It is commonly understood that employers are not permitted to discriminate amongst their employees, as the age, equal pay, gender and race legislation for example has collectively affirmed. However, a case which has just settled in Germany, likely to impact on Scottish local government, has highlighted the circumstances in which discrimination can successfully be justified. Stephen Miller explains,

The drive for equality of opportunity in the workplace is such an indelible aspect of our membership of the European Union that the extent to which its principles are pragmatically applied can come as a surprise. But, as with the fundamental Convention rights, equality proves itself to be a relative not absolute force.

All but the direct forms of discrimination can be justified. (In fact, even direct age discrimination can be justified). So, it follows that it can often be acceptable to discriminate indirectly against employees in the United Kingdom, although Judges do not of course frame their decisions in quite such a contentious way. A more acceptable formulation is to stipulate that employers are obliged to minimise rather than eliminate discrimination but, of course, it amounts to the same thing.

The effects of this little-recognised expedience at the heart of our anti-discrimination law are seen most vividly when an organisation changes its pay policy with a view to removing out-dated, often potentially discriminatory, elements.

In Germany, the massive civil service pay code was amended in 2005 to eliminate the age-based remuneration which had led to pay inequalities for younger workers. There was no question of the state justifying that blatant discrimination so its cessation was not a surprise.

What was controversial, however, was the decision that the beneficiaries of the old, discriminatory pay system should have their pay levels preserved (known as "red circling") in order to protect against the drop in pay which would otherwise have resulted from the introduction of the new pay system.

In the joined cases of Hennigs –v- Eisenbahn-Bundesamt and Land Berlin –v- Mai the Court of Justice of the European Union (CJEU) was required to consider, amongst other things, whether the continued discrimination inherent in these pay protection arrangements was justifiable. A two year period of pay protection was fixed in negotiations between representatives of the employer and the Trade Unions ("the social partners" in the language of the CJEU).

To reduce the point to its simplest, if you have to stop doing something because it's wrong do you have to desist immediately or can you use a (two year) period of grace?

Notwithstanding the visible discrimination inherent in such a protection system the CJEU was persuaded that it was necessary in order to introduce the modernised pay system that the red circled employees have their pay protected for a limited period of time. The pay protection arrangements were described in the Judgment as having been "a decisive factor in enabling the social partners to implement the changeover" in pay systems.

When, in July 1999, the Scottish Local Government employers agreed with their Trade Union partners to introduce new pay and grading arrangements for their so-called single status workforce (an amalgamation of manual and white collar workers) it was agreed that there be a fixed three year period of pay protection. Whilst that period may appear on the long side measured by today's standards it is certainly not excessive. Measured by the standards applying in 1999 it really was a remarkable achievement when the prevailing agreements at that time universally provided for a lifetime pay protection (for the lifetime of the contract not the employee!).

I would describe the CJEU Judgment in Hennigs as improving the prospects of the Scottish Local Government employers successfully defending their pay protection arrangements because of the recognition of the important role played by the social partners (employers and trade unions) in effecting fundamental changes to pay and grading systems, particularly those underpinned by national collective bargaining. When employers and trade unions are able, in this situation after years of joint working and negotiation, to establish a practical and workable collective agreement it is only right that the courts should carefully guard against too much state interference even when equality issues are at stake. This Judgment sensibly addresses and resolves the competing interests.

Notwithstanding the clarity provided in the CJEU Judgment it seems inevitable that the question of the legitimacy of the Scottish pay protection arrangements are to be litigated in the Employment Tribunal and higher courts for many years to come and so the litigation will outlast even the most generous pay protection period.

Stephen Miller is an employment law specialist at MacRoberts