Equal Pay Update

Over the past month equal pay has been back in the news. The combination of the release of the British film “Made in Dagenham”, the Equality and Human Rights Commission’s triennial report and the introduction of The Equality Act 2010 have all had the effect of pushing equal pay back up the agenda.

Equality and Human Rights Commission

The Equality and Human Rights Commission is now required by law to report to the Government every three years.

The 2010 Report entitled “How Fair is Britain?” is the first report of its kind and reveals some very interesting equal pay statistics:
− Women now do better than men in every aspect of educational qualification. Despite this, there is still a substantial pay gap.
− On average, women earn 16% less than men; and women aged 40 earn, on average 27% less than men of the same age.
− Women with degrees face a 4% loss in lifetime earnings as a result of motherhood, while mothers with no qualifications face a 58% loss.
− Disabled women experience a 31% pay penalty compared to non-disabled men.

The Equality Act 2010

The Equality Act repeals the Equal Pay Act 1970. However, in practice, nothing really changes very much as the majority of the Equal Pay Act is included within the Equality Act 2010, which also codifies some of the existing case law. The changes are detailed below:

Pay Secrecy

The Act makes pay secrecy clauses in employment contracts unenforceable, to the extent that they prevent employees from making relevant pay disclosures. This means that there is no outright ban on pay secrecy and the clauses can still be used but may not be enforceable if their purpose is to cover up pay disparities. The aim of this new provision is to enable employees to be transparent about their pay, which should, in turn, assist with identifying unlawful pay disparities.

Material Factor Defence

Where there are statistics showing that a difference in pay between two groups disadvantages women more than men, the employer may show that this has a non-sex based explanation. In practice, this means that an employer can pay a man more for doing equal work if it can prove that the difference is due to a factor that is not sex.

Under the Equal Pay Act this had to be a “genuine material factor”. The Equality Act tightens up this material factor defence by codifying some of the existing case law. Nothing really changes but the Act does set out the circumstances where an employer must objectively justify its material factor.

Comparators

The Act also introduces the concept of a hypothetical comparator for direct sex discrimination equal pay claims. We do not expect that this will have much practical impact as it will be very difficult to prove a claim without having an actual, rather than a hypothetical, comparator.

Pay Protection

Following many cases under the NHS Agenda for Change and the Local Authority Single Status Schemes, the Equality Act 2010 confirms the case law regarding pay protection. In a nutshell, “the long-term objective of reducing inequality between men's and women's terms of work is always to be regarded as a legitimate aim". This confirms the existing case law position.

Gender Pay Reporting

The Act contains a power for the Government to demand that private employers with over 250 employees will have to report on any pay disparity between male and female workers. The Coalition Government does not like this part of the Act and it is unlikely to come into force any time soon. However, it is something to note and if you are aware of pay disparities within your organisation, then now is the time to address them.

Source Trethowans