Skills Development Scotland Co Ltd v Buchanan & Anor

In an equal-value claim, an employer establishes the Equal Pay Act 1970 material-factor defence by proving a genuine, causative and gender-neutral explanation for the pay difference. The employer need not show that the difference is objectively justified unless the explanation involves direct or indirect sex discrimination.

A causal connection originating in a TUPE transfer is not broken merely because the employer could have reduced the disparity, failed to consider TUPE at each pay review, or continued applying standard pay increases. Mere passage of time does not cause a gender-neutral explanation to lose its character, although evidence of bad faith may undermine its genuineness.

Two female employees brought equal-pay claims against Skills Development Scotland, relying on a male comparator who performed work of equal value. The pay disparity originated when the employees and comparator transferred under TUPE, with the comparator’s higher contractual salary and subsequent pay arrangements transferring with him.

An Employment Tribunal held that the material-factor defence succeeded until April 2004 but failed thereafter, reasoning that the employer should have frozen the comparator’s pay. It ordered equality clauses and left remedy for a later hearing. The employer appealed, arguing that TUPE remained the cause of the disparity and that there was no finding of sex discrimination or indirect discrimination.

The central issues were whether the causal chain had been broken and whether the Tribunal could reject the defence without identifying a gender-related explanation.

1. Appeal upheld; claims dismissed. The Tribunal erred in law. Its findings showed that the pay disparity was genuinely explained by the operation of the comparator’s transferred contract following TUPE. There was no finding of sham, fraud, pretence or gender-related conduct.
2. Under section 1(3) of the Equal Pay Act 1970, the employer need prove a genuine, material and non-sex-related explanation. It need not establish objective justification where the explanation is gender-neutral. Equal-pay legislation addresses sex discrimination, not general fairness in wages.
3. The relevant contractual term was capable of entitling the comparator to pay increases made under the employer’s normal arrangements. The employer’s standard across-the-board increases therefore remained causally connected to the transferred contract and TUPE. The fact that the employer could have frozen the comparator’s pay, or did not continually think about TUPE, did not break the causal chain.
4. The ability under the performance-related pay scheme to freeze an overpaid employee’s salary did not alter the comparator’s contract. It was also irrelevant on the facts because salary freezes were not the employer’s practice and imposing one might have breached the contractual term.
5. Mere effluxion of time does not make a gender-neutral explanation cease to be genuine or non-sex-related. Time may be relevant, together with other evidence, in demonstrating bad faith or that the original explanation no longer operates, but no such evidence existed here.
6. Indirect discrimination could in principle constitute sex taint and require objective justification. However, there were no findings of a discriminatory provision, criterion or practice, and the pay-audit evidence did not establish such a case. No remit was appropriate.

• Employment Appeal Tribunal: Appeal from the Employment Tribunal sitting at Edinburgh. The appeal was upheld and the Claimants’ claims were dismissed.
• Employment Tribunal: Judgment registered on 3 June 2010. The Tribunal held that the material-factor defence applied until April 2004 but not thereafter, ordered equality clauses and postponed remedy.