All things being equal – legal analysis of the Equality Bill

Equality Bill: key equal pay provisions

Equal value claim Restates the current legislation to allow individuals who are paid less than a comparator of the opposite gender to bring claims for the difference in pay for up to six years’ arrears.

Gender pay report Provides a power for the Secretary of State to pass regulations requiring employers with 250 or more employees to publish “information relating to the pay of employees for the purpose of showing whether there are differences in the pay of male and female employees”.

Positive action Allows employers to take positive action to increase representation of minority groups, including women, by making it lawful for employers to choose a candidate from an under-represented group for a job when faced with two or more candidates who are equally qualified for the role.

Tribunal recommendations Allows tribunals to make wider recommendations to employers in discrimination cases, to prevent similar cases of discrimination arising in future. Currently, tribunals can only make recommendations in relation to individual employees, many of whom have already left employment when proceedings are commenced.

One of the aims of government is to promote equality between men and women in the workplace. Closing the pay gap between men and women was first addressed in 1970, with the passing of the Equal Pay Act. Under the Act, individuals can bring tribunal claims for ‘equal pay for like work’ to recover the difference in pay for up to six years prior to the claim.

However, although the Act came into force nearly 40 years ago, the pay gap remains. According to government figures, women still earn, on average, 22.6% per hour less than men. And, according to figures from the Employment Tribunals Service, the number of equal pay claims has increased by almost 500% in the past four years.

Campaigners such as the Equality & Human Rights Commission (EHRC) argue that the current regime is not fit for purpose and that it produces more conflict than change. The EHRC has pushed for alternative measures to close the pay gap.

The Equality Bill

On 24 April 2009, the Equality Bill was put to Parliament as part of the government’s commitment to clarify and expand on current discrimination law. Equal pay is a major factor in the Bill, which goes beyond the current complaints-led system of individual equal pay claims by proposing additional measures to close the pay gap.

Although the Bill will be open for amendments by MPs and peers before it comes into law next year, this article will consider some of its more controversial measures to combat the pay gap, and what these could mean for employers.

In the public sector, organisations with more than 150 employees will be required to publish annual reports giving details of their gender pay gaps. This requirement will also apply to the private sector, although the threshold will be higher, at 250 or more employees.

The government has said it won’t implement these provisions until 2013 at the earliest. This followed a Cabinet face-off between the equality minister Harriet Harman and the business secretary Lord Mandelson about increasing administrative costs to businesses during a period of economic decline. The EHRC has the task of monitoring progress in the meantime.

Reporting requirements

The Bill gives little detail on the reports themselves. It allows the secretary of state to pass regulations to require employers to publish “information relating to the pay of employees for the purpose of showing whether there are differences in the pay of male and female employees”. It also states that employers will not be required to publish reports more frequently than annually.

Harman has suggested that the requirements should be just a comparison of average hourly earnings between men and women. The EHRC has been asked to develop a set of metrics to achieve this, in consultation with businesses, unions and others.

The full effect for businesses will depend on what is eventually put in place, but it seems that at the least a substantial administrative burden will arise, as employers will have to analyse pay at each grade, and prepare statistics comparing pay rates for men and women.

The more serious implication for employers lies in the aftermath of publication of the gender pay report. By identifying where gaps exist, the employer could open itself up to equal pay claims, even where it has committed to rectifying the discrepancy. In calculating costs, employers should therefore also factor in the likelihood of claims being brought, and the potential liability for six years of arrears for each claimant.

At present, the EHRC encourages employers to carry out pay audits. These involve analysing the business to determine where men and women carry out like work, collecting and comparing data about their pay, establishing the causes behind any discrepancy, and proposing action to eliminate the pay gap. EHRC-style pay audits could become standard practice in the run-up to the introduction of gender pay reports, as employers seek to protect themselves from claims.

The Bill will also widen the scope for employers to take positive action, although the Equalities Office has been careful to note that positive discrimination will remain unlawful. Positive action will be achieved by allowing employers, when faced with two or more candidates who are equally suitable for a particular role, to choose a candidate from an under-represented group. This is subject to the proviso that employers may not have a policy of doing so in every case.

What effect this will have in practice remains to be seen. Currently, employers can take a certain level of positive action to improve representation – for example, by targeting their recruitment at particular schools, universities, publications and geographic areas. The Bill states that the provision should not be used as a standard recruitment practice, as this could be indirectly discriminatory. However, positive action could be used as a short-term tool for employers who wish to correct a lack of diversity in a particular area of their business.

Benefiting the workforce

Finally, the Bill seeks to close the pay gap by strengthening the powers of employment tribunals to make recommendations to employers. Currently, tribunals can only make recommendations relating to individual employees. The benefit of this is often limited, as the majority of claims are brought following termination of employment.

In future, the Bill will allow tribunals to make recommendations in discrimination cases that benefit the whole workforce, not just the individual who won his or her claim. The government hopes this will prevent similar discriminatory events from arising in the future.

In practice, where an employee has brought a successful discrimination claim, the majority of businesses will try to limit the possibility of similar claims arising in future. As such, this provision may not affect the majority of employers, although it may prove useful in the case of recalcitrant employers.

In implementing wider measures to close the pay gap, the government has had to take into account the competing aims of campaigners such as the EHRC – which argues that the Bill does not go far enough to ensure equality for women – and employers, many of whom are already struggling in the current economic conditions. It will be interesting to see how these measures stand up to scrutiny as the Bill progresses through Parliament.

Robert James Washington is an associate at Hogan & Hartson

Gender Pay Reports: What Do They Mean?

The actual format of gender pay reports has not been decided, although ministers have suggested that a comparison of average hourly earnings at each level will be sufficient. This could mean that it would be sufficient to publish details of average wages in each salary band.

Publication of pay data may open employers up to claims from employees who have been alerted to the pay gap. Employers will need to be prepared to attack the pay gap, rather than simply report on it.

In practice
The EHRC currently encourages employers to carry out pay audits, to eliminate differences in pay between men and women. Pay audits could become standard practice before the introduction of gender pay reports, as employers seek to protect themselves from claims.

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