To Truly Tackle the Pay Gap, We Need a New Equal Pay Act

It has been forty-five years since the Equal Pay Act, and yet whilst the gender pay gap is still nearly 10 per cent for full-time work and over 19 per cent for all employment, full time and part time combined,[1] the number of claims has fallen off by 70%. The Equal Pay Act is no longer working and we need a new one which will make a renewed effort to tackle some of the underlining causes of pay inequality. This should be a priority for the next government, who should commit to getting rid of the pay gap within five years. Labour’s commitment to require employers with over 250 staff to publish pay audits is welcome, but not sufficient in itself to tackle this deep seated problem. Women in Britain have been waiting for long enough.

Clause 1 of the new Equal Pay Act should state that it is the responsibility of all of us to rid our system of gender inequality. Part of the current problem is that equal pay law is not based on collective responsibility, but rather on the notion that if you are not paid fairly it is up to you to do something about it for yourself. A woman needs to find a man doing work of equal value for the same employer (a comparator) and bring a case. We should not be depending on individual women to enforce a version of contract law to tackle inequality, we should be doing it together. There should be a number of special provisions within the Act that will focus the minds of all us. They should apply for five years with possibly a sunset clause.

 

We must all work for culture change and the legal system should provide us with new tools. There should be an obligation on employers to treat female and male employees equally by doing regular published pay audits and then eliminating unfair disparities.

 

We also need to overhaul the tribunals to give them wider powers with monitoring and enforcement and have judicial oversight of pre litigation settlements.

 

Individual applications to tribunals should not just be a means of getting individual redress, they should be treated as an alert to bad practice within an organisation and a call to action. When alerted, the tribunal should order pay audits and refer the organisation onto experts who can perform skills audits and job evaluation studies. This should be done under the auspices of the Equality and Human Rights Commission. The organisation’s plan as to how it will implement the recommendations of the studies should be monitored by the ECHR. Flagrant breaches of the recommendations could be referred back to the tribunal as a form of contempt of court. Furthermore, the tribunal should be able to order these remedies, not just after a full hearing, but also as part of a negotiated pre-litigation settlement. These are currently overseen by ACAS who could come to the tribunal with recommendations that such audits and studies be undertaken.

 

If any injustices come to light, compensation should be awarded to those who took the legal action and equal pay given in future to all those who have been discriminated against. In this way individual claims would not just help the individual woman, but can ensure that work is done on behalf of all the women in the organisation who are affected: ironing out injustices and ensuring culture change. At the moment any remedies have to be purely focussed on those bringing the claim.

 

It should be noted that the Coalition Government has introduced regulations that are supposed to require employers to carry out an equal pay audit for the rest of their workforce in the event that they lose an equal pay claim.[2] However this is in practice little more than window dressing. Whilst the audit has to be published and include a plan on how to prevent breaches occurring or continuing there are no guidelines, binding or otherwise, on what constitutes an acceptable plan and the regulations are silent on enforcement or monitoring. What is more, the circumstances in which the tribunal may decide not to order an audit are numerous and broad - including where “the disadvantages of an audit would outweigh its benefits”. This is hardly radical stuff.

 

New Defences to Equal Pay Claims: If a company has regular equal pay and skills audits, and job evaluation studies done by accredited experts it should be presumed that they have an absolute defence, if they have adjusted the pay of the women according to the recommendations with no penalty during the five years since the passing of the Act. So whilst it would still be possible to take a claim, it would be very difficult to prove discrimination, furthermore the individual taking the claim would have to pay the usual court fees.

 

Gagging Clauses: It should not be acceptable that individuals are offered settlements where it looks like they have been bought off in exchange for a gagging clause. Gagging clauses in settlements should illegal, as they are in whistleblowing cases. Furthermore, settlements should be signed off by tribunals

 

We should empower women and make it easier for them to take cases to tribunals by making the procedures quicker and more straight forward. When our current system was invented 45 years ago it was supposed to be simple, informal and fast. A woman was supposed to be able to represent herself. We have moved a long way from that and cases now take many years. The experience of taking a claim is more akin to a very stressful wade through treacle.

 

We need to update procedures to speed cases up and get rid of some of the more ridiculous loopholes that have arisen over the years.

