McNeil & Ors v Revenue And Customs

The Court of Appeal rejected the appellants' challenge to the Employment Appeal Tribunal's dismissal of their equal pay claims. The central legal question was whether the particular disadvantage test in section 69(2) of the Equality Act 2010 should be tested by analysing the distribution of men and women across pay-band deciles/quartiles or by comparing average (mean) basic pay for the relevant pools. The court held that, in a case where pay is a semi-continuous variable across a band, the proper and practicable way to assess group disadvantage is by reference to actual amounts paid (typically averages across the appropriate comparison pool) rather than selective distributional slices. The court accepted that "length of service" was the material factor under section 69(1) but concluded that the Claimants had failed to show that it put women as a group at a particular disadvantage under section 69(2). The court also rejected attempts to dissect "basic pay" into a separate notional "variable" element for the purposes of the section 69(2) analysis.

This appeal concerned a group equal pay claim by female Grade 6 and Grade 7 employees of HM Revenue and Customs who complained that their lower salaries (often near the bottom of the relevant pay bands) compared with male colleagues at the top of the same bands resulted from a pay system that unlawfully disadvantaged women.

The procedural history was:

• The Employment Tribunal (Judge Snelson) directed a preliminary hearing on two agreed issues: (i) the factor(s) within s.69(1) Equality Act 2010 causing the pay difference and (ii) whether, properly defined, that factor put women at a particular disadvantage under s.69(2). The ET (17 June 2016) held that the material factor was length of service and that it did not put women at a particular disadvantage, so HMRC established the material factor defence and the claims were dismissed.
• The Employment Appeal Tribunal (Simler P) dismissed the Claimants' appeal (27 February 2018).
• This Court of Appeal (Underhill LJ, Ryder LJ, Holroyde LJ) heard the appeal and dismissed it on 3 July 2019.

Nature of the claim/application: equal pay claims under the Equality Act 2010 (Chapter 3, Part 5, "Equality of Terms"). Relief sought was pay equality (modification of terms) and a declaration that HMRC had failed to comply with the sex equality clause, subject to HMRC's reliance on the material factor defence under section 69.

Issues framed and the court's reasoning:

• The Court accepted that "length of service" is a material factor contributing to pay differences (issue (i)).
• On issue (ii) the Claimants advanced a distributional method (quartiles/deciles) showing "clustering" of women at the lower end of pay bands. The ET preferred a mean/average-pay analysis and accepted HMRC's statistics showing only marginal average differentials. The Court of Appeal agreed the ET and EAT were correct in principle: where pay is a semi-continuous variable across a band the statutory exercise requires attention to the actual amounts paid and the appropriate, practicable comparator is average pay across the proper pool rather than selective distributional segments. The ET's additional findings — that the Claimants had abandoned some earlier pleaded bases, that basic pay is indivisible for the comparison required by s.66, and that distributional analysis was an inferior surrogate which could produce arbitrary results — were accepted.
• The court also rejected the idea that the comparator should be a notional "variable element" of pay (the part above the minimum) because neither contract nor practice distinguished such distinct elements of basic pay; dividing basic pay in that way would produce anomalous results and no statutory or authoritative support existed for such an approach.
• The court additionally refused to admit, at this appeal stage, an alternative case based solely on differences in average pay since the Claimants had plainly disavowed reliance on average-pay figures below and had not pursued that positive case before the ET.

The court commented on related matters including the place of the material factor defence under s.69, the relevance of statistical "significance" and authority on Enderby-type and barrier-type indirect discrimination, and noted the Equality and Human Rights Commission guidance (toolkit) but emphasised that its percentage examples are only indicators and do not constitute legal thresholds.

Appeal dismissed. The Court held that 'length of service' was correctly identified as the material factor under section 69(1) but the Claimants failed to establish that it put women, as a group, at a particular disadvantage under section 69(2). The court endorsed the Employment Tribunal's approach that in a pay structure where basic pay is a semi-continuous variable the proper analytic focus is on actual pay amounts (averages across the appropriate pool) rather than selectively analysing distribution across deciles or quartiles; it also rejected attempts to treat basic pay as divisible into a separate 'variable' element for the s.69(2) analysis and refused to permit a new alternative case to be advanced for the first time on appeal.

Employment Tribunal (Judge Snelson) directed preliminary issues and by judgment dated 17 June 2016 dismissed the claims (Employment Tribunal judgment). Employment Appeal Tribunal (Simler P) dismissed the claimants' appeal: [2018] UKEAT 0183/17, [2018] ICR 1529 (27 February 2018). This Court of Appeal dismissed the further appeal: [2019] EWCA Civ 1112 (03 July 2019).