Sex discrimination: Going beyond the rhetoric

Employers should regularly review whether disparate outcomes occur at various stages of the HR process which may be due to employees’ or candidates’ protected characteristics.

Notions of tackling sex discrimination and narrowing the gender pay gap have become embedded in company rhetoric but a number of employers have recently been called out for merely paying lip service to these important issues. For example, Channel 4 has been widely criticised for its use of secrecy clauses in settlement agreements with female employees who had alleged pay discrimination and harassment. Also, on International Women’s Day on 8 March, a Twitter bot responded to companies’ tweets about their equality initiatives by pointing out the size of their gender pay gap.

Failing to address pay inequality and discrimination properly will be costly in terms of reputational damage, which may demoralise and destabilise the existing workforce and make it harder to recruit new talent. Valuable management time will be lost dealing with litigation and there is the risk of high compensatory awards. The employment tribunal may also order a time-consuming equal pay audit, with the report to be made publicly available, as seen in the recent case of Macken v BNP Paribas London Branch [2019].

Macken

Stacey Macken made headlines after BNP Paribas (BNP) was ordered to pay her more than £2.08m in compensation. She accepted an employment offer as global prime services product manager at BNP on an annual salary of £120,000. Shortly after she commenced employment in 2013, BNP hired a man to do a similar role on an annual salary of £160,000. Records of the recruitment process were light – BNP asked no set questions, kept no answers to questions and conducted no scoring against objective criteria. Ms Macken and her comparator were never told that there was any difference in seniority between their roles.

Despite both employees receiving the same performance grading in their first year of employment, Ms Macken’s bonus (of £3,822) was less than half the bonus paid to her comparator. In years two to four, she received a lower performance rating than her comparator and was given a £10,000 bonus each year, while the comparator was awarded £40,000, £50,000 and nearly £70,000 over the same period.

Ms Macken raised concerns about pay inequalities in a grievance and appeal, which BNP dismissed without a full investigation. Her manager subsequently unfairly marked her down in performance appraisals, which restricted her bonus awards to £10,000.

BNP increased Ms Macken’s pay to £125,000 in 2015. An email from her manager described the increase as:

… a great indication of our attitude to equality.

However, her comparator’s pay remained almost £3,000 per month more than hers.

Ms Macken was subjected to a number of incidents amounting to sex discrimination, including:

• her manager telling her ‘not now, Stacey’ whenever she asked a question, a phrase that colleagues copied;
• her manager asking ‘if this is the right bank for you’;
• drunken male colleagues leaving a witch’s hat on her desk; and
• a colleague telling her a story about someone who had engaged in prostitution role play with his wife.

Tribunal decision

The employment tribunal upheld Ms Macken’s claims for direct sex discrimination, victimisation and equal pay in 2019. However, the remedy judgment was only published in February 2022.

On equal pay, the tribunal rejected BNP’s argument that Ms Macken was junior and her comparator was senior. Rather, both employees shared the same job title and job description, their manager had a high degree of discretion over setting starting salaries and there was no objective justification for the differences between their salaries. The bank’s record-keeping of the recruitment process was ‘woefully inadequate’ and the tribunal used this to draw inferences of discrimination.

BNP unsuccessfully tried to rely on the material factor defence on the basis that the male comparator’s former employer had paid him a higher salary than Ms Macken and she had only asked for £120,000 initially. The tribunal held that the main reason for the difference in salary levels was that Ms Macken was seen as junior because of her gender.

The witch’s hat, objectionable storytelling and ‘not now, Stacey’ incidents were out of time as standalone claims but were relevant to the drawing of inferences of sex discrimination in the working environment. The bank was unable to establish that Ms Macken’s less favourable treatment (in respect of her pay, performance review and bonus) was not because of her sex. The bank’s hostile treatment of her (including its inadequate treatment of her grievance and appeal) following her concerns about equal pay and discrimination amounted to victimisation.

Ms Macken’s compensation included an equal pay award of more than £400,000 relating to salary, bonus and pension contributions by reference to the male comparator. The tribunal also awarded £860,000 for loss of future earnings until retirement, £212,000 for personal injury and £124,000 in additional compensation, including injury to feelings and aggravated damages. It awarded the maximum 25% uplift (of £317,000) to Ms Macken’s compensation to reflect the bank’s failure to follow the Acas Code on Disciplinary and Grievance Procedures.

Pursuant to the Equality Act 2010 (Equal Pay Audits) Regulations, the tribunal ordered BNP to conduct an equal pay audit and publish a report by 30 June 2022. It noted that the bank had not undertaken such an audit in the three years before Ms Macken commenced employment.