 

Complex, multiple cases should be overseen by senior judges.

 

We must reintroduce a short form questionnaire that employers must complete which will help give women the information necessary to take a claim.

 

Women who are replaced by a man who is then paid more than her really ought to be able to rely on that as evidence of discrimination. We should amend The EA 2010 s.64(2)to clear up any confusion on this by stating that “a comparator could be a predecessor or a successor in the job”.

 

We should sweep away the defence that a difference in pay is a result of a “material factor”. This law seems to be that if a woman is paid differently to a man, but the employer does not mean to discriminate and the difference has arisen by accident or inertia that is a defence. Pay differences should be justified objectively[3].

 

A new Equal Pay Act will also need to make it clear that a woman does not need to find a comparator who works for the same employer in the same building! We must sweep away this restriction which can be found in both the Equal Pay Act 1970 and the Equality Act[4].

 

Compensation for failure to pay equally should be restricted once more to two years: One by-product of the old Equal Pay Act being so closely aligned with individual contract law has been that the European Court of Justice has stated that a breach of the Act should attract compensation in a similar way to breach of contract. The upshot of this is that instead of awarding compensation of two years back pay as the original Act envisaged, the ECJ has ordered that compensation must be awarded for six years. By raising the stakes in this way, the ECJ has not encouraged the ease by which cases can be settled and our ability to effect change has been hampered. Restricting compensation to two years would be a pragmatic change which would help to allay fears in the business community that this concerted attempt to affect culture change would be too costly. If challenged in the ECJ, the UK would need to explain that compensation is being restricted as part of a coherent progressive policy drive to ensure gender pay equality. The provision for two years back pay could also relapse to six years after a five-year period, helping to focus minds on the urgent need to deal with the problem.

 

Fees for Equal Pay Claims should be abolished for five years: As part of this change of emphasis, we will need to encourage women to come forward with their grievances, not just for their sake, but for the sake of others. Claimants will become closely akin to whistle-blowers under this new system. We should therefore waive tribunal fees during what we hope will be a period of change.

 

Settlements: Negotiation is always better than litigation and another way of driving through workforce change. However there have been recent cases where Trade Unions have been taken to court by their members for what were seen as unfair settlements. In order to inspire confidence in collective agreements, there should be Codes of Practice within the new Equal Pay Act and potentially guidance from ACAS.

 

Prevent out-sourcing, agency-working and bogus self-employment being used to circumvent equal pay: The old Equal Pay Act never envisaged an employment market as we have today and only provides a very clunky response. Any new Equal Pay Act will need to be fit for the modern day.  It must restore and strengthen guarantees on terms and conditions for public sector workers transferred to private sector; close loopholes in agency worker regulations; and create statutory rules against sham self-employment.

 

Pay Audits and s.78: Labour’s  very welcome commitment to bring into force, for the private sector, the dormant power conferred in s78 EA 2010 to introduce regulations that require employers to publish information relating to the pay of male and female employees needs careful attention to the details in order to ensure this is more than a “modest” change.[5] There should be an obligation to act on any disparities brought to light by the audit. The restriction to businesses of more than 250 employees obviously leaves out most businesses. Furthermore the duty to reveal pay information can be interpreted as falling short of a proper pay audit, which compares pay across each stratum of equivalent work. For the information revealed to be useful, it should be published by reference to grade and job title, not just gender and should also include other forms of pay beyond salary, such as bonus payments.

 

What these suggestions don’t tackle! Occupational Segregation: One of the more entrenched causes of the pay gap between men and women is occupational segregation, with nearly two-thirds of women employed in 12 occupation groups, most of which are related to women’s traditional role in the family (these include caring, catering, cleaning, teaching, nursing, clerical work etc.[6]).  It’s as though women have left the kitchen, but they haven’t got very far!

