Co-Operative Group Ltd & Anor v Walker

An employer’s material-factor defence to an equal-pay claim continues to justify an originally lawful pay disparity unless a later decision, or a failure to decide when circumstances require a decision, is itself tainted by sex discrimination. A tribunal cannot infer that the defence ceased at an unidentified earlier date merely because a later job-evaluation study shows that the jobs were then of equal value. Evidence must establish when, and to what extent, the material factors ceased to operate.

A job-evaluation study may alert an employer to a pay disparity, but its findings cannot be extrapolated retrospectively. A tribunal should not determine an unpleaded alleged omission to review pay where the evidence does not address why a review was not undertaken, when it should have occurred, or the continuing weight of the material factors.

The respondent was appointed Chief Human Resources Officer during a financial crisis. Her salary was negotiated below those of two male executive comparators. The Employment Tribunal accepted that the original disparity was justified by material factors, but held that those explanations had ceased to be material before a Hay job-evaluation study in February/March 2015.

The appellants appealed the equal-pay finding and a finding that the respondent’s 2015 performance appraisal was direct sex discrimination. The respondent cross-appealed against the rejection of her direct-sex-discrimination claim concerning her notice of termination and dismissal. The central equal-pay issue was whether the originally justified differential could become unlawful before the Hay study without an identified later decision or omission to decide.

1. The appeal was allowed in part. The Employment Tribunal’s equal-pay finding could not stand. Its finding that the original material factors had ceased at some unidentified point between February 2014 and February 2015 was unsupported by the evidence.

2. Once the appellants had rebutted the presumption of sex discrimination by establishing genuine, material and sex-neutral reasons for the original salary differential, that justification persisted. A further unlawful decision was required before the original lawful decision could be displaced. A failure to decide may have that effect, but only where facts and circumstances called for a decision to equalise pay.

3. The Tribunal had identified neither a fresh pay decision nor an omission to act in circumstances requiring a pay decision. It could not treat the original justification as having gradually become unlawful merely because the relative importance of the roles had changed.

4. The Hay study showed that the respondent’s work was at least of equal value by the date of the study. Its conclusions could not be projected backwards to establish equality of value, or the disappearance of the material factors, in the preceding period. Nor was there evidence showing when any individual justification ceased or whether the justifications operated jointly or independently.

5. The study nevertheless fixed the appellants with knowledge of a pay disparity. Internal failure to communicate it to the body setting executive pay did not remove that knowledge. The issue of a later culpable failure to review was not remitted, because neither party had led evidence on why no review occurred, when it should have occurred, or its consequences.

6. The appeal against the finding of direct sex discrimination in the 2015 performance appraisal was dismissed. The Tribunal was entitled to find less favourable treatment, draw the inference of discrimination, and reject the appellants’ explanation. The respondent’s cross-appeal was also dismissed: the Tribunal was entitled to find that the notice and dismissal resulted from proposed changes to the HR function rather than sex discrimination.

• Employment Appeal Tribunal: allowed the appellants’ equal-pay appeal, dismissed their appeal concerning the 2015 appraisal, and dismissed the respondent’s cross-appeal.
• Employment Tribunal, Manchester: in August 2018, upheld some claims, including equal pay and direct discrimination in the 2015 appraisal, but rejected the direct-discrimination claim concerning notice and dismissal.