Government gender pay gap laws ‘lack power to sanction employers’

2 Jan 2018 By Marianne Calnan

Legal expert says new legislation would be required to punish non-reporting

The government has granted “no direct power” in its gender pay gap reporting regulations to the Equality and Human Rights Commission (EHRC) to impose sanctions on employers that fail to comply, according to a legal expert.

Anna McCaffrey, senior counsel in Taylor Wessing’s employment, pensions and mobility group, told People Management that because the government opted not to include in its regulations any specific civil or criminal sanction around gender pay reporting, the EHRC lacks the power to impose the sanctions it has proposed.

The lack of power to enforce criminal or civil sanctions, first reported by the Financial Times, could mean many companies will simply fail to report their gender pay gaps accurately – or will not report at all. 

McCaffrey added, however, that there may be “negative publicity and reputational issues” in store for companies that are found not be to complying with their obligations, which may lead to regulatory enforcement.

The equalities watchdog launched its enforcement strategy on 19 December to tackle non-compliance of gender pay audits, warning employers last month that those that failed to meet their reporting obligations would face ‘unlimited’ fines and convictions.

The strategy, open for consultation until 2 February 2018, states that the EHRC may seek summary convictions and an unlimited fine against organisations that still refuse to comply with a court order, and may issue unlawful act notices against those that do not accept the offer of an agreement and are found to have breached the regulations as a result of the investigation.

It could also investigate suspected breaches of the regulations by private and voluntary sector employers and offer them the opportunity to enter into a formal agreement to comply as an alternative to continuing with the investigation. Such agreements can themselves be enforced in cases of non-compliance, the EHRC stated.

On the sanctions’ lack of legal enforceability, McCaffrey said it was possible that further reviews on how the gender reporting rules were working in practice could “prompt changes such as introducing explicit sanctions for those that don’t report, or to clarify the scope of the EHRC's enforcement powers under the gender pay gap reporting regime”.

But should the EHRC want to take action against non-compliant employers in the meantime, it would have to rely on its general enforcement powers under the Equality Act.

The issue with using these powers in relation to gender pay reporting is that the Equality Act does not specifically include a requirement on employers to publish gender pay information. “There are therefore reasonable grounds for a technical challenge of an attempt by the EHRC to use its enforcement powers under the Equality Act to take action against employers for not complying with their gender pay reporting obligations,” said McCaffrey.

The reporting regulations require organisations with 250 or more employees to publish the difference between the mean and median hourly pay rate for their full-time male and female employees and the difference between the mean bonus pay and median bonus pay for male and female employees. It also requires reporting of the proportion of male and female employees awarded bonus pay, and the proportion of male and female full-time employees in the lower, lower middle, upper middle and upper quartile pay bands.

The deadline for reporting data for private sector employers, required to be published on organisations’ websites and the government’s gender pay gap service website, is 4 April 2018. However, as it stands, just 499 of an estimated 9,000 employers have published their figures.

Ranjit Dhindsa, partner and head of Fieldfisher’s employment, pensions and immigration team, told People Management that only the public ‘name and shame’ aspect of the reporting is standing in the way of employers being sanctioned: “Businesses are being given an opportunity to comply.”

Without legal standing for enforcing these sanctions, there is little preventing employers from failing to publish their gender pay gap data.

The government implemented the regulations in a bid to combat workplace gender inequality. The European Institute for Gender Equality’s Gender Equality Index 2017, published in October, found that the UK’s gender equality at work had barely budged over the last decade.

Whitehall departments issued their own gender pay reports just before Christmas, as the working year drew to a close. They revealed an average gender pay gap across the civil service of 12.7 per cent.

The Ministry of Justice’s median gender pay gap is 10.6 per cent in favour of male staff, while the Department for Business, Energy and Industrial Strategy revealed a median pay gap of 12 per cent in favour of men.

Other employers, meanwhile, may have published their data inaccurately – including Hugo Boss, Dana UK Axle and Age UK North Tyneside, according to the Financial Times. Sixteen organisations initially reported that, on average, there was no gap between what their male and female employees were paid, which is statistically implausible.

Anne Milton, minister for women, told the Financial Times that, for large employers, reporting the gender pay gap and ensuring the information is accurate is not optional but “is the law. Almost every employer will have a gap, but waiting to report it won’t change those figures. Don’t wait for the deadline – get on and do it!”

The EHRC did not respond to People Management’s initial request for comment.

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