Hosso v European Credit Management Ltd

The jurisdiction of an employment tribunal under the Equal Pay Act 1970 depends on a contravention of a contractual term modified or included by an equality clause. The claimant must identify that term.

Where a standard share-option scheme gives the employer discretion over allocation, unequal exercise of that discretion is not, without more, a difference between contractual terms for EPA purposes. The claim falls under the Sex Discrimination Act 1975, subject to its limitation period. A benefit is regulated by the employment contract where its express or implied terms govern entitlement, eligibility and probably amount. The court left open whether a benefit awarded through contractual discretion is regulated by the contract.

The appellant, a research analyst employed by the respondent, received fewer share options than a male comparator under the respondent’s discretionary share-option scheme. She pursued the complaint under the Equal Pay Act 1970 and the Sex Discrimination Act 1975. Her SDA claim was conceded to be out of time.

The Employment Tribunal upheld the EPA claim. The Employment Appeal Tribunal, in UKEAT/0475/09/CEA, dismissed the appellant’s appeal and allowed the respondent’s cross-appeal, holding that the scheme was not incorporated into the contract and was genuinely discretionary. The central issue was whether the claim concerned contractual pay within the EPA or discriminatory treatment under the SDA.

Appeal dismissed. Stanley Burnton LJ gave the principal judgment. Patten LJ agreed. Mummery LJ agreed with the dismissal and was in broad agreement with the reasoning, but expressly left one aspect of the analysis open.

1. Under section 2(1) of the Equal Pay Act 1970, an employment tribunal has jurisdiction only over a claim for contravention of a contractual term modified or included by the equality clause. The relevant contractual term must therefore be identified. This followed the approach in Hayward v Cammell Laird (No. 2) [1988] AC 894.
2. The appellant could not identify such a term. The written terms of the share-option scheme were the same for her and her male comparator. There was no less favourable contractual term and no corresponding term in the comparator’s contract that was absent from hers. The equality clause consequently had no operation.
3. The complaint concerned the unequal exercise of a discretion under a standard scheme, rather than a difference in contractual terms. Such a complaint was a sex-discrimination claim under the SDA, not an EPA claim. Section 6(6) of the SDA excluded benefits regulated by contract from section 6(2), but did not confer jurisdiction under the EPA.
4. Stanley Burnton LJ considered, as an additional matter, that a benefit was regulated by contract where express or implied terms governed entitlement, eligibility and probably amount. A benefit conferred by an employer’s discretion under a contract was not, in his view, regulated by that contract. The broad reading of Hoyland v Asda [2006] IRLR 46 was rejected, although its decision was explained by reference to findings that the bonus entitlement and amount were contractual. Mummery LJ considered this issue unnecessary to the result and left it open.
5. Arguments based on eligibility, the duration of the options, and an implied duty of good faith or trust and confidence did not establish an EPA claim. The implied duty was equally present in the comparator’s contract and was not modified by the equality clause. The SDA claim was out of time, so the appeal was dismissed.

1. Court of Appeal (Civil Division): Appeal dismissed. The claim concerned discriminatory exercise of a contractual discretion and was not within the jurisdiction conferred by the Equal Pay Act 1970.
2. Employment Appeal Tribunal, UKEAT/0475/09/CEA: The appellant’s appeal was dismissed and the respondent’s cross-appeal allowed. The share-option scheme was not incorporated into the employment contract and was genuinely discretionary.
3. Employment Tribunal: The appellant’s claim under the Equal Pay Act 1970 was upheld.