ET order that bank conducts equal pay audit 'a red flag', warns lawyer

Out-Law News | 26 May 2022 | 8:31 am |

Susi Donaldson tells HRNews about the implications of the employment tribunal decision in Macken v BNP Paribas
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  • Transcript

    Back in February the London Central Employment Tribunal handed down its ruling in the case of Stacey Macken and BNP Paribas – a case that was widely covered by the press at the time. Stacey Macken brought various claims against the bank, including one for equal pay, arguing she’d been paid less than her male comparator on the grounds of sex. The case is important for a number of reasons but one in particular didn’t get the attention it deserved in our view, hence why we’re returning to it now.

    The first striking feature of the case, which grabbed all the headlines, is the size of the award - £2m which ranks among the highest ordered by a tribunal in a UK equal pay case. Second is the very damaging PR this case brought on the bank which certainly suffered a lot of reputational damage as a result of this case. Third is the scathing criticism by the employment judge, Emma Burns, of the bank’s “opaque pay system”. It resulted in an order that the bank conduct an equal pay audit, the first time that has happened in the UK. It is that point we’ll focus on shortly.

    The case was reported by the national press, including the Guardian and Daily Mail. They describe a culture of harassment at the bank and how City banker Stacey Macken had a witch’s hat left on her desk by drunken male colleagues. She was also regularly belittled by her boss who would say ‘not now, Stacey’ whenever she tried to speak to him - a phrase he used so often that colleagues even copied it. At the time Macken was earning £120k-a-year as a finance specialist and she claimed that over a four-year period she received hundreds of thousands of pounds less than her male peers in salary and bonuses and that after she complained, managers targeted her with unfair treatment.

    While much of the commentary on the judgment has focused on the total compensation that the tribunal awarded Stacey Macken – over £2m – the striking thing about this case is the fact the tribunal ordered the bank to conduct a detailed equal pay audit - a huge undertaking – and that it be published by June 2022. That was ordered notwithstanding the fact the bank had already recognised its failings, changed its pay practices, and addressed its culture by instituting a remediation programme.

    So, let’s get some reaction to this case and understand what it means for employers. Susi Donaldson has been looking at the judgment and joined me by phone from Glasgow to discuss it. I started by asking her about that order by the tribunal that the bank conduct an equal pay audit:

    Susi Donaldson: “It’s the first time that an employment tribunal has ever made this order and I think what it has really brought home to us is the fact that it's not discretionary. They must order it where there have been breaches of equal pay law unless the case falls within one of several exemptions.”

    Joe Glavina: “Tell me about the audit that the bank has to carry out, Susi.”

    Susi Donaldson: “So, the audit itself is very detailed. It has to contain, in this case anyway, it had to contain gender information for all employees who had been employed by the bank over a 12-month period and that gender pay information covered all forms of remuneration, including basic pay, pensions, allowances, and discretionary bonuses. The audit also needs to identify any differences in pay and do a sophisticated analysis whereby they explain their approach to equal value, as well as the reasons for any pay disparities which are identified, so it's a very involved and onerous exercise for employers to have to undertake. In this case BNP Paribas only had six months in which to undertake this entire audit. I think that the final sting in the tail is that even once the audit has been done, that's not the end of the matter, it doesn't end there. It needs to be submitted to the tribunal who will determine whether it complies with the order and, if it doesn't, the tribunal can order them to amend it. Then once the audit is deemed to be compliant, the bank then needs to publish it on its own website and leave it there for at least three years, as well as informing everyone whose gender pay information has been included in the audit, where they can obtain a copy, and that will include both current and former staff. There is scope to redact the information, so if the publication could result in a breach of a legal obligation, then there's an option for the bank to redact it or, potentially, not to publish it at all, but it would need to explain its position to the tribunal and give good reasons for publishing a redacted version. So, you know, there's a possibility that the tribunal could force the publication of the of the equal pay audit.”

    Joe Glavina: “This sounds like a complete nightmare for the bank. Reading the judgment it’s clear the bank has been far from transparent and that has landed them in this hot water. So is the message to employers out there – be open and transparent or you may pay a heavy price?”

    Susi Donaldson: “Yes, absolutely, and one of the exemptions that the bank tried to rely upon to avoid having to undertake this equal pay audit was that it wasn't necessary, they'd already conducted an equal pay audit, but the tribunal said that well, actually, despite that, they retained a very opaque pay system, albeit there had been the introduction of some increased transparency around the job hierarchies and there was very little information available about internal equal pay reviews, the comparative process undertaken, the approach that they’d taken to material factor defences, and also their internal review hadn’t extended to bonuses. So, I think this highlights to employers that if you are going to undertake an equal pay audit it is very important to get specialist advice to make sure it will tick all the necessary boxes.”

    Joe Glavina: “Final question, Susi. How big a deal is conducting an equal pay audit? Is it necessarily a massive piece of work?”

    Susi Donaldson: “Yes, I mean, depending on the complexity of the employer’s pay structure, it can be a very complex exercise particularly if there's no sort of consistent grading structure in place which would enable you to assimilate jobs which are of equal value, that's when it can become very, very complicated. But yes, a comparative analysis needs to be undertaken to identify areas where pay disparities can be found and then, once those pay disparities have been identified, a further analysis needs to be undertaken normally involving discussions with HR and line managers who understand what these employers do day-to-day to ascertain whether there are any material factor defences which might justify the pay disparity. So, it's a very, very involved and time-consuming process but the benefit of getting us involved at the early stage is that it can be done illegally privileged basis.”

    Just picking up on that last point. The great advantage of the audit being legally privileged is you retain some control and can address any issues without having everything brought out in the open – precisely the opposite of what happened to BNP Paribas in this case. The judgment in that case does make for interesting reading with plenty of lessons about the importance of pay transparency and a good culture. It’s a decision of the London Central Employment Tribunal called Stacey Macken v BNP Paribas London Branch. We’ve put a link to that judgement in the transcript of this programme.

    LINK

    - Link to judgment: Stacey Macken v BNP Paribas London Branch