While the tribunal considered that the bank should provide a full apology to Ms Macken (it had made a public statement but not accepted any liability), it noted that an effective apology:

… needs to be genuine and heartfelt rather than ordered.

The failure to apologise was therefore reflected in the £35,000 award of aggravated damages.

Practical tips for employers

In light of this case, we have identified some key tips to help employers avoid discrimination and equal pay claims.

Hold equality and diversity training

Regular, effective equality and diversity training is a vital part of any organisation’s effort to avoid harassment and discrimination in the workplace. It is important for staff at all levels to understand what types of behaviour fall foul of discrimination law, how each person can help prevent discrimination, the damage that can be caused if discrimination takes place and how to report concerns about discrimination.

Section 109(4) of the Equality Act 2010 enables an employer to avoid liability for discrimination perpetrated by its employees if it can show that it took all ‘reasonable steps’ to prevent those acts or types of acts occurring. Suitable training is a key part of the ‘reasonable steps’ defence, although the Employment Appeal Tribunal in Allay (UK) Ltd v Gehlen [2021] noted that an employer cannot rely on any training that has become ‘stale’.

Comprehensive equality and diversity training should be given to all staff involved in decisions about recruitment, performance reviews, promotions, pay rises, bonus awards and the disciplinary and grievance processes. All new joiners should also receive training as part of the induction process. Staff should receive suitable refresher training every one to two years and training records should be retained.

Monitor underrepresentation and differences in pay

Employers should regularly review whether disparate outcomes occur at various stages of the HR process which may be due to employees’ or candidates’ protected characteristics. If there is a difference in treatment, it is important to investigate and understand why this may have occurred.

Employers must take steps to remedy any deficiencies. For example, if they discover that, compared with men, fewer women receive promotions or their bonuses are lower on average, it may be appropriate to include a woman on the panel which determines promotions and assess bonuses. If an employer is receiving proportionately fewer job applications from certain ethnic minority groups, it should try to establish why this is and how it can increase their representation.

Encourage employees to speak up

Employers should create a healthy, supportive environment in which team members feel free to share their ideas, opinions and concerns, provide feedback and ask questions, without fear of retaliation. Employees should be able to report any wrongdoing without fear of victimisation and feel that their concerns will be taken seriously. An open culture will help the employer to identify and remedy potential problems before they lead to discrimination claims.

Put equality policies in place

Employers should have written policies that support equal opportunities, explain to staff how to act to avoid harassment and discrimination and give job applicants and workers confidence that they will be treated fairly and with respect.

More than just a statement of good intentions, these policies should be embedded in the organisation and discussed during equality and diversity training. The employer should regularly monitor and measure their effectiveness, including whether they are adhered to consistently throughout the organisation and whether they achieve the desired outcome.

We recommend updating policies regularly to ensure best practice and compliance with the law. The employer can adapt its policies to deal with any issues or concerns which it has identified.

Keep records

Employers should keep written records of how managers reached key decisions, for example on pay and promotions. This should instil discipline in decision-makers to act fairly, objectively and consistently. These records can also help explain to an employment tribunal, if necessary, why it was legitimate to take a particular decision even though it disadvantaged a particular employee or group of employees.

Job interviewers should keep records, to be retained by HR, of the questions they asked, candidates’ responses, the marks awarded, discussions with other interviewers and the decisions reached.

When deciding discretionary bonuses, managers should record why they made each award. If there is a fair and objective reason why two apparently similarly performing employees received materially different bonuses, this should be apparent from the written records.

In Macken, if the bank had kept better records, it might have been able to explain more convincingly why Ms Macken’s salary and bonus were lower than her male comparator’s.

Deal effectively with grievances

If an employee complains about discrimination or harassment, this should be taken seriously and investigated promptly and thoroughly. Grievance procedures give the employer the opportunity to remedy the situation where appropriate, without it leading to litigation.

An employee who raises a grievance in good faith, regardless of whether it is upheld, is protected from any detrimental action. Employers should be mindful that if they subsequently place a complainant on a performance improvement plan, put them at risk of redundancy or give them a lower bonus or salary increase than expected, this could give rise to a victimisation claim.

Stop asking about salary history

On International Women’s Day 2022, the women’s minister, Baroness Stedman-Scott, launched a pay transparency pilot scheme. Participating employers will list salary details on job adverts and refrain from requesting salary history details during the recruitment process. According to the Fawcett Society, which has been running an End Salary History campaign, asking about job applicants’ current or past pay causes past pay discrimination to follow women, disabled people and people of colour throughout their career.

