The Equality Act 2010 – 10 things you need to know

The long awaited Equality Act 2010 received Royal Assent on 8 April 2010. The primary aim of the Act is to consolidate and harmonise the existing equality legislation. However, it will also introduce some significant new provisions.

Wragge & Co's discrimination experts discuss 10 things employers need to know about the new Act.

1) When does the Act come in to force?

Summary

The Equality Act received Royal Assent on 8 April 2010. The former Labour Government intended its main provisions to come into force in October this year. The combined discrimination provision and equality duties are not scheduled to come into force until April 2011 and the private sector gender pay reporting provision not until 2013, if at all.

However, the contents of the Act itself and these proposed deadlines will now be subject to review by the new Coalition Government. On 15 June the Government Equalties Office (GEO) removed the former administration's proposed implementation timetable from its website. The GEO spokeswoman simply states that "the GEO could not rule out that the majority of the Equality Act could now be delayed". So watch this space.

Detail

The new Government's Coalition Agreement touches only briefly on employment law. It apparently intends to maximise flexibility for employers and employees, while at the same time safeguarding fairness and providing an environment in which businesses can compete. How this will be achieved and what part the Equality Act will play is unknown at this early stage. We will have to wait and see what changes, if any, are made to the Act and the timetable for bringing it in.

The Equality and Human Rights Commission began a consultation on its new Code of Practice for Employment in January 2010 and has since announced that it aims to publish the new code by September 2010. It will clearly push on with its efforts to address inequality in the workforce regardless of the Government's approach.

Before the election the Conservatives said it would not bring in the extended positive action clauses, the Public Sector Equality Duty or provisions aimed at increasing pay transparency, we shall see!

2) Does it affect me if I'm a public body or working with one?

Summary

Yes. In addition to the employment rights within the Act which will apply to public and private sector employees alike, the Act introduces a socio-economic duty on certain public bodies.

The aim of the duty is to encourage public bodies to consider, when they are making strategic decisions, how their decisions might help to reduce the inequalities associated with socio-economic disadvantage.

An individual's route to enforcing the duty is by way of Judicial Review which is an expensive and drawn out process, not for the faint hearted.

The duty does not extend to private employers. However, those contracting with the public sector may be called upon to demonstrate that their strategic thinking falls in line with the duty in order to win work from public bodies which are bound by the Act.

Detail

What is the socio-economic duty?

The Equality Act introduces a duty on public bodies to consider, when they are making strategic decisions, how their decisions might help to reduce the inequalities associated with socio-economic disadvantage.

It is not entirely clear how this will work in practice but a public body might consider how their strategic thinking influences inequalities in health, education or the work place.

Which public bodies should comply with the duty?

The duty applies to the public bodies listed in the Act. The list can be amended by legislation but currently includes government departments, local authorities and the NHS.

The duty also applies to a public body working in partnership with a local authority to draw up their sustainable community strategy for an area, which is essentially a plan to promote or improve the economic, social and environmental well-being of their area.

How would an individual enforce this duty?

There is no remedy in private law for an individual who believes there has been a failure by a public body to comply with the duty.

An individual would have to seek Judicial Review of the public body's decision if they believe the public body has not considered socio-economic disadvantage when taking a strategic decision. However, Judicial Review is an expensive and drawn out process and may deter an individual from taking any action.

3) What impact does it have on pensions?

Summary

The Act extends non-discrimination rules to cover gender reassignment, marriage and civil partnerships and sex. In addition, existing provisions on sex equality (or equal treatment), unfair maternity practices and the ability for trustees to make "non-discrimination alterations" by resolution in certain circumstances are replicated in the Act.

Of much greater concern to employers and trustees is the revocation of Schedule 2 of the Age Regulations. This removes the existing exemptions for various age-related practices commonly used by many pension schemes. It is anticipated that these will be re-created in new regulations but no replacement has yet been published.

