Financial Implications of Equal Pay
UNISON Scotland's response to the Scottish Parliament
Finance Committee Inquiry into the financial implications of the
equal pay aspect of the Single Status Agreement
January 2006
Scottish Parliament Finance Committee
Financial
implications of the equal pay aspect of the Single Status Agreement
Introduction
UNISON Scotland welcomes the decision of the Scottish
Parliament Finance Committee to conduct a short inquiry into the
financial implications of the equal pay aspect of the Single Status
Agreement.
UNISON is the largest trade union in Scottish local
government. In this evidence we outline the background to the
current problems and our concerns over the funding of the Single
Status Agreement.
Background
As with other employers, local government employers
have struggled to meet their binding legal obligation to introduce
equal pay despite the fact that the relevant law has been in place
for over 30 years. In 1999, along with the GMB and T&G unions,
UNISON signed the Single Status Agreement with Local Government
employers. This agreement was designed to deliver modernised employment
relations, across all occupations, building on verifiable pay
equality as a cornerstone of the relationship between Councils
and their employees. The single status agreement was due for implementation
in April 2002. The trade unions recognise that, both financially
and logistically, this was a major undertaking for the employers
and the unions have been reasonable and patient in dealing with
delays in the intervening period.
Local government employers have not been granted
the financial resources or flexibility to modernise employment
in a manner comparable with secondary school or higher education,
health and several other valued public services. UNISON believes
that the time has come for the Scottish Executive to play an active
role in the delivery of a solution that ensures equality and fairness
within modernised local government services.
Job Evaluation & Equal Pay
Although the modernising effect of ‘single status'
goes far wider than equal pay, it is the issue of equal pay which
accounts for the current problems faced by employers and employees.
Equal pay between women and men is a binding legal
obligation. It applies to salaries and to additional benefits
such as bonuses or holidays. Where an employee can show a pay
inequality with someone of the opposite gender then they will
be compensated for up to five years. The comparison must be made
between people in similar jobs or jobs of equal value.
There are many sources of pay inequality within
local government. For example many jobs traditionally dominated
by women are undervalued and underpaid. MSPs will remember the
long running Nursery Nurses dispute. That dispute was about the
historic undervaluing of women's work. It was the type of dispute
the Single Status Agreement was designed to avoid. But that is
not an isolated case. UNISON has many members among classroom
assistants, homecarers, cooks, cleaners and clerical workers who
have historic pay problems that must be addressed.
Another major problem is the fact that women do
not get access to bonus schemes commonly offered to male manual
workers.
Employers tend to use Job Evaluation schemes to
ensure equal pay between women and men. Once jobs are evaluated,
employers and trade unions use that data to negotiate around pay
and grading models that offer women and men equal rewards. What
tends to happen is that pay freezes or red-circling are used to
hold back the pay of one group while those previously undervalued
and underpaid catch up. Nowhere in the Equal Pay Act does it say
an employer can sack a man to create equal pay with a woman. The
Equal Pay Act is based on levelling up, not levelling down.
Workers Facing Pay Cuts
Rather than meet their equal pay obligations and
raise the pay of women to match that of men, UNISON fears that
some employers may be tempted to sack all staff and offer re-engagement
on lower salaries and poorer terms and conditions. Although some
employees always lose out under job evaluation, widespread substantial
pay cuts are simply unacceptable and will inevitably result in
further disputes.
What is also unacceptable is the absence of any
meaningful dialogue in some parts of the country. UNISON has a
duty to its members to check any proposed grading system to make
sure it is based on equal pay for work of equal value. In order
to do that, UNISON needs to know the data from the job evaluation
exercise if we are to negotiate over the implementation of equal
pay. Without data access, new terms and conditions cannot be adopted.
Having signed an agreement to give the unions this data in 1999
some employers are now refusing to provide the relevant data.
UNISON is being forced to refer the matter to the Information
Commissioner, all of which brings further delay.
Role for the Scottish Executive
All the trade unions are agreed - the time has come
for the Scottish Executive to act. It is no longer an option for
the Executive to hide behind the statement that this is a private
matter between Council employers and employees. The Scottish Executive
rightly supported pay modernisation in health and education. With
80% of local government funding coming from the Executive, councils
also need support.
This is also a matter of Scottish public policy.
Are public services to be free from discrimination or not? In
addition to passing legislation to enable individual claims of
equal pay, there are other obligations on member states under
EU law. For example, under Article 4 of the Equal Pay Directive
member states must take the necessary measures to ensure that
"provisions appearing in collective agreements, wage scales,
wage agreements or individual contracts of employment which are
contrary to the principle of equal pay shall be, or may be declared,
null and void or may be amended." Employers in Scottish local
government are accountable to the Scottish Parliament and, without
changing Westminster legislation on equal pay, the Parliament
and the Executive should be assisting local government employers
in their efforts to tackle inequality. The Scotland Act 1998 (Sch.
