Samantha Walker v Co-Operative Group Ltd

JurisdictionEngland & Wales
CourtCourt of Appeal
JudgeLord Justice Bean,Lord Justice Males,Lord Justice Phillips
Judgment Date14 Aug 2020
Neutral Citation[2020] EWCA Civ 1075
Docket NumberCase No: A2/2019//3016/EATRF

[2020] EWCA Civ 1075

IN THE COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE EMPLOYMENT APPEAL TRIBUNAL

THE HON LORD SUMMERS

UKEAT/0087/19

Royal Courts of Justice

Strand, London, WC2A 2LL

Before:

Lord Justice Bean

Lord Justice Males

and

Lord Justice Phillips

Case No: A2/2019//3016/EATRF

Between:
Samantha Walker
Appellant
and
(1) Co-Operative Group Limited
(2) Richard Pennycook
Respondent

Daphne Romney QC (instructed by Charles Russell Speechlys LLP) for the Appellant

Andrew Burns QC and Alice Carse (instructed by Addleshaw Goddard LLP) for the Respondents

Hearing date: 23 July 2020

Approved Judgment

Lord Justice Bean
1

Samantha Walker was employed by the Co-operative Group Ltd (“the Co-op”) from 25 March 2013 to 4 April 2017. By a claim issued in the employment tribunal (“ET”) at Manchester on 29 September 2017 she made numerous claims, some of them also against Richard Pennycook, the Co-op's Chief Executive Officer. They were as follows:

a) Equal pay;

b) “Ordinary” unfair dismissal;

c) Automatic unfair dismissal within s 103A of the Employment Rights Act (“ ERA”) 1996 (relating to protected disclosures);

d) Detriments on the grounds of protected disclosures within s 47B of the ERA 1996;

e) Victimisation because of protected disclosures: s 27 of the Equality Act (“ EA”) 2010;

f) Direct sex discrimination;

g) Indirect sex discrimination;

h) Associative indirect disability discrimination: s 19 of the EA 2010;

i) Associative discrimination arising from disability: s 15 of the EA 2010.

2

The hearing took place over ten working days before Employment Judge Sherratt and two lay members. Both parties were represented by Queen's Counsel: Simon Devonshire for the Claimant and Andrew Burns for the Respondents. The tribunal was occupied for seven working days in deliberation and drafting. Their judgment, promulgated on 13 November 2018, runs to no less than 397 paragraphs and is a thorough examination of every aspect of the claims. Their conclusion was that:-

1. The Claimant was unfairly dismissed by the first respondent (this was “ordinary” unfair dismissal under s 98 of the ERA 1996).

2. The Claimant's work was, from a date to be determined, equal to that of her named comparators, having been rated as equivalent in a job evaluation study (“JES”). The defence of material factors failed.

3. The Respondents directly discriminated against the Claimant on the ground of sex in relation to the decision to grade the Claimant's performance as only “partially achieved” for 2015 without an adequate year end appraisal.

4. All other claims were dismissed against both Respondents.

3

The employers appealed against the finding on equal pay and the rejection of the material factor defence; Mrs Walker cross-appealed against the rejection of her direct discrimination claim other than in relation to the grading of the Claimant's performance for the year 2015.

4

The hearing at the Employment Appeal Tribunal was heard in London by Lord Summers, sitting alone. He allowed the employers' appeal against the decision on equal pay; dismissed their appeal against the limited finding of direct sex discrimination in respect of the year-end appraisal (there has been no appeal to this court on that aspect of the case); and dismissed Mrs Walker's cross-appeal on direct sex discrimination.

5

Mrs Walker now appeals to this court with the permission of Simler LJ on both equal pay and direct sex discrimination.

The facts

6

The Co-op promoted Mrs Walker to the role of Group Chief HR Officer (‘CHRO’) in around February 2014. She had previously been Director — Group HR Strategic Projects. By early 2014 her base salary was £215,000.

7

The Co-op was not in a healthy state at the start of 2014. At a meeting of the Group Remuneration and Appointments Committee (‘Remco’) on 26 February 2014, the Group CEO, Euan Sutherland, explained the background to proposed changes to the executive team. A paper on Executive Structure and Remuneration was considered at a Remco meeting on 4 March 2014. It emphasised the need for an executive team with the potential to deliver a critical transformation of the business. The ET noted:

“The executive agenda was said to be possibly the most complex one facing a large business in the country at that time involving fixing a business on the verge of financial collapse, turning around the food business after years of neglect, re-forming a membership system that was faltering from a fundamental disconnect, effecting a major governance change, rediscovering the purpose of the mutual sector's largest contributor, redefining the social goals agenda to create a forceful campaigning organisation, balancing the highly sensitive political agenda across all of Westminster, removing the taint of scandal and refreshing an iconic national brand. The objectives of the remuneration proposals were:

• Retention of continuing executives through the transformation period (the next 3–4 years);

• Reflection of increased roles and responsibilities in the remuneration packages where appropriate;

• Standardisation of the packages and terms for new executives;

• Bringing consistency to executive packages and contractual terms.”

