On Monday, March 12, the High Court ruled that the UK Government had failed to implement EU laws regarding equal treatment properly so failing to give women full protection against sexual harassment and pregnancy discrimination, as required by the relevant EU laws.

The Government had until Friday, March 16, to inform the High Court as to how it plans to remedy the situation. It is understood that the Department of Trade and Industry will not appeal the decision and will now take steps to change the law. Communities secretary and minister for women Ruth Kelly will now consult with the UK's Equal Opportunities Commission (EOC) over the changes. The changes to the UK law will no doubt include a wider definition of "harassment" and wider obligations for employers when managing pregnant employees and those who have been on maternity leave. This could lead to significant changes in the way employers deal with service-related benefits and the payment of bonuses.

Background

The EU Equal Treatment Amendment Directive 2002 ("ETAD"), contains provisions relating to pregnancy discrimination and sexual harassment. The UK Government implemented these provisions by the Employment Equality (Sex Discrimination) Regulations 2005 ("Regulations") which amended the existing Sex Discrimination Act 1975. These amendments came into force on October 1, 2005.

The Equal Opportunities Commission ("EOC") brought judicial review proceedings in the High Court arguing that:

  • the Regulations did not properly implement the ETAD, so meaning that women were not given the required level of protection against sexual harassment and pregnancy discrimination;
  • the interpretation of the Regulations could mean that women may lose aspects of existing maternity rights already established in UK case law; and
  • there was a lack of clarity in the scope of the Regulations, so giving uncertainty as to the extent of the legal rights and obligations for both employers and employees, which could lead to costly and time consuming litigation.

Key Points

On Monday, March 12, the High Court agreed with the EOC and ruled that the Government had failed to implement the ETAD properly. The key points to note are:

  • Women's rights during maternity leave. The Regulations should be made clearer so that women are protected from sex discrimination where they are denied certain benefits during both ordinary maternity leave and additional maternity leave, such as being consulted about changes caused by reorganisations or receiving an appraisal or being paid certain types of bonus.

CML/OML

Certain terms and conditions of employment continue as normal during compulsory maternity leave (the first two weeks after childbirth ("CML")) and ordinary maternity leave (broadly, the further 24 weeks leave ("OML")). Examples of these terms are the statutory period of continuous employment and seniority-related benefits. However it has always been the case that remuneration during OML (that is, salary and other payments related to the employee's performance such as bonuses, profit-related pay and commissions) will not continue as normal. In these circumstances, the employee is entitled to the pro rata amount relating to the performance of that employee while at work. Conversely, for payments given equally to a group of employees (of which the employee on OML is a member) and which are not related to individual performance or are not work related, the bonus is not treated as remuneration and should be paid in full to the employee on OML.

During additional maternity leave (the 26 weeks leave following OML ("AML")), unless the employment contract states otherwise, most of the terms and conditions of employment are "suspended" other than terms relating to termination, redundancy and disciplinary and grievance procedures. On this basis, as all other terms are suspended, time on AML was not included for length of service related benefits nor remuneration. This approach reflects the wording of the Regulations. The High Court has now specifically ruled that such an approach could not be permitted under the Regulations if the Regulations had implemented the ETAD correctly, and so service on AML should be included. If the Regulations are changed as a result of the ruling, periods on AML must be included for length of service benefits. For example, this will affect an employer that has a pay scale which increases based on the duration of the employee's service, or an employer that provides job titles dependant on length of service (such as "analyst," "director" or "managing director"). In essence, the High Court has ruled the current UK law is incorrect as previously it was thought that you can differentiate between a woman on AML and an employee who is not.

With regard to bonuses, if the Regulations are changed, the same principles regarding bonuses during OML will apply to employees on AML (as set out above).

  • The definition of "harassment". The EOC submitted that the wording in the Regulations does not offer sufficient protection against sexual harassment as it requires that harassment must be unwanted conduct which is on the ground of a woman's sex, whereas the ETAD defines harassment as unwanted conduct related to the sex of a person. Therefore, the definition of "harassment" used in the Regulations is too narrow as the ETAD requires a wider definition of harassment to ensure that "women in the workplace are not subjected to any unwanted conduct related to their sex which violates their dignity or creates an intimidating, hostile, degrading, humiliating or offensive environment" — an example of this is where a woman solicitor is harassed by clients or a hotel worker is harassed by a guest (in both cases where the employer knew or ought to have known about the harassment).
  • Vicarious liability. The High Court stated that an employer is liable for harassment, if it knows of continuing and/or regular objectionable conduct but fails to take any steps to prevent it. An example of this would be where a bartender is continuously being harassed by members of the public and the employer does not take steps to eliminate the harassment.
  • Special protection. The High Court confirmed that women occupy a special position during pregnancy and maternity leave and so have special protection. This means that there should not be a requirement for a pregnant employee claiming pregnancy discrimination to rely on a non-pregnant female comparator.

Next Steps

Women's rights during maternity leave are unclear and the High Court has ordered the Government to recast the legislation. In our experience, confusion for employers tends to arise in two areas: (i) length of service-related benefits and (ii) payment of bonuses. If the Regulations are changed to be in line with the High Court's decision, the period spent on both OML and AML and must also be included when looking at service related benefits — previously it was thought that only OML must be included. With regards to bonuses during both OML and AML, the employee is entitled to the pro rata amount relating to the performance of that employee while at work. However, for payments given equally to a group of employees (of which the employee on OML/AML is a member) and which is not related to individual performance or is not work related, the bonus should be paid in full regardless of the employee being on OML or AML. It was previously thought that an employer can distinguish between an employee on AML and those that are not.

The High Court makes it clear that an employer can be liable for harassment against a woman when the perpetrator is a client, customer or even a member of the public. The main industries that are thought to be affected are the hospitality and healthcare sectors. Nevertheless, while harassment can almost be seen as an "occupational hazard" in some environments (such as in A&E departments, bars), an employer should take action to try and reduce the exposure of its employees to this form of harassment, otherwise it could be vicariously liable for the harassment.

The risk of workplace harassment (using the wider definition) should be assessed and policies should be put in place to deal with such scenarios and employers should ensure that its employees know how they should react to these situations.

It could be possible that some employees will now try to bring claims against their employers on the back of this decision, although any claims are unlikely to be heard until (and if) the Regulations are amended.

It is understood that the Department of Trade and Industry will not appeal the decision and will now, through consultation with the EOC, take steps to change the law. In a press release on Monday, March 19, the government promised to change sex discrimination law "as soon as is reasonably practicable." This will no doubt include changes to the Regulations and we will keep you updated.