The Government Equalities Office’s publication of a consultation on the scope of proposed regulations to bring in equal pay audits where a tribunal finds that an employer has breached equal pay legislation has re-opened the debate on whether these proposed regulations will promote a culture change with regard to the equal treatment of women or simply promote a rise in spurious tribunal claims (Equal Pay Audits: a further consultation). The regulations will be brought in by section 98 Enterprise and Regulatory Reform Act 2013 which inserts a new section into the Equality Act 2010 giving the government the power to make them.
The fear is this. The estimated cost, calculated in a regulatory impact assessment, of a mandatory equal pay audit is around £12,800. Add that to the legal costs (an estimated average of £6,556 per case) of defending a claim and the cost of any compensation (average compensation for breach of equal pay between 2000/1 and 2010/11 was around £18,500) and it begins to look more attractive to employers to settle cases than to fight them. With this in mind, employees will be more encouraged to bring spurious claims in the expectation that their employers will strike a deal before the claim gets to court.
What about publication of the audit? The government has indicated that it will not require the results of the audits to be made public yet it encourages employers to do so if they wish (whilst issuing a warning about data protection issues) but the audit results would have to be disclosed to employees covered by the audit, trade unions and the tribunal that ordered the audit.
Some commentators have sought to reassure employers that they need not be concerned about the Government’s proposed regulations since a tribunal could only make an equal pay audit order following a successful claim for unequal pay. With respect, this rather seems to be missing the point that the critics are making. Employers will be fearful of the risk that an order may be made – however small that risk may be – and that is surely likely to act as a disincentive to fight an equal pay claim that could be settled at a reasonable cost, quietly and quickly.
The final point to make about the regulations is that they will contain a right for a tribunal to impose a penalty of up to £5000 on companies who fail to comply with an audit order. Supporters of the audit scheme claim the penalty is not fit for purpose since the cost of carrying out an audit would far outweigh the maximum penalty a tribunal could award. It would be cheaper to disregard the order and to pay the fine.
The final word on audits goes to Alexander Ehmann, head of regulation at the Institute of Directors:
One day the Government state they’ve helped to simplify dismissal processes and the next day they decide to load businesses with new duties, such as gender pay audits…Regulating your way out of a recession is the worst strategy of all.
Meanwhile, in North and others -v- Dumfries & Galloway Council the Supreme Court has decided that council employees are entitled to back payments worth £12m, when it was determined that 251 female nursery workers are entitled to the same bonuses as male manual employees. The Supreme Court had to determine whether the affected employees and their comparators were “in the same employment”. Comparisons were made with a variety of manual workers employed by the local authority including groundsmen, refuse collectors, refuse drivers and a leisure attendant. According to the Supreme Court such comparisons can reasonably be made and finding specific reasons not to do so would defeat the purpose of the legislation. Following the decision UNISON has announced that it has a further 2000 claims awaiting the outcome and it is therefore reasonable to assume that further valuable settlements are on the way.