8

The Co-op put members of the executive team into tiers: the CEO in Tier 1, the COO in Tier 2; the Divisional Chief Executives in Tier 3 and Mrs Walker, Paula Kerrigan (Strategy Director), Nick Folland (Chief External Affairs Officer) and Alistair Asher (Group General Counsel) in Tier 4. The Tier 4 band was £350–550,000.

9

After a lengthy discussion at Remco on 4 March 2014 it was agreed that the salary for Mrs Walker's role, as well as that of the Strategy Director (Ms Paula Kerrigan), would be £400,000 to reflect that both were new to executive roles. Mrs Walker's salary was later increased to £425,000 when, as the ET found, she “pushed back a little”.

10

The equal pay claim named Mr Folland (NF) and Mr Asher (AA) as comparators. Mr Folland's salary had been set taking into account what was described as his “deep experience that will ensure that we develop and sustain the internal and external relationships that are vital to our future success”; he was also to work on the reform of the Co-op's membership system. Mr Asher's 30 years of experience in the legal profession, including as a senior partner in Allen & Overy, and his “significant role in the design of the business model which ultimately saved the Bank from resolution [sic]”, were taken into account when determining his level of salary and other benefits.

11

For the Respondent before the ET Mr Burns put forward four material factors:

a) Vital roles – the Co-op saw AA and NF as vital to the immediate survival of the Co-op. They were part of the core team who with RP refinanced the Bank and reformed governance so that the Co-op was not regarded as ungovernable and bound to fail. The Claimant and a strong HR function were important but not regarded as vital, as was AA and NF's core work.

b) Executive experience – Remco considered that both the Claimant and Paula Kerrigan were newly promoted to the Executive and unproven at that level, unlike everyone else on the team at that time. The proposed increase from £215,000 to £500,000 seemed excessive for individuals who had no experience at executive level. Remco did not feel there was any justification for more than doubling their salaries in those circumstances.

c) Flight risk – it was crucial in the eye of the storm to maintain stability and the top team of people and support the interim CEO. Euan Sutherland had recruited NF as his Chief of Staff and AA as his corporate lawyer, but then left abruptly. There was an understandable concern that they might consider following him out. Had either of them followed him then that could have brought down the Co-op.

d) Market forces – AA was on a higher pay package as he was a top corporate lawyer with particular expertise in the Co-op Bank separation and was paid at the high market rate for top general counsel. This exceeds the market rate for CHROs.

12

In their findings of fact the ET accepted that when Remco fixed the salaries of Mrs Walker and her two comparators in February and March 2014 these four material factors applied and were not related to sex; and that each of these material factors was at that time a reason for the difference in pay between Mrs Walker and her two comparators.

13

In the latter half of 2014 the Hay Group was appointed to develop a group wide grading structure to introduce consistent grades across all the different businesses which made up the Co-op Group. To provide a ceiling, in February 2015 the work of the two comparators and Mrs Walker had been rated by a JES which scored Mrs Walker's role higher than the roles of her comparators.

14

It was common ground that the Hay JES was presented to Mr Pennycook in March 2015. The Claimant, as CHRO, started communicating its findings within the Co-op at the end of the summer of 2015. However, the ET accepted Mr Pennycook's evidence that the contents of the JES were not communicated to Remco.

15

In October 2015 Mr Pennycook prepared a confidential note to non-executive directors of the Co-op proposing that with immediate effect Mrs Walker should report to the Chief Operating Officer, Pippa Wicks, to allow Mrs Walker to continue to pursue the operational HR agenda while Ms Wicks would be responsible for executive level HR and interactions with Remco.

16

There followed a period of discussion with Mrs Walker about her future role but no agreement was reached by 25 March 2016, when she began a period of sick leave.

17

On 1 April 2016 the Co-op gave Mrs Walker 12 months' notice of the termination of her employment in a letter from Mr Pennycook, which so far as material stated:

“We have spoken over the last three months about the changes that we want to make to the HR function. As indicated to you and for the...

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