 

The law on equal pay focuses on individual comparisons within the same employment, which critics say is “intensely myopic” and means that “gender segregation goes largely untouched.”[7] Under the EP 1970 the claimant had to identify a male co-worker doing equal work for the same employer at the same or equivalent establishment. In practice, this was often extremely difficult, as the union Unison explained in its submission to the bill committee of the EA 2010: “Part of the cause of unequal pay is the low value assigned to occupations with high concentrations of women (so we pay our plumbers more than child carers), so the absence of a male counterpart can prevent some women from making legitimate claims.”[8]

 

Hypothetical Comparators: Unison called instead for “the use of hypothetical comparators in discrimination cases where no actual comparator exists.” Hypothetical comparators, which are used in other kinds of discrimination law[9] and are recognised by EU law[10], are gleaned from evidence of examples that are similar enough to the claimant to allow a meaningful comparison to be made. The Equality Act 2010 did allow for the use of hypothetical comparators for cases of direct discrimination in equal pay cases - that is to say, really blatant discrimination where a worker is basically told that they would be paid more if they were male - but not indirect discrimination, where the conditions and practices of a workplace combine to put female staff at a disadvantage.[11] The exclusion of hypothetical comparators from indirect discrimination cases has led commentators to predict that “although there have been changes to the law on comparators, the effect that the new provisions will have on equal pay and the gender pay gap is likely to be restricted.”[12] The legislation could be amended to make it clear that hypothetical comparators can be used for both direct and indirect pay discrimination claims.

 

Flexible working: We must not kid ourselves here though, the biggest obstacle to equal pay remains the fact that women continue to do the vast majority of unpaid work at home and until that changes, women will not have equality. In the meantime, and frankly even if it happens, we must continue to strengthen the law to allow flexible working so that people can balance their work and home lives. In many ways the rules have gone backwards under this government. Although the right has recently been extended to all employees regardless of dependents, it has in other respects been weakened. If a mum falls over and needs help in hospital and coming out again afterwards, a daughter simply cannot wait for her employer to consider a request for flexible working for three months as is their right. She is more likely to either leave, go part time or simply take a pay cut and demotion.

 

So whilst a new Equal Pay Act would not fix all aspects of gender inequality, but it would certainly be a step in the right direction, so let’s do it.

 

 


[1] Office of National Statistics: Annual Survey of Hours and Earnings, 2014 Provisional Results

[2] The Equality Act 2010 (Equal Pay Audits) Regulations 2014

[3] Glasgow City Council and Others v Marshall and others [2000] I.C.R. 196: Lord Nicholls at 202 “if the employer proves the absence of sex discrimination he is not obliged to justify the pay disparity”

[4] S 79 (3)(b) EA 2010

[5] Monaghan at 16.13

[6] S. Fredman, “Reforming equal pay laws”, Industrial Law Journal 2008 193 at 195

[7] See Fredman at 196

[8] "Memorandum submitted by UNISON", para 5.1, http://www.publications.parliament.uk/pa/cm200809/cmpublic/equality/memos/ucm0402.htm

[9] S1 (a) Sex Discrimination Act 1975

[10] Directive 2006/54/EC Articles 1 (c) and 2 (a)

[11] S71 Equality Act 2010

[12] Gow and Middlemiss at 173

 

Appendix: How a New Equal Pay Act could encompass outsourcing, agency working and self employment

 

 

1. Outsourcing

 

a. The requirement imposed by S 79 of EA 2010 that the male comparator is employed by the same employer or an associated employer at the same establishment is said by equality law specialists to cause “very significant disadvantage for women employed in public sector services that have been contracted out to private contractors.”[1] The upshot is that “a woman doing equal work at the same establishment as a better paid male comparator has no claim if she is employed by an agency or outside contractor.”[2] In other words, if a council outsources its cleaners to a private company, they will no longer be able to ensure that their pay keeps up with that of binmen or other council employees that would have once been rated equivalent to them. This will be so even though the cleaners will be doing exactly the same work in exactly the same place alongside exactly the same binmen.

 

b. In theory, their conditions are supposed to be protected by the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE). Under Regulation 4 of TUPE, the fact that a service is being transferred to the private sector is not allowed to result in a variation of the transferred employees’ rights. However, this protection can be got around by the qualification offered by Regulation 5, which allows for contracts to be varied for “(a) a reason connected with the transfer that is an economic, technical or organisational reason entailing changes in the workforce; or (b) a reason unconnected with the transfer.” As a result, there is considerable scope for slippage in pay and conditions after the transfer has taken place.