Detail

The Act replaces and extends various non-discrimination rules which ensure that all pension scheme rules have non-discrimination rules implied within them. Prior to the Act, non-discrimination rules relating to age, disability, religion or belief and sexual orientation were implied. Section 61 of the Act extends this to cover gender reassignment, marriage and civil partnerships and sex.

The sex equality rule (or "equal treatment rule") implied by section 62 of the Pensions Act 1995 has been replaced by section 67 of the Act, but this merely replicates the existing provisions.

Similarly, the 'unfair maternity provisions' contained in paragraph 5 of Schedule 56 to the Social Security Act 1989 (which require a woman on paid maternity leave to be treated as if she is working in respect of any rules relating to scheme membership, accrual of scheme rights and determination of benefits) have been replicated at section 75 of the Act.

The current exemptions contained in Schedule 2 of the Age Regulations make certain practices exempt from age equality law. This covers a number of common pension scheme rules (e.g. minimum and maximum ages for eligibility, waiting periods and use of age-based criteria in actuarial calculations) but the relevant exemptions are missing from the Act. It is anticipated that these will be recreated in new regulations, but, as these have yet to be published, it is unclear whether there will be any alterations.

In addition, the Government has announced that the default retirement age will be 'phased out', but this will be after consultation with businesses and interested groups.

4) Do I need to think about discrimination differently?

Summary

Not really - in general the Act is consolidating existing law.

There are a number of technical amendments and standalone provisions of which you need to be aware. The Coalition Government may well choose not to bring some of these provisions into force (see section 10).

Detail

Most of the new standalone provisions are covered elsewhere in this alert. However, key other provisions to look out for are:

• Confirmation that "associative" and "perceived" discrimination will be unlawful.
• Recast disability discrimination from the three forms familiar under the Disability Discrimination Act (DDA) (direct, disability related and failure to make reasonable adjustments, as curtailed by the House of Lords' decision in Malcolm). Instead we will have direct disability discrimination, discrimination arising from disability (which aims to restore the Pre-Malcolm position) and an entirely new concept of indirect disability discrimination.
• Tribunals will have the power to make recommendations that benefit the wider workforce, not (as currently) just the claimant. While there is no enforcement regime against an employer who has failed to implement a recommendation, subsequent claimants are sure to ask questions about recommendations and whether they have been acted upon (for example, in statutory questionnaires). The possibility of such wide recommendations may give a claim a value far exceeding the financial exposure of the particular claim.

5) What impact will this have on Equal Pay cases?

Summary

The Act largely replicates the provisions of the Equal Pay Act 1970.

• The Act appears to have reversed current case law in respect of the material factor defence, in that employers must show that the difference in pay is a proportionate means of achieving a legitimate aim, even if there is no taint of sex discrimination.
• While the Act maintains the need for actual comparators rather than hypothetical comparators in equal pay cases, it has introduced a new provision which allows an employee to rely on a hypothetical comparator in circumstances where they have no actual comparator, provided that the claim relates to direct discrimination.The Act contains a provision which aims to achieve greater transparency about pay in the workplace by protecting employees making or seeking relevant pay disclosures.
• The Act has introduced a new provision which will allow the Government to enact regulations requiring certain employers to disclose pay information to show the extent of any gender pay gap.

Detail

Overview

The Act is primarily aimed at pulling together existing case law on equal pay and largely replicates the current provisions of the Equal Pay Act 1970 (EPA). The former administration shied away from radical reform in this area, such as scrapping the different regime for equal pay and allowing it to be dealt with by the sex discrimination provisions. However, there are a few significant differences to the previous regime, some of which have attracted a lot of media coverage.

Material factor defence

Section 69 sets out in what circumstances an employer can rely on a material factor defence to defend an equal pay claim. There is a slight change of wording from the EPA. Under the EPA, the material factor must be "genuine" but that word has been removed on the basis it adds nothing but confusion, which is probably right. The employer will still need to show, as it does now, that the reason put forward for the difference in pay is the real reason, not a sham.

