Webinar: Revised UK Gender Pay Gap Reporting Obligations: What You Need to Know Now

This week the UK government has published the revised version of the Equality Act 2010 (Gender Pay Gap Information) Regulations 2017 in the form in which they are likely to come into force on 6 April 2017.

Join us at our webinar on Thursday 15 December 2016 from 12 – 1pm GMT when we will provide practical guidance on the new reporting requirements, including:

  • Which employers will be caught
  • What you need to publish and when
  • Measuring your pay gap – including what counts as “pay” and how to calculate the gender pay and bonus gaps
  • Whether you should provide a narrative to explain any pay gaps and what it might look like
  • The potential consequences for your business arising from this new obligation, including the risk of equal pay and discrimination claims
  • The implications for your brand and reputation and how to manage them The main webinar presentation will last 50 minutes, followed by a 10-minute online question and answer session.
  • This webinar is suitable for Legal and HR professionals as well as Finance and Reward specialists.


Unwinding settlement agreements through lack of mental capacity

When you sign up a Settlement Agreement with an ex-employee you think that’s the end of the matter, right? Clearly that is the general intention, but we already know that even the most procedurally prim and proper settlement agreement can be undone by evidence that it was entered into by fraud or misrepresentation and now we have the question of mental incapacity also.

In Glasgow City Council –v- Dahhan the EAT has concluded that the Employment Tribunal can overturn an otherwise binding Settlement Agreement if it finds that the employee lacked the mental capacity to make it.  In essence, all the legal bells and whistles in Section 203(3) ERA and Section 147(5) Equality Act, etc. can’t make binding an agreement which was not valid in the first place.

Do employers signing agreements with employees with mental health issues need to worry about this?   Only occasionally. That is due to the very high threshold of incapacity required before a contract entered into would be void at common law and so be an invalid basis for a Settlement Agreement.  It is an indication of the level of this threshold that one of the predecessors to the current Mental Capacity Act 2005 was the fairly frankly-named Lunacy Act, passed while I was still at Law School in 1890.  This is absolutely not about re-opening Settlement Agreements with employees suffering from “ordinary” stress, anxiety, delusions, bipolar disorder, depression, etc.

The MCA 2005 lays down some basic principles designed to protect those unable to make particular decisions, but also to maximise their ability to make them or at least to participate in decision-making so far as they can:

  1. A person must be assumed to have capacity unless it is established that he does not – therefore the burden is on the employee to show that he lacks  capacity, not on the employer to show that he has it;
  2. A person is not to be treated as unable to make a decision unless all practicable steps to help him to do so have failed – in circumstances where the employer knows it is dealing with an employee with very limited mental abilities, it might therefore use a doctor or counsellor to explain the importance of the Agreement as well as a lawyer, and perhaps also simplify the drafting of it;
  3. A person is not to be treated as unable to make a decision merely because he makes an unwise decision – therefore employers need not fear that an employee entering into a Settlement Agreement which sells his rights well short perhaps lacks the capacity to make it binding.

The Act then refers to three categories of mental incapacity:-

  1. Those whose affairs are under the control of the Court.  Any contract made individually with such a person, even via a Settlement Agreement, will be void.  Employers would need to ensure that the Agreement was signed off by the relevant Court Officer, with the benefit of the usual legal advice required for an Agreement of that sort;
  2. Those whose mental state is such that although not under the control of the Court, they are unable to appreciate the nature of the transaction they are entering. In those cases the contract will still be valid unless that inability was apparent to the employer at the time of the Agreement;
  3. People who are capable of understanding the transaction but who are (as a result of some mental disability) more susceptible to entering into a disadvantageous contract.  Contracts made by such people are binding (and hence can be turned into valid Settlement Agreements) unless affected by “undue influence”.

It is this third category who will make up the vast majority of mentally-ill employees signing Settlement Agreements. The involvement of a solicitor for the employee will go a long way to killing off any undue influence argument, so it may be better to resolve these cases via a Settlement Agreement than through Acas where that element of independent advice is not provided.

The key test is therefore whether the employee can be said not to understand the nature of the transaction he is entering into.  What does that mean? It is a very different thing from mental illness per se. Employees may have all sorts of odd beliefs, delusions and limitations careering around inside their heads, but none of these necessarily indicate that they do not understand the basic concept of trading rights to sue in return for money.    Put in more detail, do they understand the information relevant to the decision to settle, including in relation to the reasonably foreseeable consequences of deciding one way or the other or of failing to make any decision at all?  Are they able to retain that information for long enough to make that decision?  Are they able to communicate clearly the decision that they have made?