 

c. This was illustrated in the case of Lawrence v Regent Office Care Ltd where female workers who provided school dinners and cleaning services to North Yorkshire Council sought to establish whether the comparison with male workers in local government service was still valid after the transfer. The claimants argued that the workers were all employed in the same service, even if not employed by the same employer.  The European Court of Justice reaffirmed the position under EU law that the comparator did not have to be under the same employment, but rejected the claimants’ case on the grounds that “differences identified in the pay conditions of workers performing equal work of equal value cannot be attributed to a single source, there is no body which is responsible for the inequality and which could restore equal treatment”.[3] According to the Advocate General in that case, the single source could be “the legislature, the parties to a collective works agreement, or the management of a corporate group.”[4]The rationale is that there has to be a body “which is responsible for the inequality and which could restore equal treatment.”[5]

 

d. The Advocate General in Lawrence argued that allowing comparisons with employees of other employers where there is no “single source” will expose companies to arbitrary legal sanctions for things beyond their control. This is surely right. That is why is important to try and ensure that there is a “single source” in place for claimants in the Lawrence situation.  It could be made a statutory requirement that the public body and the contractor reach a binding agreement that sets out and guarantees terms and conditions for employees in the service being transferred. This would be the “single source” for the purpose of allowing contracted-out service workers in female-dominated occupations (e.g cleaning) to assert their right to equal pay. Under the last Labour government, these agreements were recommended to local authorities as best practice, but the Coalition scrapped it.[6]

 

2. Decentralised and fragmented pay agreements

 

a. Equal pay laws are also being marginalised by the increasing decentralisation and fragmentation of pay-setting within an employer. In Robertson v DEFRA[7], the Court of Appeal held that even where the comparators have a shared employer, there may be no “single source” and so no claim.

 

b. The case concerned an attempt by civil servants in DEFRA to use a comparator at the Department for Transport. The Court held that although they were all the servants of the Crown, responsibility for negotiating and agreeing their pay and conditions had been devolved by delegated legislation to the individual departments concerned. As Fredman notes, this result was unfortunate because “even without creating a new employing entity, an employer can insulate workers in one department from equal pay claims by those in another department by delegating control over terms and conditions to different department heads.”[8] The Equality and Human Rights Commission also considered that the case was wrongly decided.[9] It is certainly arguable that in Lawrence, the ECJ’s “single source” test is clearly a permissive gesture to allow in certain circumstances, cases to be brought where the comparators are not of the same employer. It does not provide authority for restricting claims even when there is the same employer.

 

c. Another restriction can be found in UK equal pay statutes themselves. Under both the Equal Pay Act 1970 and the Equality Act 2010 even when a woman does share the same employer as her chosen male comparator, the comparator will only be deemed valid if they work at the same establishment[10] of the same employer or a different establishment of the same employer where “common terms and conditions apply at the establishments”[11]. Critics say that this has rendered the coverage of equal pay laws narrow and has given rise to confused and conflicting interpretations by the courts.[12] . Lady Hale in North v Dumfries and Galloway Council [2013] has also indicated that the provision is hanging by a thread: “if that provision erects a barrier to a claim which would otherwise be available under European Union law, it would be our duty to disapply it.”[13]

 

d. It is suggested that this should be swept away and replaced with a general rule that comparisons can be based on all operations of a single employer. That would not mean that exculpatory things like collective bargaining agreements or regional weightings would be ignored by the Tribunal. Far from it. They could be cited instead as material factors in the respondent’s defence under s 69 EA 2010.

