Court of Appeal
The appellant employee (H) appealed against the Employment Appeal Tribunal's dismissal of her equal pay claim against the respondent employer (E).
E operated a share option scheme for its employees. The scheme was neither referred to nor incorporated in H's contract of employment. Although H had been granted share options under the scheme, she had not been granted as many as had her male comparator (C), who was engaged in like work. H asserted that E had breached its duty to operate the scheme in a non-discriminatory manner. The employment tribunal treated her claim as if it had been advanced under both the Sex Discrimination Act 1975 and the Equal Pay Act 1970, until she conceded that the claim under the 1975 Act was out of time. The tribunal assumed that the grant of share options was the payment of money for the purposes of s.6 of the 1975 Act. It also assumed that if the grant of the options was regulated by the contract of employment within the meaning of s.6(6) then H's claim lay under the 1970 Act and not under the 1975 Act. It upheld her claim under the 1970 Act. The EAT allowed E's appeal, finding that the scheme was discretionary, was not regulated by H's contract of employment, and was not covered by the 1970 Act.
H submitted that her right to share options was regulated by her contract of employment because (1) her contract was a pre-requisite to entitlement under the scheme; (2) it regulated both her eligibility under the scheme and the duration of the options granted under it; (3) the implied term of trust and confidence required the discretion conferred by the scheme to be exercised in a non-discriminatory manner.
HELD: (1) A benefit could be said to be regulated by a contract of employment if the express or implied terms of that contract governed the eligibility for, and probably the amount of, that benefit. Lord Johnston, when giving judgment in Hoyland v Asda Stores Ltd  CSIH 21, 2006 S.C. 550, did not intend to hold otherwise. In that case, the employee's right to a bonus was clearly regulated by her contract of employment, Hoyland considered. Had Parliament intended s.6(6) of the 1975 Act to exclude benefits received by an employee irrespective of the terms of his contract, it would have used simpler words (see paras 16-18 of judgment). (2) In order for H to have a claim for which the tribunal had jurisdiction under s.2 of the 1970 Act, she had to be claiming a contravention of a term of her contract that had been modified or included by virtue of the equality clause implied by s.1. The term had to be identified, and that had not been done in the instant case. Indeed, it was not suggested that there was any such term. Quite aside from whether the scheme had been incorporated into H's contract of employment, she was unable to show that there was any term in her contract less favourable than the corresponding term in C's. The equality clause had no operation, there was no valid claim for the contravention of any term modified or included by it, and there was therefore no claim within the jurisdiction of the tribunal under s.2. What H was complaining of was not a difference in contract terms, but a difference in the exercise of the discretion conferred by a standard contract. Such a claim had to be made under the 1975 Act (paras 20, 23, 25). (3) The implied term of trust and confidence was a part of C's contract of employment as well as H's. It was not a term that had been included or modified by virtue of the equality clause and any claim for its contravention was out with the tribunal's jurisdiction under s.2 (paras 27, 46). (4) (Obiter) (Per Stanley Burnton LJ) A benefit conferred by the employer's exercise of a discretion under a contract of employment was not "regulated" by the provisions of that contract. The contract did not regulate the benefit unless it determined the amount of benefit to which the employee was entitled. If its provisions conferred on a female employee a right to a lesser benefit than her male equivalent, the equality clause would modify her contract to confer an equal benefit on her. Any failure by her employer to honour her modified contract would fall within the scope of s.2(1) of the 1970 Act. If her contract contained no provision entitling her to the benefit, while that of her male equivalent did, the equality clause would deem that provision to be included in her contract, and again any failure of the employer to honour that term would give rise to a claim under s.2(1) (paras 29-30).
 IRLR 235 :  Eq LR 155 :  ICR 547
FEMALE EMPLOYER,DISCRETIONARY SHARE,SEX DISCRIMATION,EQUAL PAY
William Meade (Senior Clerk)