Equal pay and the cloak of legal privilege
In litigation, at a certain point, the parties hit the disclosure obligation. Litigation operates transparently – on a ‘cards on the table’ basis. If relevant to an issue disputed, the documents have to be produced for the other side to inspect. If a document is privileged, the content is hidden from the other side. Legal advice privilege operates, creating a relationship of confidence between the lawyer and client. The communication becomes confidential.
The definition of the client is important – this will not often be the same as the organisation involved in the litigation. It needs to be a client group of defined individuals to keep it confidential and privileged. Litigation privilege can also protect communications between lawyers, clients and a third party where the dominant purpose is litigation. The documents must be confidential and post-date the claim.
Sharing too widely can lose legal privilege. If you are working with lawyers to take legal advice about potential equal pay claims arising from your audit and you are working with a third party like Paydata and the information comes to the lawyers to assess the legal risk, this can all be covered by legal privilege but it needs to be set up correctly from the outset. The intention needs to be made clear at the outset in this highly complex area of law. If you do things under privilege, you cannot then rely on that information to defend a claim without losing legal privilege, this information would have to be made public.
Frequently asked questions
Our Reward Expert Tim Kellett recently hosted a webinar with Jane Fielding, Partner and Head of Employment, Labour & Equalities at international law firm Gowlings WLG. The session (available on demand here) explored how legal privilege can provide protection for the employer – empowering them to identify any equal pay risks within their business and make evidence-based decisions. The following questions about equal pay emerged.
1. What is the biggest challenge organisations face in conducting Equal Pay Audits?
Having conducted Equal Pay Audits for over 15 years, we’ve seen many challenges. Buy-in from senior management is one of the biggest hurdles. Persuading senior management is a common challenge from the outset. The second one is having that grading system in place. It is hard to do an accurate analysis without the system to identify like for like work and if not, this creates work further down the line to unpick false positives. The third challenge is that some employers become overwhelmed with what to do. We help them prioritise where to take action if they have done an audit of the whole organisation.
2. Does Equal Pay take precedence over TUPE protection of pay rates?
If you have negotiated rates with a trade union, it is not a ‘get out of jail free’ card. Unions can be sued themselves and have been sued before so it is not a defence in itself and equal pay needs to be objectively verifiable. TUPE transfers could be a defence if they have been operating without review ever since – however, if you have inherited a workforce and there is an equal pay issue, the TUPE protection will not last forever and from an employer brand point of view, you might want to review this and remedy the situation sooner rather than later.
3. “Performance” as a Material Defence Factor – is it a fundamental reason given for pay differential even if people are doing the same role or one of equal value?
Theoretically, performance may justify a difference in treatment on pay, but it is not something we see relied on to justify basic salary differentials. It is more common in relation to a term such as bonus, provided it is based on objective criteria untainted by sex. Equal pay tends to work on the basis there is a value for a role reflected in the basic salary and while salary ranges are used to reflect greater experience in a role, differentials between peers within salary ranges tend not to be justified by way of performance. The strength of your position will always be the data you have and the evidence you can adduce.
4. Does equal pay also cover contractual benefits, e.g. car allowance?
An equal pay claim can be brought to challenge any contractual employment benefits. Challenges to discretionary benefits would be by way of a sex discrimination claim.
5. Our senior team are nervous about the actions they will be forced to take from conducting an Equal Pay Audit – to what extent can legal privilege address this concern?
An understandable concern - you can use legal privilege to do an equal pay audit (EPA) purely to get legal advice on the potential legal exposure that the organisation would face if challenged. But if you want to be able to rely on the results to take action, you would need to do a second open process to avoid waiving privilege over the advice. So, it is possible but needs to be planned and implemented carefully and may require a second exercise if action is needed. If you were ordered to conduct an EPA following an employment tribunal decision against the organisation, this would not work.
6. In what circumstances would the Employment Tribunal not order an Equal Pay Audit?
The Employment Tribunal must order an Equal Pay Audit unless there is evidence that the organisation has carried out an audit in the last three years so there is no point ordering another one; or it is clear what action is required if there is a self-contained, individual case; or there may be no reason to think it is a wider issue; or if the disadvantages of an audit would outweigh the benefits, for example parts of the business are going to be sold. Where there is not much to be gained from this, it will not be ordered. Not many equal pay claims get all the way to the Tribunal so the audit would not be ordered.