Strathclyde Regional Council v Wallace (West Dunbartonshire Council v Wallace)

An employer establishes the material-factor defence under section 1(3) of the Equal Pay Act 1970 by proving that the pay disparity was caused by genuine, significant and relevant factors which were not sexually discriminatory. A factor free from sex discrimination need not also be objectively justified.

If the factor is directly or indirectly discriminatory, the defence succeeds only if the discrimination is objectively justified. The measure must correspond to a real need of the employer, be appropriate to the objective pursued and be necessary to achieve it. The Act eliminates sex discrimination in pay; it does not establish a general right to fair wages or equal pay for like work irrespective of sex.

Unpromoted women teachers performed the same work as male principal teachers but received lower salaries. The employers conceded that the work was like work. They relied on the statutory promotion structure, competitive appointment, staffing controls and financial constraints as material factors explaining the disparity.

The industrial tribunal and Employment Appeal Tribunal held that the employers had not established the defence under section 1(3) of the Equal Pay Act 1970. The Second Division of the Court of Session reversed that decision: 1997 SLT 315. It was agreed that the disparity had no connection with sex and affected male as well as female unpromoted teachers. The central issue was whether factors wholly free from sex discrimination nevertheless required objective justification.

1. Appeal dismissed unanimously. Lord Browne-Wilkinson delivered the leading speech. Lord Steyn, Lord Hoffmann, Lord Hope of Craighead and Lord Clyde agreed with it and with the proposed disposition.

2. Per Lord Browne-Wilkinson, section 1(3) of the Equal Pay Act 1970 requires the employer to prove that the contractual variation is genuinely due to a material factor which is not the difference of sex. Genuineness means that the explanation is not a sham or pretence. A factor is material when it is significant and causally relevant to the disparity.

3. The requirement for objective justification arises only where the factor is sexually discriminatory. A directly or indirectly discriminatory factor prevents the employer from showing that the disparity is unrelated to sex unless the discrimination can be justified under the principles in Bilka-Kaufhaus and Rainey. The measure must correspond to a real need of the employer, be appropriate to the objective pursued and be necessary to achieve it.

4. Where the factor is free from sex discrimination, the employer need not prove that the disparity was unavoidable or that no alternative arrangements were available. Requiring such proof would turn equal-pay legislation into fair-wages legislation. Its purpose is to eliminate sex discrimination in pay, not every inequality between persons performing like work.

5. The promotion structure, competitive appointment arrangements, staffing controls and financial constraints were genuine, significant and causally relevant explanations for the teachers’ lower pay. None was connected with sex. The employers therefore established the section 1(3) defence.

6. McPherson v Rathgael Centre [1991] IRLR 206, which required justification where a disparity resulted from a non-discriminatory mistake, was wrongly decided. The industrial tribunal had likewise misdirected itself by requiring justification after accepting the causal explanations. The decision of the Second Division was affirmed.

1. House of Lords: Dismissed the teachers’ appeal unanimously and affirmed the Second Division’s conclusion that the employers had established the material-factor defence.

2. Second Division of the Court of Session: Reversed the employment tribunals and held that the employers had established a defence under section 1(3) of the Equal Pay Act 1970: 1997 SLT 315.

3. Employment Appeal Tribunal: Upheld the industrial tribunal’s conclusion that the employers had not established the defence.

4. Industrial tribunal: Held that the employers had failed to justify the pay disparity and therefore had not established the section 1(3) defence.