Walker v Co-Operative Group Ltd & Anor

The Court of Appeal dismissed Mrs Walker's appeals against the Employment Appeal Tribunal (EAT) decision. The ET had found that Mrs Walker had been unfairly dismissed and that a job evaluation study (JES) rated her role as equivalent to two male comparators, but had accepted that a number of material factors originally justified the pay differential when salaries were set in early 2014. The EAT allowed the employer's appeal on equal pay, holding that the historical material factors remained causative of the pay differences in February 2015 or that there was insufficient evidence to show they had ceased to operate; the Court of Appeal agreed. The court applied the scheme of the Equality Act 2010 (sections 64–66 and 69) and the Marshall v Glasgow City Council approach to the material factor defence, holding that a material factor is causative and will defeat an equal pay claim unless it has ceased to operate as the explanation for the pay differential. On direct sex discrimination in relation to dismissal, the court upheld the ET's factual finding that the reason for dismissal was a reorganisation of the HR function (SOSR) and that there was no legal basis to infer the dismissal was tainted by sex discrimination.

Background and parties: Samantha Walker was Group Chief HR Officer of the Co-operative Group Ltd from March 2013 until April 2017. She brought multiple employment claims including equal pay under the Equality Act 2010 and direct sex discrimination arising from performance appraisal and dismissal. The Employment Tribunal (ET) found in her favour on unfair dismissal and on one aspect of direct sex discrimination (the 2015 year-end performance grading), and accepted that a Hay job evaluation study in February 2015 had rated her role at least equivalent to two male comparators. The ET also found, however, that a set of material factors justified the original pay differential when salaries were fixed in February–March 2014.

Procedural posture: The employer appealed the ET finding on equal pay to the Employment Appeal Tribunal (EAT) and Mrs Walker cross-appealed aspects of direct discrimination. The EAT (Lord Summers) allowed the employer's appeal on equal pay, dismissing the ET's conclusion that the material factors had ceased to operate by February 2015, and dismissed Mrs Walker's cross-appeal on direct discrimination in relation to dismissal. Mrs Walker appealed to the Court of Appeal.

Nature of the claims / relief sought: (i) Equal pay: a claim that Mrs Walker's terms should be aligned with male comparators because her work was rated as equivalent by a JES and therefore the s 66 sex equality clause should operate unless the employer could show a non-sex-related material factor under s 69; (ii) Direct sex discrimination: that the decision to give notice and to terminate her employment was tainted by sex discrimination rooted in discriminatory appraisal and treatment.

Issues framed: (i) Whether the ET was entitled to find that material factors justifying the 2014 pay differential had ceased to operate by February 2015 such that the sex equality clause took effect from that date; (ii) the proper legal test and burden of proof in relation to the material factor defence under s 69 EA 2010; (iii) whether the ET erred in law in concluding that the dismissal (notice given 1 April 2016) was not an act of direct sex discrimination.

Court's reasoning: The Court of Appeal held (i) under the statutory scheme (sections 64–66 and 69 EA 2010) and authority such as Marshall v Glasgow City Council, a material factor must be causative of the pay disparity. The JES dated February 2015 established equivalence prospectively from that date but did not automatically erase historical causative factors. If a material factor which caused the pay difference in 2014 remained the cause in February 2015 (for example market forces in the case of the chief legal officer, or superior executive experience and related flight-risk reasons in the case of the other comparator), the employer's material factor defence survives. The ET had not found that those causative factors had ceased to operate in relation to the comparators; the EAT was therefore right to allow the employer's appeal on equal pay. (ii) On direct discrimination in relation to dismissal, the ET had made positive factual findings that the dismissal was for reorganisation (SOSR) and that a hypothetical male CHRO would have been treated similarly. Where the tribunal can make positive factual findings, the statutory burden shifts add nothing; the Court of Appeal found no error of law and upheld the ET's conclusions.

The appeal was dismissed. The Court of Appeal agreed with the EAT that the Employment Tribunal erred in concluding that the historical material factors justifying the 2014 pay differentials had ceased to operate by February 2015; the material factor defence therefore survived and the equal pay claim failed. The Court also upheld the ET's factual finding that the dismissal resulted from a legitimate reorganisation (SOSR) and was not shown to be tainted by sex discrimination.

Employment Tribunal (Manchester) judgment 13 November 2018 (full factual findings; equal pay and discrimination claims decided); Employment Appeal Tribunal (Lord Summers) judgment allowing employer's appeal on equal pay and dismissing cross-appeal on discrimination, 11 October 2019 (UKEAT/0087/19); appeal to the Court of Appeal dismissed [2020] EWCA Civ 1075 (14 August 2020).