Seventh, it is irrelevant whether there is any similarity between the actual terms of A and B. The question is whether the terms for cleaners are (or would be) the same (or broadly so) whether they are employed at X or at Y and likewise as regards the terms for manual workers. If that test is satisfied, cleaner and manual worker terms may be identical to each other (save of course in the respect which gives rise to the claim), or wholly different in structure and content, or anywhere in between.
8. Finally, on a strict analysis the “generally” alternative is redundant. All that a claimant need ever prove is that common terms and conditions apply for the two relevant classes – that is, hers and the comparator’s: that cannot be a more demanding test than proving that they apply generally and will typically be less demanding. To put it another way, the effect of the words is, logically, “generally or at least for employees of the relevant classes”.

Underhill LJ then asked whether the 2010 Act changed the law as to common terms and conditions. He concluded that it did not. There was nothing to suggest that Parliament had intended to made changes for the worse to the rights of equal pay claimants.

He went on to hold that the inclusion in s. 79(4) of the words “or as between A and B” did not import a requirement for there to be commonality as between the claimant and her comparator. While that may be the plain effect of the language, Underhill considered that the draftsman had not intended to change the test. These words, he held, had been included in error – in adopting the technique of using the term “A and B”, the draftsman had failed to appreciate it could be read as effecting a substantive change. [paragraph 78] There is no basis, he held, for treating the North hypothetical as unavailable under the 2010 Act [paragraph 79].

Unsurprisingly, it followed from this that there were common terms between the distribution workers, so that the Asda claimants could rely on them as comparators [paragraphs 103-106]. Asda applied common terms and conditions wherever they worked. In this type of case, “wherever they work” extends to a workplace where they would never in practice work because the nature of its operations is so different. The contrast is with a situation where there were no common ‘distribution terms, so that what terms a distribution worker enjoyed would depend on where they worked. This did not require detailed evidence and argument, but could have been determined on the straightforward basis that Asda’s terms for retail workers and for distribution workers applied wherever they worked.

Discussion

While this is an important victory, it will be some time before the Asda claimants can pat their back pockets. Identifying the correct comparator is of course only the first step in a long road ahead, though it will be some comfort that the Court of Appeal refused Asda permission to appeal to the Supreme Court. Having established the right to compare themselves to the distribution centre workers, the claimants will now have to win arguments that their work is indeed of equal value and if so, that there are no genuine material factors which justify the difference.

The clarity and depth of consideration of the case-law and established principles will assist many equal pay claimants. Had Asda’s arguments held sway, it would have been more complicated for employees to evidence commonality of terms and easier for employers to defeat equal value claims at the preliminary stage. Underhill’s LJ emphasis on the question of common terms and conditions as straightforward, and not requiring detailed evidence and elaborate analysis, is plainly helpful in practice to claimants.

As well as resolving the question of commonality, the judgment is of interest to employers who have identified pay gaps as part of their gender pay gap reporting. It is now more important than ever for employers to understand where they are at risk of comparisons being drawn, and to be able to identify whether the inequalities of pay may give rise to the risk of equal pay claims. Employers will not be able to rely on separate internal management structures, as comparisons can be made to workers at different sites and with different employment terms to the claimants.

Finally, note Underhill LJ’s critical approach to the drafting of this part of the Equality Act 2010, and his preference for a purposive construction, contrary to the plain language of the statute, on the basis that it had been drafted poorly and in error. This approach to construction marks a rare and bold step, and quite possibly will become emerge as a point of enduring significance.