Fines, convictions and reputational damage await businesses that fail to comply with gender pay gap reporting rules

Out-Law News | 21 Dec 2017 | 9:57 am | 3 min. read

Businesses that fail to publish any or accurate data on the gender pay gap at their organisation face potentially unlimited fines as well as criminal convictions, the Equality and Human Rights Commission (EHRC) has said.

The EHRC has opened a consultation on its proposed enforcement strategy (16-page / 460KB PDF) for dealing with non-compliance with the gender pay gap regulations in place in Great Britain. In it, it said it would initially focus its attention in enforcement against organisations that "do not publish the information required", but would also check the accuracy of the data that is published in other cases if it has the capacity to do so.

Susannah Donaldson, a gender pay gap reporting expert at Pinsent Masons, the law firm behind Out-Law.com, said that in addition to unlimited fines and convictions, businesses that fail to comply with the regulations face the prospect of significant reputational damage.

All private and voluntary sector employers with 250 or more employees will be required to report on their gender pay gap information as at 5 April 2017 by 4 April 2018.

Employers subject to the gender pay gap reporting regulations are required to publish their overall mean and median pay gaps based on gross hourly pay for men and women, expressed as a percentage; as well as their mean and median gender bonus gaps. They are also required to publish the proportion of male and female employees within each quartile of their pay distribution, ordered from lowest to highest pay, as well as the proportion of both men and women that have been paid a bonus in the preceding 12 month period.

This information must be published on the employer's own website, as well as via a government portal. Similar requirements came into force for public sector employers on 31 March 2017.

According to its proposed new enforcement strategy, the EHRC would in the first instance engage informally with organisations that it suspects have breached their reporting requirements and give those organisations a chance to move towards compliance.

However, the EHRC said that if "informal resolution" does not work, it could open formal investigations into the "suspected unlawful act". It has outlined the procedures it would follow, and timescales that would apply, in such cases in its draft strategy.

The EHRC said that it will be open to it to reach agreements with organisations that are subject to investigation to bring an end to those investigations. In such circumstances, the EHRC said it would "monitor for compliance within the agreed timescales for both reporting years" and that businesses found to be compliant would face no further enforcement action. However, the EHRC would retain powers to seek a court order to compel compliance by businesses if they breach the terms of the agreement reached.

In cases subject to investigation where an agreement cannot be reached, the EHRC will be able to issue unlawful act notices against businesses found to be in breach of their gender pay gap reporting duties. The EHRC said that notice would compel employers to "prepare a draft action plan … within a specified time, setting out how they will remedy their continuing breach of the [regulations] and prevent future breaches".

The regulator would have the power to go to court to require the employers to produce an action plan if they fail to do so in response to the unlawful act notice served on them, and it would also be able to apply for a court order to compel compliance with action plans that have been created.

Failure to comply with the orders could result in unlimited fines and convictions, it said.

The EHRC also said that it would publish "the number of compliant and non-compliant employers on social media before and just after the compliance date".

The regulator said its "staged approach" to enforcement would involve industry-by-industry scrutiny of compliance.

"We will divide non-compliant employers by industry and contact a tranche of randomly selected non-compliant employers within each industry," the EHRC said. "We will determine the number of employers selected for each tranche based on the number of non-compliant employers overall and the scale of non-compliance in each industry."

Donaldson said that some employers may have mistakenly thought that the gender pay gap regulations were "effectively toothless" since the rules themselves "contain little detail on the consequences of non-compliance". However, the EHRC's proposals "show that presumption is misplaced".

"The EHRC’s enforcement strategy serves as a warning shot to those unwitting employers, with the EHRC emphasising its commitment to acting as a fair but firm regulator," Donaldson said. "Its seeming readiness to use its enforcement powers and to resort to 'naming and shaming' means the potential for reputational damage is considerable."

"As at today’s date only 441 employers across Great Britain have published their gender pay gap data so this development will serve as a wake-up call to many," she said.

The EHRC's consultation is open until 2 February.

Rebecca Hilsenrath, chief executive of the EHRC, said: "Over 40 years since the ban on sex discrimination in pay, it is shameful that women continue to be held back. But change is on the horizon and it’s about time. The law now says employers must be transparent about pay for women, and our regulatory role is to make sure this happens."

"We will educate employers about their responsibilities and hope to see widespread compliance. If that doesn’t happen, we won’t hesitate to resort to our more stringent legal powers - including enforcing unlimited fines and convictions," she said.