From 1 October 2014, tribunals will have the power to require employers that lose an equal pay claim to complete an equal pay audit of their workforce.
Employers will normally also be required to publish such audits on their website and draw the audit to the attention of staff. The new power will be a factor in deciding an employer’s strategy for handling equal pay claims.
Successive governments have considered how best to address the continuing gender pay gap in the UK, which rose to 19.7% in 2013, according to the Office for National Statistics.
Although a provision in the Equality Act would require all employers with 250 or more employees to publish information about gender pay differentials, this obligation has not been brought into force.
The government preferred to focus on employers that are found to have broken the law, rather than requiring all large employers to publish pay information. It amended the Equality Act to require tribunals to order employers that lose an equal pay claim to conduct an equal pay audit.
If a tribunal orders an employer to carry out an equal pay audit, it must specify which employees the audit should cover and over what period of time.
The audit has to be submitted to the tribunal by a specified date; the employer must have at least three months to conduct the audit. The tribunal will assess whether the audit complies with the requirements.
If the employer fails to submit the audit, or the tribunal believes that the audit does not comply with the requirements, there will be a further tribunal hearing and a new date will be set by which a completed audit must be submitted.
If publication of the equal pay audit in this way would result in a breach of a legal obligation, for example a breach of the Data Protection Act, the employer can publish the equal pay audit with any revisions that are necessary to avoid such a breach.
The sanction for failure to prepare an equal pay audit by the original deadline without a reasonable excuse for the failure is a fine of up to £5,000. A further penalty of up to £5,000 can be imposed if the employer fails to prepare an equal pay audit by the date subsequently ordered, with a further penalty of up to £5,000 if there is a continuing failure to comply with orders made by the tribunal.
The impact of the new rules will not be felt immediately. Although the regulations are expected to come into force on 1 October 2014, they only apply to pay discrimination complaints that are presented on, or after, that date.
Given that the average age of an equal pay claim at its date of clearance is 237 weeks, according to the latest tribunal statistics, tribunals are unlikely to be making such orders imminently.
Having said that, employers faced with a pay discrimination claim after 1 October 2014 will need to be aware of the new rules and take them into account when deciding their strategy for dealing with a case.
Claimants may use the new power to try to encourage an employer to settle a claim rather than risk being ordered to conduct an equal pay audit. Employers could, however, choose to tackle the issue head on and carry out an equal pay audit voluntarily.
They would then be exempt from being ordered to carry out, and publish, a further audit. However, such an audit could provide ammunition for further claims, unless the employer is committed to addressing any equal pay issues that are revealed.
– Jo Broadbent is of counsel at Hogan Lovells
