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Bonus Payments and Sex Discrimination
There are a number of wonderful examples in life where circumstances have occurred which seem to define logical explanation. Could there be an alternative theory underlying the "true" position?
Was there a second gunman? Did the US Military really know about that thing that crashed outside Roswell? Were the All Blacks really poisoned before the 1995 World Cup?
In each of these cases, there exist alternative theories to explain an outcome. Proving one or more of these alternative theories is, however, somewhat more difficult. This amounts to what has popularly become known as the "conspiracy theory".
Many claims that are brought in employment law appear to rest upon conspiracy theories. This is not necessarily a criticism of claimants - but, in many cases, a reflection upon the nature of the types of issues that may arise.
The recent decision of the English Employment Appeal Tribunal in Barton v Investec Henderson (2003 WL 1610245) illustrates a case which arguably involved the airing of a conspiracy theory.
Ms Barton joined Investec Henderson - an investment bank - in 1990. She had significant experience in fund management and broking investment banking, and was a respected media expert. By the late 1990s she became a Research Director.
One of her colleagues was a Mr Horsman - who joined the Bank in 1997, also as a Research Director. At the time that he joined, both Mr Horsman and Ms Barton were paid on a basic salary of £105,000. In addition to this salary, each was entitled to a bonus awarded at the end of each financial year, share options and "LTIPs" (being a bonus amount paid over a period of time as a means of encouraging valuable employees to remain with the organisation).
In the middle of 1999 the Bank became aware of attempts by competitors to poach Mr Horsman. The Bank regarded Mr Horsman as one of the three key members of its staff, and it made a decision to increase his salary to £150,000 as a means of encouraging him to stay. It also awarded him certain share options and LTIPs.
In early 2001 Ms Barton became aware of the disparity in salary between her and Mr Horsman. She complained to the Bank, and, as a result, an increase was made to allow her to retain parity. Ms Barton was, however, unaware at that time of the additional awards which had been made to Mr Horsman (and which exceeded similar awards that had been made to her).
The nub of the case related to bonus awards that were made in 2001. In that year Mr Horsman was awarded a bonus of £1,000,000 - and Ms Barton a bonus of £300,000. It appears that these bonuses were awarded by the Bank in its discretion subject to what the Tribunal described as "a rough and ready process, not a precise science". There was, however, reference to the fact that in 2001 Mr Horsman had generated revenue for the Bank of £10 million compared to £3.2 million generated by Ms Barton.
Ms Barton made a complaint against the Bank, alleging that it had acted contrary to the Sex Discrimination Act 1975 in the way in which it had awarded these bonuses (and in the way in which it had generally provided more favourable treatment to Mr Horsman). In broad terms, the Bank's response to this complaint was that it had not been motivated by any distinction of gender, but rather out of material factors that distinguished the two employees. Amongst other things, the Bank maintained that Mr Horsman was a more significant employee to the organisation, and that there was a real need to provide him with additional remuneration to prevent him from being "poached" by a competitor.
Some of the interesting aspects of this decision relate to the idiosyncrasies of the English law. First, it was accepted that, in general, it would be difficult for an applicant to provide overt evidence of discrimination - and that inferences would normally have to be drawn from primary facts. In other words, the English law provided some leeway for a conspiracy theory to be raised. Secondly, a Code of Practice concerning Equal Pay required "transparency" in pay systems. In this case, one of the fundamental concerns related to the apparent lack of transparency in the way in which bonuses had been calculated and paid.
At first instance, the Tribunal had found that the Bank had used genuine material differences in determining the bonuses paid to each of Ms Barton and Mr Horsman. It dismissed Ms Barton's claim.
On appeal, however, it was determined that Ms Barton had provided enough information to place a burden upon the Bank to disprove discrimination. It was decided that the Tribunal had failed properly to deal with certain aspects of the claim - including deciding whether the Bank had proved that there were objective reasons for the different treatment of these employees.
While there are some significant differences between the English legislation and New Zealand law, it is not inconceivable that a similar claim could be brought in this country under the Human Rights Act 1993. That legislation prohibits "less favourable treatment" in employment on the basis of gender (amongst other things). At the core of Ms Barton's claim was an allegation that there was no good reason for less favourable treatment to her in the payment of substantial bonuses - and that the prospect existed that her employer had discriminated against her on the basis of her gender. Many of the difficult issues in Ms Barton's case were factual - and turned upon the Bank's ability to disprove the allegation of discrimination. It is likely that similar difficult issues would arise in a claim brought under New Zealand's legislation.
In short, this case serves as an illustration that where benefits of employment may be provided on a discretionary basis, allegations of unlawful discrimination may arise. If a claim is made, difficult factual issues may confront an employer attempting to justify different treatment on an appropriate basis.
