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When the Sex Discrimination Act 1975 was enacted, it did not affect that aspect of the Equal Pay Act, but it allowed claims of discrimination in employment to be made where the employer treats a woman employee less favourably than he treats, or would treat, a worker of the other sex. In other words, a sex discrimination claim in employment does not require an actual comparator, where, but for her sex, the claimant would have received the same benefit as a man, actual or hypothetical. But, read literally, the Equal Pay Act rules out any hypothetical comparison at all.

Clauses 64 and 79 are intended to maintain what the Government consider to be the effect of current law, so that a person seeking to make an equal pay

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claim must still use a comparator of the opposite sex whose pay is the responsibility of the same person. The comparator must be a person doing the same or similar work, and must, as the Minister said, be a real and not a hypothetical one.

Domestic legislation, however, such as the Equal Pay Act and the Sex Discrimination Act-and now this Bill-must be read and given effect in accordance with EU equality legislation, which is broader. That is made quite clear in the current version of the equal pay directive, which deals with other matters too. Article 33, as is normal under directives, requires the United Kingdom to bring into force the laws, regulations and administrative provisions necessary to comply with the directive by a particular date-the idea being that domestic law should state what EU equality law requires. There is an obligation to notify the Commission and so on.

7 pm

The first problem, as the Minister said, is that, read literally, the Equal Pay Act and, until now, the Equality Bill do not permit a woman to compare her work and pay with those of a man previously employed in the same undertaking. An example is the Wendy Smith case, in which I appeared many years ago. She was a manageress in a pharmaceutical firm and there was only one job, so she could not compare her work and pay with those of her predecessor, who was a man. Lord Denning and co decided that the case should go to Luxembourg because there was a mismatch between what the Equal Pay Act said and what the Court of Appeal realised was required under EU law-namely, that you should be able to compare your work and pay with those of a male predecessor. I tried to persuade the court that this should include the hypothetical comparator but it said that that was too broad. However, you must be able to compare your work and pay with those of your predecessor or successor.

My Amendment 74-I think that this is still one of the few issues of contention between me and the Government-would state in the Bill the true position. It is not suggested by the Minister that it does not state the true position, and it is not said that it is not required by the judgment in McCarthy Ltd v Wendy Smith, but in my view, when a ruling of the Luxembourg Court was interpreted and applied by the Court of Appeal, it is not satisfactory to leave the matter to ministerial statements, explanations, Explanatory Notes or codes or whatever. The law needs to provide employers and employees with legal certainty, which is meant to be one of the main purposes of the Bill. Therefore, I very much hope that this open-minded Minister will at least agree to take away Amendment 74 and consider whether, in compliance with our EU obligations, it should be accepted on Report, when I shall certainly bring it back. That is the first problem.

The second problem is that Clause 64 as it stands is even narrower than Barbara Castle's Equal Pay Act-what is known in the trade as "regression". In Clause 64 the drafter has managed to use "colleague". It requires that the claimant be employed on work that is equal to the work that a "colleague" of the opposite sex does. The word "colleague" is not appropriate for someone who is not working contemporaneously with the claimant.

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A person cannot be a colleague if he or she no longer works there. That is why my Amendments 71 and 73 substitute "person" for "colleague" and why the government amendment substitutes "comparator". I am perfectly happy to accept "comparator" rather than "person"; there is no difference.

The amendments simply ensure that the Bill echoes the Equal Pay Act. However, as I said, they do not give effect to the ECJ's judgment in McCarthy Ltd v Smith, which is why I still respectfully insist that Amendment 74 is needed to make it quite clear that the references to the work in Clause 74 are not restricted to work done contemporaneously by the claimant. This is an important area where the Government have done something creative. I greatly welcome that, so I shall move on. However, it is important that we understand what is going on.