The government recognises that not all employers have agreed pay scales and there is a lack of transparency about some pay policies and historic pay decisions. To change this and help narrow the gender pay gap, the government intends to assist the employers taking part in the pilot scheme to develop pay methodologies which other employers in similar sectors can then adopt.

Employers may wish to sign the Fawcett Society’s pledge to send a clear signal to current and prospective employees that they are serious about equal pay.

NDAs and confidentiality obligations in settlement agreements

Many cases involving issues similar to those raised in Macken settle by way of a confidential settlement agreement before they reach the tribunal stage. However, including post-termination confidentiality obligations in settlement agreements or using non-disclosure agreements (NDAs) when settling harassment, discrimination or equal pay claims is controversial given the negative press NDAs continue to receive.

NDAs are under increased scrutiny because, as high-profile cases which have emerged in the wake of the Time’s Up and #MeToo movements have shown, they deter victims of harassment and discrimination from speaking out. Channel 4 recently faced widespread criticism for its use of gagging clauses in settlement agreements with female employees who had alleged pay discrimination, harassment and bullying. The irony of a broadcaster which reports on these issues and is a proponent of free speech seeking to prevent its own employees from speaking openly about discrimination was not lost on commentators.

Maria Miller MP and the charity Pregnant Then Screwed are campaigning for the use of NDAs to be dealt with in the upcoming Employment Bill. According to Pregnant Then Screwed, about 90% of women it surveyed who signed NDAs felt they had no choice but to do so. Apart from the ethical issues this raises, Acas makes clear in its guidance on NDAs that putting an employee under pressure to sign a confidentiality agreement may result in it being invalid. This will allow the individual to disclose the contents of the agreement.

Tips for using confidentiality provisions

In some cases, the use of confidentiality provisions, especially on top of discriminatory treatment, can adversely affect the employee’s mental health. In-house counsel, HR and line managers should bear this in mind when communicating with employees about an NDA.

Confidentiality should never be traded for a guaranteed reference, and an individual who has signed an NDA should not be prevented from receiving a copy of the agreement (as happened in the case of Harvey Weinstein’s PA, Zelda Perkins).

It is also important to be aware that settlement agreements cannot validly prevent employees from:

• making a protected disclosure; assisting a regulator;
• complying with legal obligations; or reporting criminal activities to the police.

The confidentiality agreement should state that it does not stop the employee from taking any of these steps.

Entities regulated by the Financial Conduct Authority must make clear in their settlement agreements that nothing prevents the employee from making a protected disclosure. Also, the agreement or NDA must not require the employee to disclose to the firm if they have made a protected disclosure or to warrant that they know of no information which could form the basis of a protected disclosure.

Where confidentiality clauses are unenforceable

The Acas guidance on NDAs provides that confidentiality clauses are unenforceable when they attempt to hide something that cannot legally be kept confidential. NDAs may be inappropriate or even unlawful where:

• an issue affects a number of workers and the NDA could have a wider impact due to a lack of transparency about that issue;
• they are used as a matter of routine, leading to a culture which lacks openness; or the employer is trying to hide an issue instead of addressing underlying problems.

The guidance says employers should not use confidentiality clauses to cover up inappropriate behaviour or wrongdoing, particularly where there is a risk of repetition of such behaviour. Nor should they try to stop the reporting of discrimination or harassment.

Avoiding overuse of NDAs

Rather than an employer’s starting point being to include an NDA in a settlement agreement automatically, it is good practice to consider whether a confidentiality provision is actually required in that specific case. There is a growing awareness that open disclosure of sexual harassment and discrimination issues and taking a zero-tolerance approach when problems arise is ultimately better for employers’ reputation and employee relations.

Reference point
Non-disclosure agreements guidance, Acas (February 2020)

Cases Referenced
Allay (UK) Ltd v Gehlen [2021] UKEAT/0031/20/AT
Macken v BNP Paribas London Branch [2019] ET 2208142/2017 and 2205586/2018

Citation reference:
Michelle Chance, Mark Rose and Alfie Bright, ‘Sex discrimination: Going beyond the rhetoric’, (April 2022 #229) Employment Law Journal, https://www.lawjournals.co.uk/2022/03/24/employment-law-journal/sex-discrimination-going-beyond/, PDF accessed on 24 March 2022

(This opinion piece first appeared in the latest edition of the Employment Law Journal.)

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