A hotel manager on £90,000 a year was a victim of sex discrimination when her bosses enforced a 33 per cent salary cut during Covid while two male managers only lost 20-25 per cent, a tribunal has ruled.
The owners of the three Utopia Leisure hotels argued that the men lost less money then Ms S Mueller because they both had two separate jobs, as hotel and spa managers.
Mr Heath, operations director for Utopia Leisure, and owners Mr and Mrs Hinchcliffe, said Mueller lost 33 per cent because she earned more than £85,000 per year.
The three had agreed the cut at the start of Covid, amid fears of job losses, with those earning £30-84,999 losing 25 per cent and those below £30,000 taking a 20 per cent hit.
Mr Perry and Mr Jurca earned more than £85,000, but the respondents took away 25 per cent for their general manager role and 20 per cent for the spa manager role, counting them as individual jobs.
The tribunal said it was an “accounting detail” and that Heath and the Hinchcliffes had used it to “disguise” a bespoke arrangement that favoured the two men over Mueller.
It added that the respondent's position that the pay cut was imposed on the male managers on the basis of their having two separate jobs was “not only lacking in any logic but is not the case".
The claim for direct sex discrimination against all respondents was successful, while Mueller also won her claim for equal pay against Utopia Leisure.
The tribunal heard that Mueller was employed as a general manager at Great Fosters Hotel in Egham, which is owned by Utopia Leisure, from 15 April 2019 until her resignation on 8 January 2021.
Utopia Leisure operates five hotels under the brand Alexander Hotels and employs approximately 550 people.
According to the tribunal, in March 2020 the hospitality industry felt the “full brunt” of the coronavirus pandemic, subsequent restrictions and lockdowns, and Heath and Mr and Mrs Hinchcliffe discussed ways to maintain their business and retain their staff.
A pay cut was agreed upon by the three. The tribunal heard the pay cut was imposed by Utopia Leisure with a view to retaining jobs.
The tribunal also heard that, while not explicitly stated, the circumstances at the time were such that, had the pay cuts not been "imposed", it was recognised by all that the only alternative would be "job losses".
Heath explained to the panel that individuals on lower salaries were possibly "disproportionately" affected by pay reduction in respect of fundamental living needs. Those with higher incomes could afford the cuts better and therefore they lost a higher percentage, he said.
Heath informed the tribunal that he and the Hinchcliffes had reached an agreement: a 20 per cent pay cut for individuals earning less than £30,000, a 25 per cent pay cut for those on £30-84,999 and a 33 per cent pay cut for those earning £85,000 and over.
The tribunal ruled that Mueller's salary was £90,000, giving her a 33 per cent pay cut.
At the same time, the managers of two other hotels owned by the same group, Perry and Jurca, took a 25 per cent cut.
Heath said: “The hotels managed by both Perry and Jurca had spas attached to them. These spas were run as separate businesses with their own internal accounts, profits and loss and balance sheet.”
He added that it had been determined that Perry and Jurca therefore had two jobs and that the pay cuts percentage was applied to earnings from each, not added together.
Jurca's total pay of £90,000 was reported as £67,500 for the general manager function and £22,500 for his spa manager role, according to the tribunal.
Perry's overall remuneration of £91,000 was reported as £68,250 for his general manager position and £22,750 for his spa manager position. It was also highlighted that the cuts were implemented automatically via payroll, with no management scrutiny.
Both men were handed a 25 per cent cut for their general manager role and a 20 per cent salary reduction for their spa manager position.
Heath told the tribunal that he and the Hinchcliffes discussed each individual and determined what they thought was a “fair” percentage salary decrease to impose based on bands they had established. However, the tribunal stated that Heath made no hint that the level of cuts imposed was related to the “duties” or the seriousness of those duties.
Mrs Hinchcliffe told the tribunal that the level of pay cut was enforced on the basis that those who could afford it paid more.
In response to the disparity between Mueller, Perry and Jurca, Mrs Hinchcliffe told the tribunal that they had “bigger jobs” than Mueller.
The tribunal heard that Mueller, as general manager of Great Fosters, "duly implemented" the wage reduction to hotel staff. She was notified of the 33 per cent wage cut imposed on her in an email dated 23 March 2020.
However, the tribunal found that there was no consultation with her or any other staff over the reduction.