Where a sex equality clause will not operate because there is no actual comparator with whom a claimant can compare his or her pay or other terms, Clause 71 commendably enables the person who is treated less favourably than another-by being paid less because of the claimant's sex-to bring a claim for direct sex discrimination using a hypothetical comparator. By way of explanation, if the noble Baroness, Lady Howe, wished to bring an equal pay claim but could not do so because there was no actual comparator, then if there were direct discrimination, which explained why she was paid less than she should be, she could bring a direct sex discrimination claim under Clause 71. That is good and new. However, Clause 71 does not enable a claim of indirect sex discrimination in relation to pay to be brought where there is no actual comparator. In my view, that is not compatible with EU law, although I accept that the circumstances in which EU law does or does not require an actual comparator are not clear. That is why I shall not press that point: it is not fair to expect the Government to operate on the basis of unclear law. I gather that there may be a case that deals with that point.

There are other bits of unclarity. For example, EU law talks about not only the same establishment but the same service, and it is not absolutely clear what is meant by "service". I shall not continue with this legal analysis, so, to cut a long story slightly shorter, I agree that, where the Government have dealt with the problem of "colleague", replacing it with "comparator", that seems to be absolutely fine.

I think that the Government's amendment on the so-called material factor defence has the same effect as mine. I naturally prefer my own drafting but I am not so stupid as to think that it must prevail over the Government's drafting, which achieves the same effect.

In all other respects, I am grateful to the Government for what they have done. However, I insist that Amendment 74 should be included. That change should have been made when all those years ago Lord Denning's Court of Appeal said that what is on the face of the Act does not represent Community law. That is when it should have been amended under the European Communities Act. It was not but we now have an opportunity to do so, unless my amendment is defective in not stating the law correctly, in which case I shall happily look at an alternative on Report.

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Baroness Morris of Bolton: I thank the Minister very much for the explanation of her amendments, which we welcome. I look forward to her response to Amendments 76 and 77 tabled by the noble Lord, Lord Lester of Herne Hill, because we need clarity here.

Baroness Howe of Idlicote: I should like to say what a pleasure it was to hear the noble Lord, Lord Lester, setting out as clearly as ever these very important matters and how they should be brought up to date. In particular, he made a very strong case for Amendment 74. I hope that the whole area of direct discrimination and indirect discrimination, which seemed to rule our lives in the early years at the Equal Opportunities Commission, when I was very happy to be the deputy chairman, has moved on and that it has been helped by European law. Let us make certain that we take advantage of this Bill to do just that. I am only rather sorry that the noble Lord, Lord Lester, has decided to move back from the area that he is not quite certain about. Now would seem to be the time to tighten up this area, not least when we have a very receptive Government, who seem to be extremely keen to help and accommodate as many as possible of the amendments that we are trying to put forward.

Lord Mackay of Clashfern: I entirely agree with the substitution of comparator for colleague. The fact that it has been changed from "colleague" to "comparator" is a bow to Amendment 74 tabled by the noble Lord, Lord Lester. There is no doubt that the essence of Amendment 74 is in fact the present law. It was the subject of judicial decision a long time ago, imported in effect from the European law by which we are bound. It is right to make clear in our law-now that we have an opportunity of revising it-that this is the position. The drafting is a matter that Lord Lester has devoted himself to, and it looks to me to be perfectly reasonable-if I may use that expression-but the Government may have some criticism of that. I understood the noble Baroness to say that we had better stick to the present law, as it is in the statute. There is a lot of sense in that, because whenever you change the law, lawyers immediately find an opportunity for further argument.

However, this is a different situation-although this is not at present in the statute, it is present in our accepted law, and has been for a long time. Therefore it is right that in this case the change should be made. I do not think it will provoke new litigation, because the point has been settled some considerable time ago as being the terms of European law. I think European law was clear on this point, although on other matters-as the noble Lord, Lord Lester, said-it is not clear, although we should not venture into that area. Where European law is clear, and our courts have applied it, I would have thought that it was wise to put it in the statute.

Baroness Royall of Blaisdon: I thank all noble Lords who have participated in this brief debate. The noble Baroness, Lady Morris, said that she looked forward to the Government's response to Amendments 76 and 77 from the noble Lord, Lord Lester. I included that when I dealt with government Amendments 75, 78

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and 79-I said that the wording of our amendment, and that of the noble Lord, Lord Lester, is different, but we believe the effect to be substantially the same, and that our amendments have the desired effect. Therefore, we would prefer our amendments to Amendments 76 and 77. I have heard very clearly what noble Lords-especially the noble Lord, Lord Lester, and the noble and learned Lord, Lord Mackay of Clashfern-have said about Amendment 74-

Baroness Morris of Bolton: I think I probably did mean Amendment 74. That is where we need clarity.

