Hosso v European Credit Management Ltd

This appeal concerned whether an employee's claim about fewer share options than a male comparator fell within the Equal Pay Act 1970 (EPA) or the Sex Discrimination Act 1975 (SDA). The court held that for the Employment Tribunal to have jurisdiction under the EPA the complaint must be of the contravention of a contractual term modified or included by the EPA's equality clause (sections 1 and 2). The appellant had not shown any contractual term that was less favourable than the comparator's contract, and the share option allocations were governed by a standard discretionary scheme not incorporated into her contract. Accordingly the claim was one about the exercise of a contractual discretion (a matter for the SDA) rather than a contravention of an equality-modified contractual term, and the appeal was dismissed.

Background and nature of the claim:

• The appellant alleged sex discrimination because she received fewer share options than a male colleague under the employer's Share Option Scheme. The claimant's ET1 referred to the respondent's statutory duty not to operate the scheme discriminatorily; the claim was treated below under both the SDA and the EPA, but the appellant conceded the SDA claim was out of time.

Procedural posture:

• The Employment Tribunal upheld an equal pay claim under the EPA. The Employment Appeal Tribunal allowed the respondent's appeal, holding the scheme was discretionary and not regulated by the contract. The appellant appealed to the Court of Appeal.

Issues before the court:

• Whether the provision of share options was "regulated by the woman's contract of employment" for the purposes of s.6(6) SDA (such that jurisdiction would be under the EPA rather than the SDA).
• Whether, and when, the Employment Tribunal has jurisdiction under the EPA (ss.1 and 2): specifically whether there was a contractual term modified or included by the equality clause that had been contravened.
• Whether the discretionary grant of share options, or any right to options, was an express or implied contractual term amenable to modification by the equality clause.

Court's reasoning and conclusion:

• The EPA confers tribunal jurisdiction only in respect of contraventions of contractual terms modified or included by the equality clause (section 2). The court emphasised the need to identify a specific contractual term capable of being modified or included.
• The evidence and findings showed the Share Option Scheme comprised standard written terms equally applying to both employees; there was no finding of incorporation into the appellant's contract and no proved contractual term less favourable to the appellant than to her comparator. Thus the equality clause had no operation and there was no EPA claim within the Employment Tribunal's jurisdiction.
• The discretionary allocation of options was an exercise of contractual discretion, and complaints about differences in the exercise of such discretion are matters for the SDA (but the appellant's SDA claim was time barred).
• The court rejected attempts to import, by implication, contractual terms reflecting each exercise of discretion or to treat any employer decision to grant options as automatically creating a contractual term for EPA purposes.

Result: Appeal dismissed for lack of EPA jurisdiction on the facts; the discrimination complaint (if otherwise well founded) was caught by the limitation under the SDA.

Appeal dismissed. The Court of Appeal held that for an Employment Tribunal to have jurisdiction under the Equal Pay Act 1970 the complaint must concern the contravention of a contractual term modified or included by the equality clause; the claimant had not demonstrated any contractual term (express or implied and less favourable than her comparator's) regulating the allocation or amount of share options, and the disparity arose from the exercise of a contractual discretion. Such a complaint falls within the SDA (but the appellant's SDA claim was out of time).

The claim was first considered by an Employment Tribunal (details in the judgment), which treated the claim under both the EPA and the SDA and upheld the claim under the EPA. The Employment Appeal Tribunal (UKEAT/0475/09/CEA, judgment given by His Honour Judge Peter Clark) allowed the employer's appeal and held the scheme was discretionary and not regulated by the contract. The appellant's further appeal to the Court of Appeal was dismissed ([2011] EWCA Civ 1589).