Employers must be careful in expressing reservations about a mentally ill employee’s capacity to contract, since that will apply only in the most extreme of cases and they will be guilty of the worst sort of stereotyping if they automatically extrapolate from a mental health condition of some sort (or from unusual appearance, old age or challenging behaviour) to that level of incapacity.

The EAT in Dahhan sent the case back to the Tribunal for the question of whether Mr D had the mental capacity to contract to be finally resolved.  If that is reported, we may then gain some greater awareness of how that judgement would be made by a lay (non-medical) Tribunal. Pending that at least, this case should not alter employer practice in relation to Settlement Agreements.

UK Gender Pay Gap reporting: revised Regulations issued

The wait is over!  Yesterday the UK Government issued the revised Equality Act 2010 (Gender Pay Gap Information) Regulations 2017.  Technically the Regulations are still in draft (as they have yet to be approved by Parliament), but the content should not change between now and when they are due to come into force on 6 April 2017. This may or may not be a good thing.  See our critique online.

So, what’s new?

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Help! I’ve just recruited a psychopath

Statistically-speaking, your CEO is difficult, challenging, demanding, at times unreasonable and also stands a reasonable chance of being part psychopath, so says a recent report, almost.

A new study of 261 senior professionals in the US has found that more than one in five (21%) can technically be classed as psychopaths, which is apparently the same ratio that you find in prisons.

According to researchers from Australia’s Bond University and the University of San Diego, CEOs with psychopathic traits “create chaos”, pit one person against another and “enjoy getting what they want at the expense of others”. More worryingly, the researchers suggest that ‘successful psychopaths’ may be tempted at some more or less unconscious level to adopt unethical and illegal practices and undermine colleagues.

So why recruit them? Because the line between superficially attractive business management attributes and those which border on the clinically psychopathic can be a very thin one.  We want our business leaders to be driven, committed, ambitious for success and willing to take a degree of risk to achieve it.  The gap to the less attractive behaviours associated with the condition is a small one.

The challenge for HR is to have in place both a robust recruitment process which can tell the difference and screens out candidates with materially undesirable traits and behaviours and equally important, internal mechanisms to deal swiftly and effectively with these behaviours should a “psychopath” actually be hired regardless.

So what should your approach be to the recruitment process and when your new CEO is, er, making his mark? Here are some practical tips to consider:

A)      External recruitment process

  1. Select your recruiter very carefully. Draw up suitable criteria to bench-mark potential firms against and stick to it. Only work with reputable search firms who have a track record of appointing the type of senior person you want to recruit. Insist on some sort of independent psychological profiling test or tests to help build a more rounded picture of candidates’ personalities than just a CV and an interview may provide.
  2. Invest time in the recruitment process. Make sure that candidates meet multiple members of staff. As a rule of thumb the combined recruitment process should take between 10-15 hours at CEO level. However, a note of caution; do not make the process unnecessarily lengthy or have them meet everyone from the cleaner upwards or frustrated candidates may walk away.
  3. If searching for a CEO, agree a detailed brief with the Board or owner and make sure the brief also captures desired personality traits, behaviours and competencies. Do not just focus on the technical ability of candidates or where they have worked previously as these details do not tell you enough about the behavioural aspects of a person. Maybe they are indeed a wiz at R & D or Finance, but does that give them the emotional depth, patience and resilience to manage across the entire business?
  4. Don’t regard references as merely a formality, especially if they bear the hallmarks of something crafted as part of a settlement agreement – “mutual consent”, “left to pursue other opportunities/to spend more time with family”, etc. No-one says these cannot be true, but the odds are against it!  Equally, if the former employer will not go beyond “He worked for us from A to B as C” for a senior executive (especially long-serving), you cannot fault its legal compliance but could usefully probe the backstory leading to so terse a comment.

B)      A CEO with behavioural problems

  1. If you report to the CEO you have an ideal opportunity to raise your concerns as part of your role as the organisation’s ‘honest broker’. These meetings should be documented but otherwise confidential, at least initially. This takes courage, as such an approach will not grant you the protections of whistleblowing and may alienate your line manager (the CEO) from the start.  If nervous about the CEO’s response, try raising the issue in confidence with a non-executive director or Chairman whose role it is to maintain Board standards.  Be aware also that those who may nod agreement when you talk about it privately with colleagues may say something different when grilled by the CEO him/herself.
  2. The Board should also be notified using evidence, not anecdotal hearsay (although you may have to rely on this source of information initially and in the absence of anything else). If there is a real problem it is possible the Board has some awareness of the situation already.
  3. If there is a picture of inappropriate behaviour emerging you will need to build a factual case. This could take months, so be prepared for the long haul (but NB two relevant considerations here – first, does the CEO have unfair dismissal protection and second, is he/she doing so much harm that it is worth the unfair dismissal exposure just to have him/her out of the business?).
  4. Consider if there are any interventions you can make in the form of the CEO’s development or creating Board away-days where the CEO’s behaviour can be observed without its being seen to be all about him/her.
  5. If you have access to Board evaluation documents (which normally also evaluate the Board member as well as the team), study them to ascertain if they highlight any comments from peers or the Chairman.
  6. In serious cases, take legal advice, if necessary independently, so that the company understands its legal obligations and can minimise cost should severance or a court case be necessary.

