Employment Law Coffee Break | HR learnings behind the 'witch's hat', pay transparency, and worker status
Published on 11th Mar 2022
Welcome to this week's Employment Law Coffee Break in which we look at the latest legal and practical developments impacting UK employers.
#BreakTheBias: tribunal highlights the cost of getting it wrong
Tuesday 8 March was International Women's Day where everyone was invited to #BreakTheBias and imagine a "gender equal world free of bias, stereotypes and discrimination"; one which is "diverse, equitable and inclusive" and "where women's careers thrive and their achievements are celebrated". We are seeing many employers taking increasingly progressive steps as they seek to create workplaces reflecting these aims, but unfortunately there continue to be many instances where behaviours still fall short.
In a recent remedy judgment, an Employment Tribunal awarded a claimant over £2 million for equal pay, sex discrimination and victimisation. It also ordered the respondent to carry out an equal pay audit in respect of its "opaque" pay system. An equal pay audit is required by statute where there is equal pay discrimination, unless the respondent can bring itself within any of the listed exemptions (which the respondent was unable to do). While the respondent had sought to take its own remedial actions by the time of the remedy hearing in relation to equal pay, the tribunal did not consider that these went far enough to prevent it from ordering an audit to be conducted across the workforce to explain the respondent's "approach to equal value" and enable a "a proper comparison to be made of the remuneration levels of men and women employed by the Respondent who are doing work of equal value" with "all elements of remuneration to be included i.e. base pay, pension contributions, discretionary bonuses and any other allowances, although not benefits in kind".
While many employers are now well tuned to complying with gender pay gap reporting obligations (the next round of reporting will fall on 4 April) and taking appropriate steps to close the gender pay gap, this case highlights the continuing need to remain alert to equal pay issues. The associated upset, cost and time demands as employers seek to understand and resolve any concerns, together with the wider impact on employee relations and brand, should not be underestimated. While an equal pay audit will be an appropriate tool to identify issues of discrimination within a pay system and enable the development of an action plan for putting right any significant pay differences that cannot be objectively justified, legal advice should be taken when scoping, planning and undertaking the audit to minimise the risk of legal claims and potential disclosures.
As well as throwing a spotlight on fair pay practices, this case also highlights the difficulties women can face in being treated equally with their male counterparts during the recruitment process and throughout the employment relationship. It reinforces the importance of employers promoting a culture where all are welcome and given a safe space to undertake their work free from discrimination and harassment and with the knowledge that valid concerns will be investigated properly – here the tribunal awarded a 20% uplift equating to £317,000 as a result of the respondent's failure to follow the Acas Code on Disciplinary and Grievance procedures. HR has a key role in protecting the business and what this case makes clear is that HR does this best by ensuring that obligations are complied with and processes are applied properly. Training for managers will be key.
Camilla Neate, Associate Director in our employment team, explores the issues this case raises and learnings for HR here.
Government pilot to promote pay transparency in job adverts
The Minister for Women, Baroness Stedman-Scott, this week launched on International Women's Day, two new initiatives to "level up" employment opportunities for women.
In light of evidence showing that listing a salary range on a job advert and not asking applicants to disclose salary history "provides a firm footing for women to negotiate pay on a fairer basis", one initiative will seek to improve pay transparency in recruitment processes to help businesses who want to attract women to their positions. Participating employers will be asked to list salary details on job adverts and to stop asking about salary history during recruitment. The government specifically recognises that previous historic pay decisions and ambiguous pay policies may make it difficult for participating employers to include pay information on job adverts and will therefore work with employers to develop and pilot a methodology to address this challenge. The government considers this "could have a significant impact in closing salary gaps and tackling pay inequality".
Alongside this, the government is also launching a new returners programme to help women back into STEM (science, technology, engineering and maths) careers in light of research and employee feedback that returning to STEM roles after time out "can present significant challenges". Organisations will be helped in recruiting and retaining talented staff who may otherwise be overlooked through training, development and employment support. The new programme will run for a minimum of two years.
These two initiatives represent another mechanism with which to close the considerable average gender pay gap which still remains across many businesses.
Employers seeking to promote the steps they have been taking towards pay equality need to be aware that businesses are increasingly coming under scrutiny for any equality claims made: this week a gender pay gap bot on Twitter publicised employers' gender pay gaps in response to their tweets celebrating International Women's Day.
No obligation to perform a minimum amount of work to be a worker
The Court of Appeal (CA) has recently looked at the question of whether or not an individual engaged under a contract is obliged to perform a minimum amount of work in order to be a worker for the purposes of minimum statutory benefits and protections (such as paid annual leave, minimum wage, a section 1 statement of rights). The claimant agreed to provide services personally to the respondent under an overarching contract, supported by individual contracts when work was assigned. There was no obligation on the claimant to accept any particular work; he was free to refuse to accept or cancel work at his discretion, and even after he had accepted an individual engagement. The Employment Tribunal concluded that the claimant was not engaged as an employee (which was not appealed) and the key question before the CA was therefore whether the claimant was in fact a worker for the purposes of the Working Time Regulations 1988.
The CA agreed with the ET that to qualify as a worker it was only necessary to establish, in line with the statutory definition, that that there was a contract under which the claimant undertook to perform work personally and that the respondent was not a client or customer of a profession or business carried on by the claimant. Applying a Supreme Court decision of last year, the CA rejected the respondent's contention that there must necessarily be an "irreducible minimum of obligation", that is, an obligation on the claimant to perform a minimum amount of work – the fact that the parties are not obliged to offer, or accept, any future work is irrelevant.
Increasing numbers of businesses are looking to utilise flexible labour to meet business demands and this latest decision provides further helpful clarification of when an individual will be entitled to statutory rights and protections as a worker. With claims for back-dated holiday pay potentially spanning back over many years it is important to make a correct status determination to avoid significant unexpected liabilities.
The Court of Appeal here only needed to address the claimant's status as a worker and not whether he was an employee. Employers should also remain mindful of an earlier Court of Appeal decision last year which held that a single assignment under an overarching contract can potentially be a contract of employment (and effectively within the IR35 "deemed employment" tax regime for contract workers working via their own personal service companies), even if there is no obligation to accept those assignments. Whether or not sufficient "control" exists, seems to be becoming the main factor in determining employment and tax status in UK cases. See our earlier insight.
We continue to wait and see if legislative reform in this area is forthcoming. Proposals in the UK – set out in the Good Work Plan in 2018 – have centred on a possible statutory test on employment status, as well as greater protection for workers. However, with progress on a number of employment-related reforms outstanding, including the consultation on the use of non-compete provisions in employment contracts (we understand a response is expected "in due course") and ethnicity pay gap reporting, any immediate legislative reforms are unlikely.