Section 69 appears to reverse current case law, in that objective justification for a difference in pay will now always be required, even if there is no taint of sex discrimination. That is not the position under current Court of Appeal case law.

Another change worth noting is the express provision in section 69(3) that a long-term objective of reducing inequality between men's and women's terms of work is always to be considered a legitimate aim. This is helpful to employers to a degree, particularly where they are introducing a short-term discriminatory measure (such as pay protection) to achieve greater equality in the long-run. But the public sector pay protection cases which have prompted this section really turn on whether the steps taken to achieve the aim are proportionate and section 69(3) does nothing to help with answering that question.

Hypothetical comparators

While the Government has decided to stick with the requirement for actual comparators rather than hypothetical comparators in equal pay cases, it has attempted to address the potential unfairness to claimants in section 71.

The effect of this provision is to allow a woman claiming equal pay to rely on a hypothetical comparator, where she has no actual comparator, if the claim relates to direct discrimination, e.g. where the employer says "I would pay you more if you were a man."

That may sound an unlikely scenario, but the Equality and Human Rights Commission report on the financial services sector shows that these sorts of examples are not as far-fetched as you might imagine. The report quotes one male manager saying in response to a request from a female employee to talk to him about re-grading (and presumably a consequent increase in pay), "If you show up for work in fishnets for the next month then maybe we'll talk about it". It is unlikely he would have said the same to a male peer of the woman in question.

6) Talking about the pay gap - do we have to and can we stop our employees talking about it?

Summary

The Act aims to achieve greater transparency regarding pay in the workplace. Pay secrecy clauses will be unenforceable by employers where an employee wants to make a "relevant pay disclosure". Employers who try to stop their employees from discussing pay with colleagues may face claims of victimisation, making ignoring the new legislation a risky approach.

In an effort to improve the gender pay gap in particular, the Act also includes provision for the Government to introduce regulations requiring certain employers to disclose pay information to show the extent of any gender pay gap. This provision only applies to companies in the private sector with more than 250 employees.

While there is likely to be a 'grace period' before this provision is brought into force, a wise employer could use this time to assess whether gender pay reporting would highlight a gender pay gap in its workforce, and if so, to try and rectify it.

Pay secrecy clauses

Despite all the hype during the consultation period that the Equality Act would ban pay secrecy clauses, the Act does not do this. It does, however, include a provision which aims to achieve greater transparency and dialogue about pay in the workplace by protecting employees making or seeking relevant pay disclosures. The effect of the Act is to make pay secrecy clauses unenforceable by the employer against an employee making or seeking a "relevant pay disclosure"; and it provides protection for the employees involved against victimisation by the employer for having made or sought a relevant pay disclosure.

While the main thrust of this provision is aimed at the gender pay gap, it in fact applies to all forms of protected characteristics. So, someone trying to establish whether they may be being paid differently because of their race is also entitled to the protection of this provision.

Is this provision really going to remove the veil on pay? Probably not in and of itself but it could contribute to a more open atmosphere about pay if an organisation is genuinely committed to this. In the City, there is a lot of voluntary silence about pay, particularly bonuses, as it can often suit to have an excuse for letting people think your bonus has been higher than is in fact the case.

Disclosing gender pay gap information

Gender pay gap information is dealt with at Section 78. This is a completely new provision aimed at encouraging transparency around pay. In contrast to the protection for relevant pay disclosures, this section only applies to gender discrimination. It paves the way for the Government to introduce regulations requiring certain employers to disclose pay information to show the extent of any gender pay gap.

So which employers does it apply to? There are three limitations. Firstly, the employer must have 250 or more employees. Secondly, public sector employers (as defined in schedule 19) are excluded. This is presumably because public sector employers are already caught by the equality duties and so a specific, more limited power is not necessary in the same way as for the private sector. Finally, section 78 does not apply to government departments and parts of the armed forces not specified in schedule 19.