 

3. Agency workers

 

a. The rise of agency working as opposed to direct employment also presents real challenges to the enforcement of equal pay and attempts to address these have not been entirely successful. The case of Allonby v Accrington and Rossendale College[14]highlighted the inadequacy of equal pay laws that were formulated in a way that did not envisage the way in which management responsibilities were going to fracture in an era of outsourcing. The case concerned a part-time college lecturer on rolling one-year contracts who was then transferred from direct employment with the college to self-employment through an agency. The part-time lecturers were overwhelmingly female and now found themselves on less pay and worse conditions. The claimant wanted to use a male full-time lecturer as her comparator but the domestic and European courts rejected this because technically the male lecturer worked for the college and she was self-employed. What was more, the triangular employment arrangement of college-agency-worker meant that there was no “single source” either: The college paid the male lecturer, the agency paid the female lecturer. As a result, the ECJ ended up endorsing an employment arrangement that was clearly designed to circumvent one of the EU’s core values, the promotion of equality between men and women.[15]

 

b. The ECJ acknowledged that the supplanting of traditional direct employer-employee relationships with self-employment and agency-working exposed a major lacuna in the law that could “be used to evade the consequences of employment-protection legislation or, as in the case of Article 141 EC [Article 157 TFEU], legislation which seeks to give effect to fundamental legal principles in regard to the employment market.”[16] As a direct result, the Commission produced the Temporary Agency Work Directive 2008/104/EC, Article 5 of which states: “The basic working and employment conditions of temporary agency workers shall be, for the duration of their assignment at a user undertaking, at least those that would apply if they had been recruited directly by that undertaking to occupy the same job.”

 

c. This was implemented in the UK with the Agency Workers Regulations 2010, but these did not go anywhere near as far as they could have. They only apply to agency workers who have been working at an undertaking for 12 weeks or more. After a short pause, that same undertaking can hire them again, so long as it is for a substantially different role, which still arguably creates scope for the rolling-over of temporary staff to avoid treating them as employees. What is more, the right to equal pay and conditions can be waived under Regulation 10, where the worker is under an employment contract with the agency which pays them in between jobs. This is called the “Swedish derogation” and has been attacked by the TUC as resulting in large numbers of agency workers (the figures they cite say one in six) who are being put on these contracts and paid less.[17]

 

d. It is suggested that a future Labour Government should abolish the Swedish derogation. It could also look at reducing the qualification period for being protected by the regulations and further safeguards against rolling temporary contracts such as reducing the number of times an agency worker can be deployed to an undertaking before a relationship of direct employment is implied.

 

4. Bogus self-employment: The triangular situation in Allonby is just one of the way in which sham self-employment can be used by employers to circumvent employee protections such as equal pay, for example by labelling worker as free-lancers, use of daily agreements, using intermediaries as payroll companies etc. By the time legislators have got around to ironing out one ruse, others will have proliferated. Of course, self-employment is by no means even in the main a ruse. Often it is a fully-informed and confident choice to trade in job security and rights for greater independence. But there will also be many occasions where it is not a choice and is in fact an abuse of an employer’s superior bargaining power. In these situations, an employee is pushed into accepting a more precarious self-employed status, signing away rights in contracts that were drafted by the employer’s lawyers and presented to them as a fait accompli.

 

5. It is therefore not surprising that self-employment has soared during the recession. According to the TUC, almost half the 1.2m jobs created since the coalition came to power are accounted for by self-employment. As Frances O’Grady said "these newly self-employed workers are not the budding entrepreneurs ministers like to talk about. Only a tiny fraction run their own businesses, while the vast majority work for themselves or another employer – often with fewer rights, less pay and no job security."[18]

 

6. In the face of long-standing legislative in action on bogus self-employment, the Supreme Court have demonstrated a willingness to set aside English law’s traditional deference to the principle of freedom of contract and instead look beyond the legal paperwork to the economic reality beneath.

 

7. The key case to look at is Autoclenz Ltd v Belcher [2011] UKSC 41 (SC) where the Supreme Court upheld an employment tribunal’s decision to strike down contractual clauses that had been inserted by the employer to conceal the reality that the claimants were in effect the respondent company’s employees. In doing so, it affirmed the approach taken by the Employment Appeals Tribunal in Consistent Group Ltd v Kalwak [2008] IRLR 505 and the Court of Appeal in Firthglow Ltd (trading as Protectacoat) v Szilagyi [2009] ICR 835.

