How lovely of the BBC to publish their “rich lists” to divert us all from the tedium and frustration of the Brexit negotiations. However, now that the genie is out of the bottle, what will the BBC and other organisations who know that a similar PR crisis concerning inequality of pay is looming do to avert disaster?
Equal pay rights are not new. The 1970 Equal Pay Act came into force in 1975 which was after the Europeans required each member state to ensure that the principle of equal pay for male and female workers for equal work of equal value was applied when Great Britain signed the Treaty of Rome on 1 January 1973. So why, over 40 years later, does the BBC (and no doubt other organisations in various sectors) report such stark inequalities in pay – it can’t all be down to a “genuine material factor defence” can it?
The principle is: equal pay for equal work.
Domestic legislation covering equal pay is now the Equality Act 2010. In broad terms, any term of a person’s contract which is less favourable than an appropriate comparator whether by lower pay or benefits or missing provisions entirely, is modified and evened up so that the two contracts are no less favourable. A comparator is someone who does “like” work (similar), work rated as “equivalent” (as shown in a job evaluation) or work of “equal value” (the effort, skill and decision required in the role is equal to or greater than a different, but higher paid, role).
The only way that an employer can justify differences between paying the person and their comparator different rates of pay is if they have a material factor defence that is not discriminatory. Discrimination comes in two flavours: direct and indirect. Direct discrimination is less favourable treatment because of a protected characteristic. Indirect discrimination is putting someone with a protected characteristic at a particular disadvantage when compared to someone without that characteristic unless to do so is a proportionate means of achieving a legitimate aim. When dealing with equal pay, the protected characteristic is sex. This would all seem straightforward, but isn’t necessarily: the Courts have spent years and countless hours hearing arguments and making decisions about every element of these definitions.
So what arguments (“material factors”) could the employer who has been paying men and women differently use to defend their approach to pay?
Differences in qualification/training - This may be relevant if the qualification or training is a requirement of or necessary for the role. However, where the role performed is the same and the comparator and other person perform it equally well, then this will not be a material factor defence.
Seniority and length of service – This may justify pay differentials, particularly on recruitment. However, once the employee and their comparator have been in post and are performing at the same level, this argument seems hard to justify and the employer will struggle to argue that the additional experience that the comparator has enables them to perform their role better.
Market forces – This is no doubt what the BBC’s remuneration committee will point to when explaining why industry “names” attract higher packages - to ensure that the “names” do not head off to better-paid rivals. In more pedestrian businesses, there are times when potential employees with a certain skill-set are in demand and a large salary package for new entrants is the best way to attract applicants. However, where does this leave their loyal existing employees who have not jumped ship at the offer of more money and now face sitting next to new colleagues on greater packages than theirs? Answer: Requesting pay parity or leaving to accept the better offers elsewhere.
Note that a material factor defence cannot be tainted by sex discrimination. This includes if the market forces are themselves tainted by sex discrimination, for example if a council pays bus drivers (who tend to be male) more than nursery workers (who statistically are female) when their work is rated as equivalent. (If a decision to pay a person less can be objectively justified, then it is not indirectly discriminatory under the Equality Act.)
The only way to prevent a claim is to make pay equal as soon as a disparity is discovered and to compensate the underpaid employee for the entire period that she (in most cases) was underpaid for up to 6 years or the length of the disparity (whichever is longer).
However, like the BBC, most employer’s budgets are limited and if the scale of the problem is large, settling on this basis could cause the entire organisation to fail, which then benefits no-one. Typically, the parties will reach a settlement on condition that confidentiality is maintained (to prevent a flood of other claims) and then issues which affect others that have been uncovered are dealt with gradually over time (using ring-fencing, restructuring and pay reviews). If no-win no fee lawyers become involved in group claims, then settlement costs will be high, but they may still be less than individual claims (because such lawyers will not necessarily want to spend the time and money on lengthy court hearing and likely appeals and will want to settle for their clients and receive their cut before moving to the next case.) However, some claims to continue (Asda/Walmart is being pursued (backed by the GMB) by shop workers claiming parity of pay with distribution centre workers) on the basis that the employer wants to justify their pay policies and therefore reverse the bad press received to-date.
Some BBC executives are suggesting that male salaries could be reduced or possibly that both salaries are rebalanced so his is decreased, hers increased, to reach parity. This will work if the man is prepared to agree a variation in this way. Chris Evan’s policy: “earn what you can, when you can, while you can” is indicative of the attitude of many and is probably why the Director General of the BBC is expecting wage inflation. However, when the fees concerned are so bloated and the public’s perception about such greed and unfairness reduces the popularity (and therefore bankability) of the individual concerned, some of these “names” may agree to reductions and those who don’t may not be re-engaged after the expiry of their contracts.
Tribunal and High Court claims for equal pay are possible and may result in awards of arrears of pay and a declaration of the existing terms to ensure pay parity (if the relationship is on-going). However most workers and employers do not want to litigate and litigants always face the risk of being labelled a “troublemaker” and reducing their employability (particularly in smaller markets).
Gender Pay Gap Reporting Audits are now compulsory for employers with over 250 employees, with published audits expected before 4 April 2018. Although this audit does not relate to equal pay directly, employers whose audits reveal disparities will no doubt come under closer scrutiny from their employees and ultimately equal pay claims may result.
The conservatives manifesto stated that they “will continue to work” and “continue to improve” gender pay parity, but if in nearly 40 years the law has not succeeded in creating a level playing field for the sexes, perhaps the legislators need to rethink how the claims system works and if bringing a claim is career limiting, compensate women accordingly. The labour party have suggested civil enforcement for employers who fail to comply with gender pay auditing and stronger union powers, which would presumably make it easier for group claims. Alternatively, there could be punitive awards against employers and individuals who knowingly or intentionally discriminate when setting pay. Additionally, society must step-up and in every area of life, women must be at least “rated as equivalent” so that brothers, fathers, husbands and sons will not and will not accept others devaluing women’s work or value.