A cynic’s guide to the draft Gender Pay Gap Regulations

So here they are, out yesterday, a strange parallel universe where months last 30.44 days and years 365.25, and where you don’t include pay for periods of leave except when you do.

In past blogs here we have criticised Government Regulations and statutory Guidance as too vague, leaving employers unclear whether they are caught by (or complying with) the legislation or not. That is not a criticism which can be levelled at the draft GPG Regulations.  These are, for the most part, exceptionally, indeed fantastically and pointlessly, prescriptive.  I say that not out of any disregard for the Regulations’ very worthy aims, but because they aim at millimetric accuracy in circumstances where there are no viable means of checking it, no real legal sanction for getting it wrong and, where give or take a few percent, it doesn’t matter legally anyway – at risk of labouring the point, the existence of a pay or bonus gap does not in any way prove (nor necessarily even suggest) any unlawful pay discrimination.

So here we go with some key points from a first read of the draft Regulations:

  • By Reg 1, the comparison is to be made between male and female “full pay relevant employees”, meaning those who are not earning less during the relevant pay period (basically, April each year) because they are “on leave”. “Leave” includes family-friendly and sickness absences, so if you are on nil or reduced pay on those grounds, you drop out of the averaging process. That is sensible, since more women than men take family leave and women take on average some 50% more sickness absence than men, so including those payments would distort the pay gap even if basic salaries were exactly the same.  On the other hand, the definition of pay includes the premiums paid to night shift workers.  They are predominantly men, so the scope for a perceived inequality without a real one is still alive and well.
  • However, by Reg 3, the “ordinary pay” to be included in the calculation includes leave pay, which it can’t if the definition in Reg 1 is correct UNLESS your leave pay is the same as your normal pay, in which case why not just use ordinary pay from the start and omit the carve-out for leave payments altogether? This means that before you can exclude someone from your averages because they were on leave, you’ll need to know whether they were on full pay or not, an entirely gratuitous over-complication.
  • Ordinary pay does not include “remuneration provided otherwise than in money” (Reg 3(2)(d)) and so appears not to address benefits provided in the form of goods or services. On the face of it, therefore, a car allowance counts as pay, but the provision of a car does not.
  • The Regulations require reporting of mean and median percentage gaps in respect of pay and bonus separately. However, the definition of pay for that purpose includes bonus but essentially only if it is paid in April. If you pay it in some other month, then it drops out of the pay calculation altogether.  For the bonus gap calculations, the sum is annualised and so it doesn’t matter when it is paid.
  • If the Government’s aim was transparency, it would surely have been easier to have regular pay and allowances measured men as against women plus bonuses and other variable figures done separately, annualised to give an average. Using bonuses either once or twice depending on precisely when they are received does not seem to shed the light on how the genders are paid that the Government must have hoped for. Take this example: A male employee earns a basic £50,000 and a bonus of £10,000, while a female colleague makes a basic £60,000 but no bonus. If his bonus is paid in April there will be no obvious pay gap, even though his salary is adrift of hers by 20%.  If his bonus is paid in some other month that gap will suddenly appear in her favour, while the bonus gap will go in the opposite direction, even though ultimately they are paid the same overall.  Quite what lessons the casual reviewer of GPG reports is supposed to take from this is unclear.
  • Then we come to a key component of any assessment of average hourly rates, i.e., knowing the number of hours actually worked. The average hourly rate of an executive working 9 to 5 is very different from one on exactly the same salary who does 8 to 7. Veering suddenly away from the minute precision of the rest of the calculations, Reg 7 tells us that when you don’t really have normal working hours, the employer should use “a number which fairly represents the number of working hours in a week having regard to” the average hours worked by that employee and others in the same role.  It is hard to see any employer doing more than sticking a moistened finger in the wind on that one, absolutely not bearing in mind in any way that the longer the deemed average day at senior (male) levels, the lower the hourly rate and the smaller the corporate pay gap will become.
  • By Reg 7(4) the averaging process for weekly hours excludes weeks in which no hours were worked, but seemingly not those in which one hour or more was done. So if this calculation is carried out scrupulously (which surely no-one will), an employee who took four days’ paid leave in that week will have in it an hourly rate five times that of his colleagues without actually having been paid any more than those who weren’t away at all.
  • But my favourite piece of legislative over-engineering is Reg 13(1). This sets out how to calculate the percentage of male full-pay relevant employees in a quartile pay band (let us say 60% for the sake of argument) and then adds a whole new paragraph to enable you to work out separately that this means that 40% are women. What, really?