Baroness Royall of Blaisdon: I welcome the clarity that this debate has brought, and I welcome the clarity that the noble Lord has encapsulated in Amendment 74. I am pleased to say that the Government will accept the noble Lord's amendment. We are indeed a listening Government.

The noble Lord, Lord Lester, also raised the question of hypothetical comparisons, and why they are not required in equal pay cases. We have allowed direct discrimination claims in Clause 74, where no equality clause applies but there is some evidence of discrimination. There is no such obvious gap in relation to indirect discrimination in pay, although we acknowledge that it is a very complex issue. If a woman can find a male comparator-just one comparator is enough-doing like work, work rated the same or work of equal value, there is an equality clause claim. If there is no such comparator, it is not possible to make a claim under the equality clause provisions alleging indirect discrimination in relation to contractual pay, so it is suggested that we should allow hypothetical comparisons.

We do not accept that a hypothetical comparator is possible in relation to an equality clause claim-you cannot have equality of terms with someone who does not exist, and we do not think European law requires us to attempt to do so. So the remaining issue is whether we should allow indirect discrimination claims to be advanced in relation to contractual pay-where equality clause claims are not possible-as we have done for direct discrimination. We do not see how an indirect discrimination claim could in practice succeed in circumstances where an equality clause claim is not possible. If there is no man in the same employment doing work of equal value, or the same work, any claim must logically be based on evidence derived either from work done in a different employment, or work of avowedly different value.

An indirect discrimination claim may proceed only if the circumstances are not materially different-Clause 23-and we consider a difference of employer or of kind of work as a materially different circumstance. We consider that it would not be possible to construct a suitable hypothetical comparator on the basis of such evidence, which would prevent an indirect discrimination claim being advanced. If we were wrong about that, it is nevertheless very likely that the same difference of employment or of work would be found to justify the difference in pay. More harm than good, in terms of new cases that would ultimately fail, would arise from legislating to make such claims possible in cases where they are not now.

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7.15 pm

Lord Lester of Herne Hill: I thank the noble Baroness, Lady Howe, the noble and learned Lord, Lord Mackay, and the Government for accepting the reason for Amendment 74. I do not want to detain the House for more than just a few moments, to explain why, first, I have not pushed the hypothetical comparator for indirect discrimination, but why I think that the Government's approach, as just stated, is too narrow.

I have not pushed it is because although the textbooks indicate that there may be no need for a hypothetical comparator, in the sad life I now have, I spent half the weekend looking at all the cases, and came to the conclusion that I could not honestly stand up here and say it is quite clear that there is no need for a comparator in indirect sex discrimination cases involving pay. However, first, I do not believe that applies where the attack is on a whole system of general application, rather than an individual case. Let me give a couple of examples. I did a case some years ago in the House of Lords where there was a challenge to the Employment Protection (Consolidation) Act 1978, which said you had to work for more than 16 hours a week to get employment benefits. The EOC argued that hit women disproportionately, and that there was no objective justification. The Secretary of State, the right honourable Michael Howard, said that was not so. The Law Lords, led by Lord Keith of Kinkel, unanimously held that there was clear indirect sex discrimination in the requirement to have to work full-time in order to get employment benefits, under European Community law. It was in no way necessary in that case for individual woman W to show, as a part-timer, that she was comparing her work and pay with individual male M. The attack was on the system of general application, and it was completely irrelevant whether the particular woman could find an actual comparator-what mattered was whether the system as a whole had adverse, disparate impact on women, and could not be justified.

That example is already in the casebook. There the claimant was not a woman, it was the Equal Opportunities Commission, but it could now be the Equality and Human Rights Commission. The same I think applies with collective bargaining. Imagine a case like the speech therapists' case, that Baroness Turner will remember, since she and I were-in our different ways-involved in it all those years ago. The speech therapists' case involved mainly women comparing their work and pay with hospital pharmacists, mainly men, at the relevant grade and with clinical psychologists. It is true that Pam Enderby was able to point to a particular man who was a hospital pharmacist and a particular man who was a clinical psychologist. The basis of the case when it went to Luxembourg and came back was that there was a systemic indirectly discriminatory problem-not a directly discriminatory problem-that required the pay systems to be changed to eliminate the indirect discrimination.