 

8. In his leading judgment, Lord Clarke cited favourably Elias J’s comments in in Kalwak that: “The concern to which tribunals must be alive is that armies of lawyers will simply place substitution clauses, or clauses denying any obligation to accept or provide work, in employment contracts, as a matter of form, even where such terms do not begin to reflect the real relationship.”[19] As a result, Clarke says, the tribunal should do as Lord Smith recommended in Szilagyi and “consider whether or not the words of the written contract represent the true intentions or expectations of the parties, not only at the inception of the contract but, if appropriate, as time goes by... where there is a dispute as to the genuineness of a written term in a contract, the focus of the enquiry must be to discover the actual legal obligations of the parties. To carry out that exercise, the tribunal will have to examine all the relevant evidence. That will, of course, include the written term itself, read in the context of the whole agreement. It will also include evidence of how the parties conducted themselves in practice and what their expectations of each other were. Evidence of how the parties conducted themselves in practice may be so persuasive that the tribunal can draw an inference that that practice reflects the true obligations of the parties.”[20]

 

9. Labour could legislate to enshrine that more purposive approach to state that where there is dispute or confusion over who is the employer for the purposes of an equal pay claim, the tribunal must determine the actual legal obligations of the parties from an examination of all the relevant evidence. A schedule could contain a non-exhaustive list of factors that indicate a relationship of employment. These could be gleaned from common law, HMRC guidelines on distinguishing employed from self-employed status,[21] or from recent European Commission discussion papers on tackling bogus self-employment.[22]

 

10. Where the tribunal finds that the actual legal obligations of the parties amount to a contract of employment the equality clause can then be implied into it and a comparison drawn with a male member – actual or hypothetical - of the employer’s staff doing work like work, equivalent work or work of equal value.

 

11. To discourage the practice of bogus self-employment, the tribunal may then wish to go the further step of considering whether the transactions set up by the employer were a “sham”, with the moral turpitude that term denotes. Where it has been found that a contract of employment was wrongly presented as something other than that and that the employee was excluded from their right to equal pay as a result (or any other fundamental employment right), the employer can be asked to demonstrate that the circumvention of the claimant’s rights was not either the main purpose or one of the main purposes for the arrangement. Where the employer fails to do this, the tribunal may then want to consider a penalty, whether recourse to a naming-and-shaming mechanism of some kind or a civil fine on top of the back-payment award.

 

12. These measures combined could be presented as a sort of employment law cousin of the general-anti-abuse tax rule brought in by the government – a general anti-exploitation rule.

 


[1] Monaghan at 6.615

[2] Fredman at 196

[3] Lawrence v Regent Office Care Ltd (C-320/00) [2002] E.C.R. I-7325 (ECJ)

at para 18

[4] At A51

[5] Lawrence at para 18

[6] Monaghan 6.617

[7] Department for Environment, Food and Rural Affairs v Robertson and ors [2005] ICR 750

[8] S. Fredman, "Marginalising equal pay laws", I. L. J, 2004, 33 (3), 281 at 283

[9] http://www.equalityhumanrights.com/about-us/devolved-authorities/the-commission-in-scotland/legal-news-in-about-us/devolved-authorities/the-commission-in-scotland/articles/case-comment-north-v-dumfries-and-galloway-council-2013-uksc-45

[10] S 79 (3)(b) EA 2010

[11] S 79 (4) (c) EA 2010 & S 1 (6) EPA 1970

[12] Fredman 196-197

[13] North v Dumfries and Galloway Council 2013 S.C. (U.K.S.C.) 298 at para 2

[14] Allonby v Accrington and Rossendale College (C-256/01) [2004] E.C.R. I-873 (ECJ)

[15] Article 157 Treaty on the Functioning of the European Union

[16] Allonby v Accrington & Rossendale College & Ors; Opinion of Advocate General Geelhoed

[2003] Pens. L.R. 97 at paras 44-45

[17] http://www.bbc.co.uk/news/business-23920631

[18] http://www.theguardian.com/money/2014/apr/14/job-market-instability-self-employed-tuc

[19] Autoclenz para 25

[20] Autoclenz Paras 30-31

[21] https://www.gov.uk/employment-status/selfemployed-contractor

[22] Opinion of the European Economic and Social Committee on ‘Abuse of the status of self-employed’

(own-initiative opinion)  (2013/C 161/03) http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52012IE2063&from=EN

 


Be the first to comment

Please check your e-mail for a link to activate your account.


Volunteer