Equal pay success in the EAT: unpacking the material factor defence
Image of Emma Darlow Stearn
In Mrs A Perkins v Marston (Holdings) Ltd [2025] EAT 170, the Employment Appeal Tribunal (“EAT”) has clarified the correct approach to a material factor defence under s.69 Equality Act 2010 (“EqA”).
Emma Darlow Stearn successfully represented the Claimant/Appellant, as sole counsel against a led team, instructed through the Free Representation Unit.
At first instance
The Claimant brought an equal pay claim in November 2023 as an individual Claimant. No other women were doing the same role as the Claimant during the period for which she claimed arrears of pay. The Claimant’s role by the end of the relevant period was Head of Enforcement – Local Taxation (“HoELT”). Her three male comparators worked as Regional Enforcement Managers / Divisional Enforcement Directors (“REMs/DEDs”). As a group, REMs/DEDs were mainly then wholly male. The pay disparity between the Claimant and her comparators by the end of the relevant period was £40,000.
At a stage 1 equal value hearing of the Respondent’s material factor defence, the ET concluded that three of seven material factors relied upon by the Respondent were neutral explanations for the pay disparity: (i) Competition and expectation (“a partial factor”) “MF1”; (ii) Market Forces (the “single most influential factor”) “MF2” and (iii) Recruitment/retention of EAs (“a partial factor”) “MF3”.
MF2/MF3 were alleged to be indirectly discriminatory. The ET found that underlying both MF2 and MF3 was the fact that REMs/DEDs all had a background of being successful Enforcement Agents (“EAs”) – the Respondent recruited REMs/DEDs exclusively from a pool of successful EAs. The ET found that 90% of EAs were men and the Claimant did not have an EA background.
The ET concluded that potential indirect discrimination was not shown. They considered why the EA labour market was male dominated, and they found that the Claimant did not share the particular disadvantage with the group, as her route to being a HoELT “was not shaped by any real or perceived barrier to working as an EA”.
The ET considered, in the alternative, whether the Respondent could justify MF2/MF3. They concluded that reliance on MF2 and MF3 was not proportionate, as there was a less discriminatory way of achieving the Respondent’s legitimate aims of “business efficiency” and/or “recruitment and retention of REMs and DEDS”: the Respondent could have opted to widen the pool of candidates for the REM/DED role to people from other (non-EA) backgrounds.
The appeal
The Claimant appealed to the EAT on five grounds; the Respondent cross appealed on six grounds (see §22-23, EAT judgment).
The Claimant’s appeal succeeded on the ground that the ET erred in their consideration of whether MF2 and MF3 were indirectly discriminatory, by failing to apply the correct legal test and by wrongly focusing on the reason why the EA labour market was male dominated.
The Claimant’s other grounds, challenging the ET’s findings that the Respondent had discharged their burden of proving that MF1-MF3 were neutral explanations for the pay disparity, were unsuccessful.
The Respondent succeeded in their cross appeal (on three of their six grounds), against the ET’s counterfactual findings that the Respondent would have failed to justify MF2 and MF3 had they been required to do so – the overarching error was the ET’s failure to undertake the critical and thorough evaluation required when assessing justification.
Deputy High Court Judge Burns remitted the following issues to a fresh tribunal for consideration:
whether MF2/MF3 were tainted by sex and/or put the Claimant at a particular disadvantage compared to the mainly or wholly male REMs/DEDs;
if so, whether MF2/MF3 are a proportionate means of achieving the two proposed legitimate aims.
Points to note
The EAT considered in some detail the principles to be applied when assessing an employer’s material factor defence under s.69 EqA, with a particular focus on the correct approach to establishing potential indirect discrimination under s.69(2) EqA.
Key points to note are as follows:
The burden is on the employer to prove by sufficiently cogent and particularised evidence that the material factor relied on explains the difference in pay complained of. General assertion is not enough (as per BMC Software Ltd v Shaikh [2019] ICR 1050 at §17-18). The EAT found that there is no higher threshold of cogency or particularisation required to prove a material factor. Rather, sufficiently cogent and particularised evidence is needed in every claim, §27-28, §61, §67.
Where a material factor is merit or market forces, an employment tribunal should require an employer to explain with particularity what those factors mean, how they were assessed and how they apply in the circumstances of the case. A chaotic or opaque pay system may make discharging this burden more difficult for an employer, §28 (see BMC Software Ltd v Shaikh [2019] ICR 1050 at §19).
Potential indirect discrimination under s.69(2) EqA can be shown in different ways and involves a broader question than the precise words of the statute. The fundamental question is whether the material cause of the pay difference between the Claimant and her comparators is tainted by sex-related factors. A formalistic approach to the operation of s.69(2) EqA should be avoided and a pragmatic approach taken focusing on substance rather than form. If there is some evidence of the material factor resulting in some disadvantage to women and to the claimant, then the burden passes to the employer to justify the reliance on the material factor, §32-34 and §44-48. (see also Dobson v North Cumbria Integrated Care NHS Foundation Trust [2021] IRLR 729 at §56; McNeil v Revenue and Customs Commissioners [2018] ICR 1529 EAT at §14; Bainbridge v Redcar and Cleveland Borough Council (No 1) [2008] IRLR 776 at §46; Ministry of Defence v Armstrong [2004] IRLR 672 (EAT) at §32, §40, §42 and §46 and Enderby v Frenchay Health Authority and another [1993] IRLR 591).
When considering whether potential indirect discrimination has been shown, the reason why a material factor operates to the disadvantage of women is “irrelevant”. It is enough that it does. An investigation into the “reason why” is "not necessary or permissible" and this may amount to an error of law, §37 and §52-54 (see also Essop v Home Office (UK Border Agency) [2017] UKSC 27 at §24 and McNeil at §53).
It is not necessary for an individual claimant to identify persons of the same sex doing work equal to hers who are put at a particular disadvantage by a material factor/s as a precondition of showing that a material factor is potentially indirectly discriminatory, §47.
“The only required causal link is between the material factor and the particular disadvantage”, §37. (It is enough that a material factor causes the relevant pay disparity and the operation of that factor is sex-tainted, without the sex-tainted aspect itself necessarily causing the disparity.)
An opaque pay system combined with some evidence of a sexual element in the employer’s reason for a pay disparity may be enough to establish potential indirect discrimination – the fact that a pay system lacks transparency may help tip the scales, §57 (see also Handels-Og Kontorfunktionaerernes Forbund I Danmark v Dansk Arbejdsgivrforening ex parte Danfoss C-109/88, [1991] ICR 74, at §10-16).
When considering justification, “a critical and thorough evaluation is required and must be demonstrated in the reasoning of the ET where it makes judgments upon systems of work, their feasibility and the economic impact in a competitive world, which the restrictions impose upon the employer’s freedom of action”, §70 (see Hardy & Hansons plc v Lax [2005] ICR 1565 at §32-33 and §54-55).
It is not necessarily an error of law, when considering proportionality (when balancing an employer’s reasonable need to rely upon their material factor/s and the discriminatory effect on the disadvantaged class), to fail to identify with precision the size of a pay gap that needs justifying, §73-75.
Conclusion
Although it does not break significant new ground, the EAT’s decision refines the material factor defence under s.69 EqA and considers a complex area of law with clarity. It is worthwhile reading for anyone interested in equal pay.
The judgment can be found here.
