On 19 December 2017 the Equality and Human Rights Commission (EHRC) published its draft strategy for enforcing the gender pay reporting requirements.
The Gender Pay Regulations require employers with 250 employees to publish certain pay data by 4 April 2018, with public sector employers required to publish theirs by 30 March 2018. To date, only around 470 employers have published their data, although 9000 are estimated to be in scope. This naturally leads to the questions:
(i) do I need to bother?
(ii) what will happen if I don't?
EHRC draft strategy
In its draft strategy, the EHRC has confirmed that it intends to engage cooperatively and informally with employers who are in breach, but would use its wider enforcement powers to ensure compliance. These include conducting investigations, issuing unlawful act notices, and entering into written agreements with employers who are in breach in return for suspending other enforcement action. It now seeks the public's views on the draft strategy by 2 February 2018.
What are the sanctions for breach?
Since the EHRC published this consultation, there has been some media speculation about whether the EHRC is lawfully entitled to use its enforcement powers to enforce a breach of the gender pay reporting requirements. In short, the Regulations do not provide specifically for any penalties for non-compliance. Instead, they include a statement in the Explanatory Note providing that a failure to comply with an obligation imposed by the Regulations constitutes an "unlawful act" under the Equality Act.
What other repercussions are there?
Although this statement is probably technically incorrect (since failing to comply with the Gender Pay Regulations is unlikely to be an unlawful act under the Equality Act), there are a number of important reasons why employers should take their reporting obligations seriously–
- Reputation: by requiring that the information is published on the government website, the government is allowing the public to check whether a prospective employer has complied with their reporting obligations. The risk of negative publicity and of losing valuable female talent to competitors, are not inconsequential remedies. There is also the distinct possibility that the government could, at some future date, decide to pursue a "naming and shaming" policy by publicising the identity of employers known not to have complied with the Regulations.
- Change in the law: whether or not the EHRC does have the powers it suggests, the Explanatory Note and the EHRC's draft proposals are clear indications of the government's wish to enforce breaches of the Regulations should informal persuasion techniques fail. The government can easily legislate for this if it wants to since the Equality Act already gives it power to make regulations in the future providing for further enforcement, whether by a fine or by some other means. Indeed, it is clear that the government intends to use the website to closely monitor levels of compliance and then review whether further regulations and sanctions will be necessary in the future. The government must also review the effectiveness of the Regulations within 5 years of commencement.
- Risk of investigation: the EHRC always has power to initiate a formal investigation if it suspects a breach of the Equality Act such as unlawful sex discrimination or failure to pay men and women equal pay. By failing to comply with the Regulations, the EHRC may have reason to suspect that such as breach has occurred and so embark on an investigation. No employer would welcome an EHRC investigation which, not only is time consuming but could also have reputational implications including creating difficulties if ever the business is sold or refinanced in the future. Failure to comply with such an investigation is an offence and could lead to an unlimited fine.
To conclude, it has been clear for some time that the government decided not to introduce a civil enforcement system at the outset but rather to rely on the public being able to access the gender pay data through the official government website. Although this has been enough to encourage only 5% of the 9000 companies caught by the Regulations to publish their data, there are another 3 months to go before the deadline so it remains to be seen whether there will be a substantial increase in the number of employers publishing their figures. But if all else fails and if insufficient companies comply, it is probably only a matter of time before the government introduces civil penalties for non-compliance.