The previous administration had indicated that it would give employers a grace period up to April 2013 before bringing in regulations under this power. It was keen to encourage employers to investigate and improve their gender pay gap voluntarily. The explanatory notes to the Equality Act state that the power will only be used if sufficient progress on reporting has not been made by 2013.

Further objections were raised by the Conservative party before the election but the Liberal Democrats stated that they would bring in mandatory pay audits for all companies with more than 100 employees.

Since gaining power, the Coalition has merely stated that it will "promote equal pay and take a range of measures to end discrimination in the workplace". So watch this space.

7) Can I ask about a person's health before I recruit them?

Summary

No, unless it is necessary to establish whether the applicant could carry out a function intrinsic to the work concerned, or the questions are necessary to one of the other four exemptions in the Act.

During the consultation period, disability rights groups lobbied the Government, claiming that the current discrimination suffered by disabled job applicants is so widespread that many are put off applying for jobs because of pre-employment health questionnaires. They called for better regulation of these questionnaires and argued that this would really improve the treatment of disabled applicants.

Under the Act there is a general prohibition on employers asking about the health of an applicant. Although technically an employer would not contravene the Act by asking questions, placing any reliance on the answers may be in contravention of the Act.

There is a carve out for employers where health questions are necessary to establish whether the applicant could carry out the job. The Act sets out certain restricted circumstances where it is permissible for the employer to ask health-related questions which are explained below.

Detail

Employers may ask pre-employment health questions if they are 'necessary' for the purpose of:

• Establishing whether the applicant will be able to comply with a requirement to undergo an assessment, or establishing whether a duty to make reasonable adjustments is, or will be imposed on the employer in relation to any such assessment
• Establishing whether the applicant will be able to carry out a function that is intrinsic to the work concerned
• Monitoring diversity
• Taking positive action
• Where having a particular disability is an occupational requirement.

Employers should give consideration as to whether the questions really need to be asked, and how they are phrased. The Act is clear that any questions may not go further than is 'necessary' but in the absence of any detailed guidance, employers need to take care in phrasing their questions to avoid complaints from job applicants.

It seems likely that questions about future, rather than past health are more likely to be acceptable as the Act only intends to allow questions focused on the applicant's future capability in doing the job.

8) What is positive action?

Summary

Positive discrimination is still not permitted but the situations where employers may take positive action have been extended to allow an employer to base selection of the successful candidate on a protected characteristic in a tie break situation.

Most commentators think the provisions are confusing and that coupled with the risk of litigation from disappointed applicants not having a protected characteristic, employers may steer clear of using this new discretion.

Pre-election, the Conservatives said it would not bring positive action into force, so watch this space!

Detail

What was the position before the Equality Act 2010?

Positive action was restricted in the UK to two situations; allowing members of a disadvantaged group access to training facilities to increase their ability for particular work; and encouraging members of a disadvantaged group to take advantage of opportunities for doing particular work.

Except for a few very narrow exceptions, employers could not discriminate in the way they selected candidates for employment, promotion, dismissal or terms of employment.

What's new under the Equality Act 2010?

The law has been widened to allow more positive action. Sections 158 and 159 are the relevant provisions.

In essence, if an employer is attempting to select people to be recruited or promoted, it can treat a person (A) more favourably than another person (B) if A has a protected characteristic and B does not in certain circumstances.

The employer may only take this positive action if:

• A is as qualified as B to be recruited or promoted
• The employer does not have a policy of treating people with the protected characteristic more favourably than those who do not share it
• Taking the action in question is a proportionate means of achieving a legitimate aim.

The legitimate aim in question must be enabling or encouraging people sharing the protected characteristic in overcoming a disadvantage or participating in an activity.

What does "as qualified mean"?