In such cases when the attack is on a pay system of general application, whether statutory or otherwise, EC law allows the claim. The really difficult question is whether it goes further. I believe that a case is pending in an employment tribunal that is probably on its way to Luxembourg, so I do not think that it is

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fair to ask the Government to legislate on that. However, I would like the Government to think about what I have just said. They may say what they like about their view but if I were right it would lead to more litigation.

Amendment 70 agreed.

Amendment 71 not moved.

Amendment 72

Moved by Baroness Royall of Blaisdon

72: Clause 64, page 43, line 19, leave out "colleague" and insert "comparator"

Amendment 72 agreed.

Amendment 73 not moved.

Amendment 74

Moved by Lord Lester of Herne Hill

74: Clause 64, page 43, line 19, at end insert-

"(2) The references in subsection (1) to the work that B does are not restricted to work done contemporaneously with the work done by A."

Amendment 74 agreed.

Clause 64, as amended, agreed.

Clauses 65 to 68 agreed.

Clause 69 : Defence of material factor

Amendment 75

Moved by Baroness Royall of Blaisdon

75: Clause 69, page 45, line 32, leave out from "factor" to end of line 34 and insert "reliance on which-

(a) does not involve treating A less favourably because of A's sex than the responsible person treats B, and

(b) if the factor is within subsection (2), is a proportionate means of achieving a legitimate aim."

Amendment 75 agreed.

Amendments 76 and 77 not moved.

Amendments 78 and 79

Moved by Baroness Royall of Blaisdon

78: Clause 69, page 45, leave out lines 39 to 41

79: Clause 69, page 46, line 1, leave out "(2)" and insert "(1)"

Amendments 78 and 79 agreed.

Amendment 80 had been retabled as Amendment 57ZA.

Clause 69, as amended, agreed.

Clauses 70 to 72 agreed.

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Clause 73 : Maternity equality clause

Amendment 80A not moved.

Clause 73 agreed.

Clauses 74 to 76 agreed.

Clause 77 : Discussions with colleagues

Amendment 80B

Moved by Baroness Thornton

80B: Clause 77, page 49, line 31, leave out from "that" to end of line 33 and insert "purports to prevent or restrict the person (P) from disclosing or seeking to disclose information about the terms of P's work is unenforceable against P in so far as P makes or seeks to make a relevant pay disclosure."

Baroness Thornton: I wish to move government Amendment 80B, speak to government Amendments 81A, 81B, 82A, and refer to Amendments 81 to 86, tabled by the noble Lord, Lord Lester, which are similar in purpose. The Committee will note that my noble friend the Leader of the House has added her name to Amendment 86, which is necessary to complete the effect of the government amendments.

These amendments are to Clause 77, which is intended to ensure that contractual clauses which seek to prevent employees disclosing details about their pay to one another cannot be used to prevent such disclosures, and so to conceal disparities in pay which are discriminatory on grounds of sex, or indeed on any of the other protected characteristics. The clause has been widely welcomed, and was welcomed by all parties in Committee in the other place. Generally speaking, it seems likely that disclosures of this kind will be made to fellow employees, which may include trade union representatives, but may also include advisers not within the same organisation.

Our intention is that all disclosures of information about pay that are directed towards finding out whether differences exist and which are related to a protected characteristic can be made freely and without sanction by the employer. This will encourage greater transparency, enabling challenges to employers that discriminate in relation to pay. The clause already provides protection where a discussion about pay is between individuals-colleagues-who are in the same employment. However, concern was raised in the other place and by the Joint Committee on Human Rights that we may not have allowed sufficient protection, for example, by allowing disclosures about pay details to be made to trade union representatives.

Although that was our intention, we have accepted that the Bill should put this beyond doubt, and so we brought forward these amendments to ensure that the clause is wide enough to protect that situation as well. The amendments change the clause so that it no longer applies only to discussions about pay with a colleague; it applies to any disclosure of information about pay which the employee can show had the necessary purpose-that of finding out whether or to what extent there is a connection between pay and possession of a protected characteristic.

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