5 section L2) also provides powers for the encouragement of equal
opportunities and in particular of the observance of the equal
opportunity requirements (this explicitly includes the Equal Pay
Act 1970).
Although concerned at the approach of some employers
on this issue, UNISON has considerable sympathy for those councils
who look at the role of the Executive in health, secondary teaching,
universities, SEPA and other areas and ask why no assistance is
available from the Scottish Executive, financial or otherwise.
The trade unions support the employers call for the position of
the Scottish Executive to be reversed.
Financial Consequences
The financial consequence for local authorities
comes in two parts. There is the cost of implementing a job evaluation
scheme, mostly involving an element of red circling described
above. Then there is the cost of compensation for past discrimination
in the form of back pay. It is the latter that has attracted most
media coverage and the attention of profit seeking lawyers. However,
it is equally important to put a fair job evaluation scheme in
place to ensure no continuing discrimination and to identify all
staff who may be suffering from pay discrimination.
The employers' evidence to the Finance Committee
of the Scottish Parliament asserted that the scale of the debt
to low paid workers was £560 million. UNISON does not accept that
as an accurate figure. The sums quoted in evidence to the parliament
reflect past inequalities in relation to bonus. They do not address
or reflect the substantial inequalities in relation to past grading
inequality because those debts have not been properly quantified
and the employers refuse to share the relevant data with the trade
unions.
No agency has accurately projected the cost of equal
pay in Scottish Local Government largely because until robust
job evaluation schemes are in place in every authority it is impossible
to accurately calculate a final figure.
Increase in Equal Pay Liability
Despite our disagreement over the scale of equal
pay liability the employers and the trade unions are agreed that
the scale of equal pay liability could not have been foreseen
when the Single Status Agreement was signed in 1999.
The Single Status Agreement was adopted with the
intention, among other things, of bringing local authority pay
and conditions into line with Equal Pay legislation. The costings
associated with Single Status negotiations were based on the rights
and obligations under the Equal Pay Act 1970. At the time the
Single Status Agreement was signed, s.2(5) of the 1970 Act stated:
(5) A woman shall not be entitled, in proceedings
brought in respect of a failure to comply with an equality clause
(including proceedings before an industrial tribunal), to be awarded
any payment by way of arrears of remuneration or damages in respect
of a time earlier than two years before the date on which the
proceedings were instituted."
However, the UK government later amended this provision
by statutory instrument. The effect of that amendment in Scotland
was to increase the scope for equal pay claims from two years
prior to the date of proceedings to five years. The explanatory
note published with the Equal Pay Act 1970 (Amendment) Regulations
2003 states:
"These Regulations amend the time limit within
which a person must institute proceedings before an employment
tribunal in respect of a breach of the Equal Pay Act 1970 ("the
Act"). The Regulations also amend the time period in respect of
which an employment tribunal or court is able to award any payment
by way of arrears of remuneration or damages in such proceedings."
"These changes are necessary to reflect requirements
of European Community law, specifically Article 141 of the Treaty
of Rome (equal pay), as applied in a number of recent cases before
the European Court of Justice and the domestic courts".
The case to which the relevant part of the note
refers is Preston & Others v. Wolverhampton Healthcare
N.H.S. Trust & Others and Fletcher & Others v. Midland
Bank Plc [2001] UKHL 5. The view of the House of Lords was
that the two year limit on compensation for past discrimination
was incompatible with Article 141 of the Treaty of European Union.
In short, the current equal pay liability is 250%
larger than could have been forecast by the most detailed analysis
in 1999 and this increase in liability is attributable to the
failure of the UK Government to legislate on equal pay in compliance
with the provisions of community law prior to July 2003.
UK Government Role
UNISON is not suggesting that the UK government
should be sued for failing to legislate properly on equal pay.
However, it has been suggested in this recent debate that the
responsibility for the equal pay debt rests solely with the employers
who signed the agreement in 1999. There can be no doubt that the
duty to implement equality rests with the employers, however,
the scale of the problem the employers presently face is attributable
in large part to a failure by the UK government and that therefore
they should contribute to the cost, or at the very least not profit
from the tax windfall from compensation payments.
In Frankovich, a case where there had been
a failure to implement a directive, the European Court said at
paragraph 37 "it is a principle of Community law that the member
states are obliged to make good loss and damage caused to individuals
by breaches of Community law for which they can be held responsible".
On the face of it there is a possibility that the UK Government
has a direct legal liability for failing to legislate competently
on equal pay. The question is whether the failure to legislate
adequately on equal pay compensation amounts to a "grave
and manifest" disregard for the requirements of community
law.
