UK government confirms scope of employment tribunals' new power to order an equal pay audit

Out-Law News | 25 Jun 2014 | 12:17 pm | 3 min. read

Firms that are ordered to carry out an equal pay audit by an employment tribunal will be required to publish the results "in a format accessible to all affected staff", the UK government has confirmed.

From October, employment tribunals will have the power to order companies that lose sex discrimination cases to carry out equal pay audits. Responding to its consultation on the content of these audits and how compliance would be enforced, the government said that it would generally be up to employers to decide how to provide this information to staff without inadvertently making "commercially sensitive data" available to competitors or the public.

"The government believes that it is important for employers to increase transparency in their pay systems and structures because this will encourage scrutiny and, where necessary, challenge to their pay policies," it said in its response. "Employers who have been ordered to publish the results of an equal pay audit, but have concerns about breaching any legal obligations relating to the disclosure of information will need to ensure that information is presented in such a way as to avoid any such breach."

"Therefore, the government has decided to make the publication of the results of an equal pay audit a requirement for employers that have been ordered to undertake an equal pay audit following an equal pay breach. The audit results will be required to be published in a format accessible to all affected staff," it said.

Firms would be able to avoid the publication requirements in cases where "there would be no means of avoiding a breach of a legal obligation" if the audit was to be published. However, it said that this would "only rarely be the case".

"The regulations will make clear that an employer who considers that they are unable to publish the results of an audit, in whole or in part, because of a breach of a legal obligation must provide the tribunal with reasons for non-publication which the tribunal could then accept or reject," it said.

Employees can bring an equal pay claim against their employer under UK employment laws where they can show that they are being paid less than members of the opposite sex for performing work of equal value. Employers have to be able to objectively justify any differential in pay between men and women. Secondary legislation, due to be introduced under the Enterprise and Regulatory Reform Act, will give employment tribunals the power to order businesses to undertake an equal pay audit if they are found to have breached equal pay laws. Businesses that are ordered to do so could be fined up to £5,000 by an employment tribunal if they fail to adhere to the requirements under the new regime, according to previous government announcements.

In its response to last year's consultation, the government confirmed its intention to set "minimum standards" for equal pay audits in regulations, which would come into effect on 1 October. Employment tribunals would have the discretion to decide on other aspects of the audit, such as coverage and timescale for completion, on a case by case basis based on the evidence presented at the hearing, it said. The majority of consultation respondents agreed with this approach, as it would give tribunals the necessary flexibility to deal with companies of different sizes while still allowing employers to know what will be expected of them if they are required to carry out an audit, according to the response.

The government has decided against publishing additional guidance on what would be required of companies when carrying out equal pay audits as the Equality and Human Rights Commission (EHRC) already has guidance on these audits, as well as additional guidance on gender-neutral job evaluation schemes, available. However, it said that it would consider "engaging businesses and employer groups" to discuss and explain the intended effect of the new regime before it comes into force.

Employment tribunal judges, rather than independent auditors, will be responsible for signing off equal pay audits, the government said in its consultation response. Although some respondents said that employment tribunal judges could lack impartiality, the government said that they were "best placed" to do so.

"This is because an employment tribunal would order an equal pay audit to be carried out based on the evidence presented during the course of hearing the equal pay claim," the government said in its response. "The use of independent auditors in this process in the manner suggested could result in employment tribunals effectively delegating their adjudicatory role to a third party."

"The regulations will therefore set out the powers and duties of employment tribunals in determining compliance with an order to carry out an equal pay audit, including where the audit is not submitted by the date specified in the order and where the submitted audit does not comply with the requirements set out in the order. They will also set out the next steps once a respondent has been found to have failed to comply with an order to carry out an equal pay audit, including the power to impose financial penalties for non-compliance," it said.