Right at the end of the draft Regulations is a sad little apology for not getting the balance between detail and proportionality remotely right here. Within the next 5 years, says Reg 16(2), the Secretary of State must review these rules “and assess… the extent to which [their objectives] could be achieved with a system that imposes less regulation“.

Which employers will be caught by the new UK gender pay gap reporting obligations?

At this stage we are still waiting for the final regulations on the new mandatory gender pay gap reporting obligations.  This current series of blog posts is therefore based on what we know from the draft regulations and discussions around them.

In terms of which employers will be caught by the new gender pay gap reporting obligations, however we do know that employers in the private and voluntary sector in Great Britain will be caught if they have at least 250 “relevant employees” on a certain date in April 2017 (and each subsequent anniversary of that date).  The Government estimates that approximately 7,960 employers with around 11 million employees will be caught by the new reporting obligations.  This represents 34% of the total workforce in Great Britain.

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Introducing mediation into your internal procedures? Here’s how

We don’t often do shameless plugs on this blog (except for our own stuff, obviously), but here is one on behalf of the Civil Mediation Council and specifically its Workplace and Employment Sub-group.

That group is holding a conference on the afternoon of 1 February 2017 in the Old Library at Lloyds of London. It is aimed at helping organisations to bridge the gap between appreciation of mediation as an abstract concept and its practical implementation as a default part of their grievance and conduct management procedures.

We are big friends of mediation in the employment context (see our Insider’s Guide series, starting here http://www.employmentlawworldview.com/employment-mediations-an-insiders-guide-part-1/.  As a result, we are delighted to have been invited to speak on how you can use the offering of mediation as an effective and potentially hard-edged device in the resolution of many of the more typical internal grievances. Even if the suggestion of mediation is rejected or if a mediation takes place but reaches no resolution, this can still be actively useful in your handling of employee complaints about managers, peers or subordinates.  Mediation does not have to succeed to be helpful to you.

We are sharing a platform with speakers with high-level experience of introducing mediation into sometimes sceptical employers with great success, with two Sirs (the Chairs of ACAS and the CMC itself), with mediation providers and with a dispute resolution specialist who is going to do something clever with technology to create an instant audience poll on key questions. It should be really good.

If you are interested in the practical use of mediation in your workforce and would like to know more about how to implement it effectively within your organisation, this conference is for you. Here is the CMC’s invitation https://www.eventbrite.co.uk/e/save-time-save-money-save-stress-make-mediation-work-for-you-tickets-29852844662 with more details of agenda, location and timing. Do have a look – it would be great to see you there.


The gender pay gap and equal pay – what’s the difference?

Sometimes people get confused between the gender pay gap and equal pay.  They are not all the same thing.

The gender pay gap measures the difference between men and women’s average pay. Equal pay, on the other hand, is the legal obligation under the Equality Act 2010 that requires employers to give men and women equal pay if they are employed to do like work.  Failing to pay a woman the same pay as a man for doing the same job is likely to be unlawful, whereas having a gender pay gap is not.

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Gender pay gap reporting in the UK: Frequently asked questions

Over the next few weeks into the New Year we are going to publish a series of short blog posts on gender pay gap reporting in the UK, based on the questions we have been asked by clients and contacts in recent months.  By the time we get to the end of our series, the Government might even have published the final version of the Gender Pay Gap Regulations and we can all start preparing properly for this new regime!

Today we are going to start off with the basics, namely what is the gender pay gap? And why does the Government think that intervention is necessary?

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Key new rules for employers posting staff to France

Foreign employers posting employees to France temporarily, whether to provide services for a client based in France or for their own sake or as part of an intra-group mobility programme, must comply with strict legal requirements.  These relate in particular to providing for those staff a set of mandatory employment rules applicable while they are working in France and also to prior notification to the French authorities of their intended posting and the appointment of a representative in France.

From 1st October 2016 employers have to make that notification on-line.  For the posting of employees by road or maritime transportation companies, the compulsory certificates of secondment (which replace the prior declaration) will have to be done on-line from 1st January 2017 onwards.

This obligation results from Law n. 2015-990 of 6 August 2016 (“Loi Macron”), which was implemented by Ministerial Decree (n. 2016-1044) dated 29 July 2016.

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