Barry v. Midland Bank Plc

The House of Lords held that a severance scheme which calculates payments by reference to an employee's final weekly pay and years of continuous service did not, in its terms or operation, constitute unlawful indirect sex discrimination under section 1 of the Equal Pay Act 1970 read with Article 119 of the EC Treaty. The court treated redundancy/severance pay as "pay" for the purposes of Article 119 but emphasised that the proper inquiry is whether the employer's chosen method of calculating pay operates discriminatorily in substance.

The Lords concluded that the bank's objectives — cushioning loss of actual salary on redundancy and recognising length of service — were legitimate and that the use of final pay and years of service were appropriate, non-discriminatory criteria. Even if a different scheme (for example one based on total hours) might have advantaged the appellant, that does not establish a breach where the actual method adopted does not discriminate between men and women in its operation; alternatively, the scheme would be objectively justified.

Background and facts:

• The appellant, Mrs Jacqueline Barry, worked for Midland Bank from July 1979. After maternity leave she returned on a key-time (part-time) arrangement (35 hours on alternate weeks = 17.5 hours/week). Her voluntary redundancy was accepted and employment terminated in April 1993.
• The bank's collective Security of Employment Agreement (August 1991) provided severance payments based on a multiplier of weeks' pay determined by years of continuous service, with "a week's pay" taken as the employee's final contractual remuneration. The scheme made no distinction between full-time and key-time workers and calculated the payment from final pay and years of service.
• Mrs Barry's payment was calculated on her part-time final pay and 13½ years' continuous service, producing a payment significantly lower than if final full‑time pay or a hours-based calculation were used. She claimed sex discrimination under the Equal Pay Act 1970 (section 1), Article 119 of the EC Treaty and earlier pleaded the Sex Discrimination Act 1975 (although she later abandoned that point).

Procedural posture:

• The claim was dismissed by the Industrial Tribunal, the Employment Appeal Tribunal ([1997] I.C.R. 192) and the Court of Appeal ([1999] I.C.R. 319). Mrs Barry appealed to the House of Lords.

Issues before the House of Lords:

1. Whether the severance payment constituted "pay" within Article 119 (answered yes);
2. Whether the bank's method of calculation gave rise to indirect discrimination against women (a three-stage enquiry: difference in treatment, disparate impact on women, objective justification);
3. If discrimination were established, whether it was objectively justified; and the appropriate remedy.

Reasoning and decision:

• The Lords accepted that severance pay is "pay" under Article 119 but emphasised that the relevant enquiry is whether the method of calculation operates discriminatorily in substance. The purpose of severance pay is to cushion loss of actual salary on redundancy; accordingly basing payments on final salary reflects the employee's immediate loss.
• Because the scheme applied the same two criteria (final salary and years of service) to all employees irrespective of sex or full-/part-time status, there was no relevant difference in treatment between men and women in the operation of the scheme. The fact that an alternative scheme based on hours might have produced a better result for some predominantly female employees did not make the actual scheme unlawful.
• The Lords noted (and the Court of Appeal and EAT had considered) the three-stage test for indirect discrimination and considered available statistics insufficient to show any compelling disparate impact that would undermine the bank's justification. Even if a prima facie discriminatory effect were arguable, the bank's objectives were legitimate and the chosen method was appropriate and proportionate; the scheme would therefore be objectively justified.

Relief sought:

• The appellant sought a larger severance payment calculated differently (effectively crediting prior full-time service and using a full-time equivalent salary).

Appeal dismissed. The House of Lords held that the bank's severance scheme, calculated by reference to final weekly pay and years of continuous service, did not constitute unlawful indirect sex discrimination under the Equal Pay Act 1970 read with Article 119 of the EC Treaty. The scheme's objectives (compensating for loss of actual salary and recognising length of service) were legitimate; the method adopted did not operate discriminatorily in substance and, in any event, would be objectively justified.

Industrial Tribunal (decision 15 June 1995) -> Employment Appeal Tribunal [1997] I.C.R. 192 -> Court of Appeal [1999] I.C.R. 319 -> House of Lords [1999] UKHL 38.