October 24, 2014

New equal pay powers for Tribunals

Employment Tribunals now have the power to order equal pay audits for employers who have lost equal pay claims.

Equal pay audits have previously been championed by the Equality and Human Rights Commission as good practice.  However, they have not been mandatory until now – as we briefly mentioned last month in our article Four October Legislation Changes.

An Equal Pay audit is a comparison of the pay of different groups of staff who perform “equal” work.  It is supposed to help employers identify and limit the risks of potentially being  found to have committed sex discrimination in relation to pay.

If the EPA finds that there are unlawful pay inequalities, then the employer must take action.

A Tribunal does not have the power to order an EPA if:

  • The employer has already carried out a suitable EPA in the 3 years preceding the date of the Tribunal’s judgment that it breached equal pay law;
  • There is no need for an EPA in order to see whether action is required to prevent pay inequalities continuing or occurring;
  • When the Tribunal finds the employer guilty of sex discrimination in relation to pay, there is no reason to believe there may be other pay inequalities within the employer’s organisation;
  • The Tribunal believes that the disadvantages of an EPA would outweigh the benefits.

An EPA must include the following:

  • Relevant gender pay information related to the employees that the Tribunal has specified;
  • Any differences in pay between men and women and the reasons for any discrepancies;
  • The reasons for any potential pay inequalities identified by the audit and
  • The employer’s plan to avoid breaches occurring or continuing.

The audit must then be sent to the Tribunal within the timeframe stipulated  and the Tribunal then decides whether or not the audit is compliant.  If it is, then the employer must publish the results of the audit on its website for a period of at least 3 years (unless they can show that in so doing, there would be a breach of a legal obligation).

Where an employer fails to comply with an EPA order, and has no reasonable excuse, the Tribunal can order it to pay a penalty not exceeding £5,000.  In reaching its decision as to penalty, the Tribunal must take into account the employer’s ability to pay.

The fine can be imposed repeatedly if the employer continues to fail to comply with an EPA order.

It remains to be seen how the Tribunal will assess whether or not the disadvantages of an EPA outweigh the advantages, therefore it is not yet clear whether employers will deal with this when they enter the ET3 defence to the Tribunal or later on, during the hearing itself, if the claim gets that far.

Sometimes pay inequalities arise accidentally and not because of any conscious steps by the employer.  Organisations may choose to conduct voluntary EPAs in order to avoid liabilities which may arise out of inadvertent discrimination.

If an EPA is conducted voluntarily and there are no pay inequalities found, then the likelihood of an EPA order being made by the Tribunal is greatly reduced.

There are certain exemptions for micro businesses and new businesses.

Need further guidance? Contact us

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