Cadman confusion

The ECJ ruling in Cadman v Health & Safety Executive Case C-17/05 (3 October 2006) received wide and varied coverage in the media, notable in particular for two diametrically opposed front-page headlines in the broadsheets: 'Mothers lose right to equal salaries' for The Times,contrasting with 'Higher pay for long service ruled illegal' in The Guardian.

Little wonder that confusion remains as to who won. The reason for this confusion can be found at para 40 of the judgment, which is worded in somewhat cryptic style:

'Since, as a general rule, recourse to the criterion of length of service is appropriate to attain the legitimate objective of rewarding experience acquired which enables the worker to perform his duties better, the employer does not have to establish specifically that recourse to that criterion is appropriate to attain that objective as regards a particular job, unless the worker provides evidence capable of raising serious doubts in that regard.'

A further cause for confusion in the press arose from widespread anticipation, following the Advocate-General's opinion earlier this year, that the ECJ would go even further in its ruling. The Advocate-General had concluded that employers should be required to justify the use of the length of service criterion in every case. It is indeed disappointing that the ECJ did not follow the Advocate-General and that the ECJ's ruling places the onus on the employee to show serious doubts about the appropriateness of the general rule in their case.

Challenging seniority

Nevertheless, there can be no doubt that the ruling is a significant step forward in equality law, since for the first time there is scope for employees to challenge some seniority-based pay systems. It therefore opens the door to claims by women who find they are paid less, not on merit, but simply because their male colleagues have worked for their employer for longer.

The ECJ's ruling recognises what it calls 'the general rule' that length of service is appropriate and legitimate as a criterion where the objective is to reward experience that enables the worker to perform his duties better. This is a reference to the special status allowed to length of service criteria since the Danfoss case (Handels og Kontorfunktionaeremes Forbundi Danmark v Dansk Arbejdsgiverforening [1989] IRLR 532).

The ECJ held that, as a result, the employer does not have to establish specifically that use of length of service criteria is appropriate (to satisfy the legitimate objective of rewarding experience that leads to better performance) in each particular job.

However, the ECJ did not leave it there. The judgment establishes an important caveat to the general rule, with the result that justification will be required in cases where the worker can provide evidence capable of raising 'serious doubts' as to whether, in their particular case, use of length of service criteria is appropriate.

Background

In June 2001, Mrs Cadman lodged her equal pay claim with the employment tribunal. At the date of her claim, she had been engaged by the Health & Safety Executive (HSE) as a band 2 inspector for nearly five years. Her comparators were four male colleagues who were also band 2 inspectors. They were paid £4,000 to £9,000 pa more than Mrs Cadman. The four male comparators had longer service than Mrs Cadman, acquired in part in more junior posts. The claim succeeded.

The HSE then appealed to the Employment Appeal Tribunal (EAT). The EAT upheld the appeal on the basis that the ECJ's ruling in Danfoss provided that no justification was required where unequal pay arose because of the use of length of service. It also held that even if justification were required, the ET had erred in law in reaching its findings on justification.

Mrs Cadman subsequently appealed to the Court of Appeal, which made an Art 234 reference to the ECJ on the question of whether an employer is required to justify the use of length of service as a criterion to determine pay, where use of that criterion can be shown to have a disparate impact on female workers. The court went on to uphold the EAT's finding that the ET had erred in law when it reached its findings on justification, and held that the case should be remitted to a different ET for determination of the justification issue, should that be necessary after the ECJ's ruling on the Danfoss point (as indeed it now will).

Length of service cases

The ECJ ruling now establishes the position in relation to justification in length of service cases as follows:

1. The 'general rule' is that use of the length of service criterion is appropriate to attain the objective of rewarding experience acquired that enables the worker to perform his/her duties better. This is a legitimate objective of pay policy.

2. Where the general rule applies, the employer is free to reward length of service without having to establish the importance
it has in the performance of specific tasks performed by the employee.

3. There may be situations in which recourse to the criterion of length of service must be justified by the employer in detail.

4. One such situation is where the worker provides evidence capable of giving rise to serious doubts as to whether recourse to the criterion of length of service is, in the circumstances, appropriate to attain the objective (of rewarding experience acquired which enables the worker to perform his/her duties better).

5. In such situations, it is for the employer to prove that that which is true as a general rule, namely that length of service goes hand-in-hand with experience and that experience enables the worker to perform his duties better, is also true as regards the job in question.

6. Where a job evaluation study is used in determining pay, there is no need to show that an individual worker has in fact acquired experience during the relevant period which has enabled him/her to perform his/her duties better. Instead, the nature of the work must be considered objectively.

Situations requiring justification

There are some important issues to note arising from this.

The 'general rule' only applies where the objective of the particular pay scheme is 'rewarding experience which enables the worker to perform their duties better'. The general rule does not apply to any other objective, for example, rewarding loyalty, so justification will be required in those cases.

The 'caveat' that there may be situations in which use of the length of service criterion must be 'justified in detail' by the employer is not limited to the situation where the worker can show 'serious doubts' about the appropriateness of the general rule. The ruling implicitly recognises that there may be other situations where justification in detail is required, although no other examples are given by the ECJ.

The way in which job evaluation studies are dealt with suggests that, in other cases where justification is required, the employer will be required to show not only that the nature of the job is such that experience generally leads to better performance, but also that the individual comparator has in fact acquired experience that has enabled better performance of duties.

'Serious doubts'

One key question which arises from the ruling is what an employee will be required to show to establish 'serious doubts' about the appropriateness of the general rule to their case. If they are able to establish serious doubts, the employer is then required to justify the use of the length of service criterion in their case.

There may be little clarity on these issues until some cases are heard by the tribunals. In the meantime, some issues which may be considered are:

• Whether the particular job is one in which experience in the job necessarily leads to better performance. This is particularly relevant to low skilled roles where the job can be very quickly learned. In that case, it might be argued that it is not appropriate to 'reward experience which enables the worker to perform their duties better' and the general rule does not apply.
• For how long does experience continue to enable the worker to perform their duties better? Although there may be a 'learning curve' for the initial years in a job, this may not continue indefinitely. The extent to which performance will go on improving with experience will depend on the nature of the particular role. There may well be a levelling-off point in many jobs. The age discrimination legislation provides that employers must justify rewarding experience over and above five years.
• The issue of proportionality will also be key. The general rule is that use of length of service criteria will be appropriate to attain the objective of rewarding experience which enables better performance. However, where the rewards are disproportionate to the objective, there should be serious doubts about whether the general rule is appropriate.
• The requirement that the employee should show serious doubts to require the employer to justify seems inconsistent with the burden of proof directive. The allocation of the burden of proof in indirect discrimination cases was the starting point for the legal analysis in the Advocate-General's opinion, but was not dealt with in any detail in the ECJ's ruling. Another element of equal pay claims where it is suggested that the burden falls on the employee is where an employee has to demonstrate that the genuine material factor being put forward by the employer to explain the difference in pay is tainted with discrimination or has a discriminatory impact (and therefore requires objective justification). Equal pay reviews, audits and questionnaires are key methods for employees to obtain information from the employer to assist in doing so. And in Nelson v Carillion Services [2003] IRLR 428, the Court of Appeal emphasised that the claimant may seek the tribunal's assistance to do so, through requests for further particulars or requests for written answers. A similar approach could be taken in relation to this issue.