London, October 4 :

Employers cannot lawfully pay some workers much higher salaries than others solely on the ground of long service, the European court of justice ruled yesterday in a judgment that will force thousands of employers to review their pay schemes.

The ruling from Luxembourg sets a precedent and means that employers in the UK, if challenged, will have to give a valid reason for paying thousands of pounds extra to someone with more experience, and cannot merely cite years of service. The ruling will have a potentially huge impact on public sector employers, including the civil service, where wide differentials based on length of service are much more common than in the private sector. The Confederation of British Industry (CBI) warned last night that experience was a “critical factor for companies when deciding how much staff are paid”.

The court’s decision is a victory for Bernadette Cadman, a principal inspector at the UK’s Health and Safety Executive who took her case to an employment tribunal five years ago after discovering that male colleagues in the same grade were earning between 5,000 pounds and 9,000 pounds more.

Her union, Prospect, who supported her claim, described the case as the most important on equal pay to be brought in the past 10 years. Cadman, who was backed by the UK’s Equal Opportunities Commission, argued that a difference of 9,000 pounds for male colleagues based on length of service amounted to sex discrimination because women were more likely to have career breaks and shorter service. Lawyers said it probably also contravenes age discrimination laws which came into force this week. Cadman had been promoted more quickly than one male co-worker, yet was paid substantially less than him. He earned more because he had worked for longer with the inspectorate, although in a junior grade. The case will now go back to the court of appeal, and then to the tribunal, where Cadman could win a salary rise and six years’ backdated pay.

Prospect’s general secretary, Paul Noon, said the ruling would have “enormous implications not just across the public service, but for any employer whose pay or benefits system unreasonably rewards length of time in employment, including enhanced leave to reward years in service”. He said, “The UK government and Treasury pay lip-service to calls to modernise pay systems but now they will need to remove their heads from the sand.” He said the union had been told by the treasury no additional funding would be available to equalise pay as a result of the ruling and that ‘outstanding anomalies’ would have to be ‘resolved within the chancellor’s stranglehold of a two per cent pay limit’. “That is not acceptable,” he said.

Cadman’s case was backed with evidence from the Equal Opportunities Commission showing that when service-related pay is analysed, women are often clustered at the lower parts of the pay band because statistically they have on average shorter service and because some jobs are traditionally male-dominated. Cadman said her case was “not about winning compensation, but about recognition that women should not be paid less than their male counterparts”.