An unpaid debt to low paid women in Scotland of
something in excess of £500 million can only be described as a
grave matter. The issue in dispute is whether in 1999 the UK government
were aware that the Equal Pay Act was not compatible with community
law and knowingly failed to amend the law.
This question is best addressed by looking at Marshall
v Southampton and South-West Hampshire Area Health Authority (No.
2) [1993]
IRLR 445. In March 1980 Miss Marshall was dismissed at
the age of 62. At the time of her dismissal men were entitled
to work until the age of 65. In 1986 the European Court ruled
that she had the right to retire at the same age as a man. When
her case returned to employment tribunal in 1988 the Sex Discrimination
Act limited compensation to just over £6,000. Miss Marshal returned
to the European Court and in 1993 she received a ruling that the
attempt by the UK Government to limit compensation for discrimination
was unlawful. Miss Marshall was eventually compensated in full.
Critically for our purposes, the ECJ held that
"equality of opportunity ... cannot ... be
attained in the absence of measures appropriate to restore such
equality when it has not been observed."
"Where financial compensation is the measure
adopted in order to achieve the objective indicated above, it
must be adequate, in that it must enable the loss and damage actually
sustained as a result of the discriminatory dismissal to be made
good in full".
The UK government intervened as a party in the Marshall
case and therefore was made directly aware of the principle set
out above. This ruling made it obvious to the UK Government that
remedies for sex discrimination had to be reviewed in order to
ensure compliance with community law.
Such a review was conducted by Ann Widecombe, then
Secretary of State for Employment, and the result was the Sex
Discrimination and Equal Pay Remedies Regulations 1993 which took
effect in November of that year. The explanatory note published
by the government with those regulations described their purpose
thus:
"These Regulations, which are made under section
2(2) of the European Communities Act 1972, are made for the purpose
of ensuring that the remedies available under legislation in Great
Britain relating to sex discrimination and to equal pay for men
and women comply with the requirements of Council Directives 1975/117/EEC
and 1976/207/EEC (following the judgment of the European
Court of Justice in Case No C271/91-Marshall v Southampton and
South-West Hampshire Area Health Authority (No.2))."
Although the regulations removed the limit on compensation
payable for sex discrimination, the two-year limit on compensation
for equal pay was retained in 1993 and remained in place until
the found to be unlawful in the Preston Fletcher case of
2003.
It is UNISON's position that it was manifestly obvious
to the Department of Employment at the time of the review in 1993
that the arbitrary limits on compensation under both the Sex Discrimination
Act and the Equal Pay Act were incompatible with community law.
Indeed, it could be argued that the appropriate amendment to the
Equal Pay Act would have been to remove entirely the limit on
compensation in line with the law on race, sex and disability
discrimination.
As we observed above, it is not now disputed that
the law on Equal Pay Compensation in the UK was incompatible with
community law until July 2003. It is clear, therefore, that the
UK government's failure to put Equal Pay law on a sound statutory
footing at the time of the Department of Employment review in
1993 seriously undermined the ability of local government employers
and trade unions to accurately project the costs of equal pay
during single status negotiations in 1999.
Conclusion
The issue for the Finance Committee is not whether
the UK government has a binding legal obligation to compensate
employers and employees for their failure to legislate competently
on equal pay. The question before the committee is whether local
government employers can be blamed now for a lack of foresight
in 1999 and penalised for not anticipating that equal pay compensation
would reach the levels we are familiar with today.
There are two issues that must be borne in mind.
The first is the simple point that local government employers
were entitled to assume, in 1999, that they should negotiate single
status with reference to the terms of equal pay law as determined
by parliament at that time. The second point is an extension of
the first. Employers are now aware that, in the light of the 2003
regulations, equal pay liability now extends back over five years.
However, had an employer made a payment of compensation spanning
five years back in 1999 then, in the absence of a legal justification,
such a payment might have been considered ultra vires.
The single status agreement is a product of the
legislation which existed at the time the agreement was signed.
Given that we now know that legislation to be flawed, it would
be unreasonable to criticise local government for costing equal
pay compliance in accordance with the national law set down at
the time in question. The fact that authorities now have a substantially
greater liability to manage is significantly attributable to the
UK Government's failure to legislate on equal pay in compliance
with the binding obligations of community law.
We believe that both local government employers
and trade unions wish to reach fair settlements both in terms
of long term fair pay structures and compensation for past discrimination.
No one wants lengthy disputes or to divert scarce public resources
to the lawyers through litigation. However, the current very tight
local government funding settlement does not provide for the cost
of this long standing obligation.
For further information please contact:
Matt Smith, Scottish Secretary
UNISON Scotland
UNISON House
14, West Campbell Street,
Glasgow G2 6RX
Tel 0845 355 0845 Fax 0141 342 2835
e-mail matt.smith@unison.co.uk
