Degnan & Ors v Redcar & Cleveland Borough Council

Under section 1 of the Equal Pay Act 1970, comparison is made between contractual terms, but a term is classified realistically by its subject matter. Payments for performance during normal working hours may constitute one term even where their calculation differs. Basic pay, bonuses and attendance allowances may therefore be aggregated and converted into an hourly rate before comparison. The transparency principle requires an effective analysis of remuneration, not artificial fragmentation into separate terms. Any justification under section 1(3) arises only after the relevant contractual provisions have been identified and classified.

The appellants were female employees of the Council who brought equal pay claims by comparing their work with that of male gardeners, refuse workers, drivers and road workers. The male comparators received bonuses and, in some cases, attendance allowances in addition to basic pay.

The employment tribunal permitted the appellants to select the most advantageous bonus and attendance allowance terms from different comparators. The Employment Appeal Tribunal allowed the Council’s appeal under UKEAT/0321/04/SM, holding that the payments formed part of one term concerning monetary payment for performance during normal working hours. The central issue was whether that construction of section 1 of the Equal Pay Act 1970 was correct.

The appeals were dismissed unanimously. Lord Justice Maurice Kay delivered the judgment, with Lord Justices Dyson and Buxton agreeing.

1. Meaning of term. Section 1 of the Equal Pay Act 1970 requires a term-by-term comparison. A term is a distinct contractual provision or part of a contract with sufficient content to permit comparison with a similar provision in another contract. The statutory scheme therefore requires realistic classification of the contractual provisions before their relative benefits are assessed.
2. Same subject matter. The Employment Appeal Tribunal correctly classified the relevant term as provision for monetary payment for performance of the contract during normal working hours. Basic hourly pay, bonuses and attendance allowances could fall within that term. Differences in the method of calculation, the requirement to work throughout a shift, or the consequences of authorised or unauthorised absence did not alter the underlying subject matter. The attendance allowance was therefore not a separate term merely because it was calculated differently.
3. Effect of the comparison. The approach was consistent with Hayward v Cammell Laird Shipbuilders (No.2) [1988] ICR 464. It avoided both an impermissible whole-contract balancing exercise and artificial fragmentation of remuneration. Monetary payments received by the male comparators for normal working hours should be aggregated and divided by the hours in the working week. If the resulting hourly rate exceeded the woman’s rate, the equality clause increased her rate only to remove that difference.
4. Transparency and justification. The approach also satisfied the transparency principle reflected in Danfoss [1991] ICR 74 and Barber v Guardian Royal Exchange Assurance [1990] ICR 616. The analysis remained sufficiently clear for effective comparison. Any question whether a difference could be justified under section 1(3) arose only after the prior analysis and classification of the contractual provisions.

The Court of Appeal accordingly upheld the Employment Appeal Tribunal’s reasoning and dismissed the appeals.

1. Court of Appeal (Civil Division): On 17 June 2005, dismissed the appeals and upheld the Employment Appeal Tribunal’s construction of the relevant contractual terms.
2. Employment Appeal Tribunal: On 27 July 2004, allowed the Council’s appeal from the employment tribunal under UKEAT/0321/04/SM.
3. Employment tribunal: Held that the appellants could rely on the most advantageous bonus and attendance allowance terms from the relevant male comparators.