There is little guidance on what "as qualified as" means. In practice, the comparison of candidates' qualifications is not usually straightforward. However, the draft Employment Code of Practice states that:

• "as qualified as" requires "a full and objective assessment of each candidate's suitability, skills, qualifications (professional and academic), competence and professional performance"
• While candidates may have different strengths and weaknesses in different areas, both can be deemed to be "as qualified" for the position.

Will employers now have to use quotas to regulate the recruitment and promotion of employees?

No. Quotas would be unlawful. The principle of selection on merit still applies and employers can only use the above provision where the person belonging to a disadvantaged group is "as qualified as" any other applicant.

In practice, it is up to the employer to choose whether to use the positive action provisions and a policy of doing so is expressly prohibited. As such, unsuccessful candidates have very little scope to challenge an employer for not taking positive action, but we expect some to try!

9) Should I be making any changes to my policies and procedures?

Summary

Potentially, but only in relation to certain areas. On the whole the Act consolidates the existing separate equality legislation, bringing it together and aligning all protected characteristics and types of discrimination.

There are, however, some changes which employers should be alive to, to ensure that their HR departments are up to date in preparation for main provisions of the Act coming into force in October 2010, 2012 and 2013.

Detail

The main changes to existing equality legislation which will need to be reflected in amended policies and procedures are:

• Reformatting the different heads of disability discrimination to include direct, indirect and discrimination arising from disability
• Removing the list of capacities used to determine disability
• Extending the definition of direct discrimination of all types to include associative and perceptive cases
• The ability for applicants, employees and ex-employees to bring a 'combined discrimination' claim
• The limitation of the use of pre-employment health questions
• Limiting the enforceability of contractual 'pay secrecy' clauses
• Imposing a duty on public sector bodies to consider the socio-economic disadvantage when taking strategic decisions.

Although employers should be aware of these changes and the potential impact they could have on their business and workforce, it is worth remembering that the provisions relating to the combined discrimination provision and equality duties are not scheduled to come into force until April 2011. Private sector gender pay reporting provision not until 2013, if at all.

As stated in part one above, the Conservatives voiced concerns about certain parts of the then Equality Bill, and said that they would not bring the whole Act into force. There has been little news about the Act since the new Coalition Government was formed, so we will have to wait and see which provisions they bring into force and when.

10) What impact will the Coalition Government have on the Equality Act?

Summary

The Coalition Programme makes no reference to the Equality Act 2010, just to its aim to promote equal pay and end discrimination.

Before the election, the Conservatives objected to the provisions on gender pay reporting, positive action and the public sector equality duty. In contrast, the Liberal Democrats supported more onerous provisions in relation to gender pay gap reporting.

It is not yet clear whether these contrasting views will result in any changes to the Equality Act and whether implementation of all or part of the Equality Act will be substantially delayed.

Detail

The Coalition Programme does not specifically refer to the Equality Act 2010. However, in the section entitled 'Equalities', the new Government pledges to "promote equal pay and take a range of measures to end discrimination in the workplace".

Before the election, the Conservatives objected to the provisions on gender pay reporting. The provisions were heavily criticised at the Second Reading in the House of Commons, with Theresa May (Shadow Minister for Women and Shadow Secretary of State for Work and Pensions) stating that the proposals were "disproportionate and bureaucratic...... heavy-handed and obstinate" and would "impose unnecessary costs on business whilst failing to solve the problem." The Conservatives suggested an alternative policy, whereby only companies found liable for discrimination by an Employment Tribunal would be subject to a compulsory pay audit. The Conservatives also stated that they would not bring in the extended Positive Action clauses or the Public Sector Equality Duty.

In contrast, the Liberal Democrats believed that gender pay reporting was a "pre-requisite to tackling the gender pay gap" and planned to bring in mandatory pay audits for all companies with over than 100 employees.

It therefore remains to be seen what changes will be made to the Equality Act 2010 in light of the parties' contrasting views.