Mueller told the tribunal that she was “petrified” about the job cuts and that she had no choice but to continue working. She also said that all staff were “essentially” in the same position, which the tribunal found to be consistent with evidence that Utopia Leisure, Mr and Mrs Hinchcliffe and Heath experienced no “pushback” in relation to the proposed cuts.
Mueller asked when her wages would be reinstated and was given no precise date because of the ongoing pandemic, according to the tribunal.
The tribunal did find, however, that Mueller never "objected" to the salary drop, "nor did she do anything to alert" her employer to the fact that she felt herself to be working under "protest".
It determined that Mueller had a “positive” relationship with Heath and the Hinchcliffes and worked "very hard" during the Covid period. She also established new business strategies such as fully utilising the gardens of Great Fosters by putting on art exhibitions.
According to the tribunal, Mueller was aware that voicing her complaint about the income reduction would "risk" her work being terminated and she wanted to keep her position while she looked for a new role.
The tribunal recognised that she was in a "difficult personal position" because she had recently relocated for this job and her spouse was "unwell" and not working at the time. It further stated that the job market in the hospitality business was "non-existent" at the time.
Mueller eventually found another job and resigned on 9 December 2020, with her last day of work on 8 January 2021, and stated in her resignation letter that she felt herself to be working "under protest”.
The tribunal ruled that the respondents were unable to demonstrate a "non-discriminatory" rationale for Mueller's treatment and her claims for direct sex discrimination were successful.
Mueller's equal pay claim against Utopia Leisure was also successful.
A remedy hearing has been set for a later date.
The tribunal ruled that imposing a 33 per cent salary cut on Mueller was a "fundamental breach of the contract of employment”, noting that the pay decrease was enforced as an alternative to the respondent implementing job cuts.
It noted that Mueller believed that, should she object, her employment was likely to be terminated and she “actively hid” that she was working under protest because of her fear of being sacked.
The tribunal stated that it was unable to discern the logic behind Utopia Leisure's choice to apply a 25 per cent cut to the salary of the two male managers since their decision under the circumstances did not correlate with Heath's explanation of imposing bigger pay cuts on those who could afford it more.
It went on to say that the respondent's position that the pay cut was imposed on the male managers on the basis of their having two separate jobs was “not only lacking in any logic but is not the case".
Employment judge Skehan ruled that Mueller demonstrated that the declared rationale behind the percentage pay cuts, which was that those who earned more bore “a heavier burden”, was not applied equally to her and the comparators.
They added that the respondent’s repeated assertions that Mueller was on a higher pay grade than Perry or Jurca was “obviously” not the case, and that reliance on an internal accounting paper distinction, which was “hidden” from Mueller and only revealed after the case management hearing, was an attempt to “obfuscate” and “disguise” the fact that a bespoke arrangement applied to the comparators.
The panel said factors such as "affordability may be tainted by stereotypic assumptions as to a woman's earnings", which may be assumed to be a second family income or somehow "less important than a man's".
The panel also noted that they did not accept the submission that had Mueller been a man she would have been subject to the same deduction and concluded that the respondent’s were unable to show a “non-discriminatory” reason for Mueller’s treatment.
Employment lawyers’ reaction
According to Dawn Dickson, employment partner at Anderson Strathern, the case serves as a valuable reminder of the importance of conducting frequent “equal pay audits” to determine whether men and women in equivalent or roughly similar occupations are given the same pay.
Dickson said that, if they were not, any audit must evaluate both the broad and more precise reasons for pay inequalities and where necessary employers must “address” such differences or ensure that the reasons for pay differentials have a “sound basis for existing”.
“Seeking to explain a difference in pay before the employment tribunal after the event as it appears occurred in this case will almost always result in no logical or credible explanation being advanced, with the result that the employer’s defence fails,” she added.
Rob Smedley, employment director at Freeths, said that on “first blush” this appeared to be a “harsh” decision for the employer as it seemed they were facing “dire consequences” as a result of Covid and imposing pay cuts may have appeared the only way out.
However, he stressed that there was no advance notice or consultation with the employees, “which will leave an employer on the back foot when it comes to defending such claims”.
Smedley also noted that the case illustrated the importance of management taking a step back to carefully test the “rationale” behind proposed decisions before they are made, especially where issues like pay are impacted and there is a clear difference in treatment between employees.