UK: tribunal orders bank to carry out and publish equal pay audit within 6 months, notwithstanding existing equal pay review process

The employment tribunal in Macken v BNP Paribas has recently given its remedy judgment in relation to successful claims of sex discrimination and equal pay brought by a female banker, following a two year covid-related delay to the remedy hearing.  A substantial compensation award was made, including aggravated damages in part due to the lack of genuine apology, and the tribunal also ordered an equal pay audit to be carried out (and published).  Notably, this was notwithstanding measures the employer had already taken to review pay as part of a remediation programme established in consultation with the FCA.

Compensation

The award of over £2 million compensation included significant amounts for past and future losses of earnings (on the assumption that M would remain employed and receive PHI payments until age 65), loss of congenial employment, personal injury and injured feelings.  £15,000 was also awarded for aggravated damages, on the basis that some of the managers' discriminatory conduct was "spiteful and vindictive", that they had not apologised for their discriminatory behaviour and had not been disciplined in any way.  A 20% uplift of over £300,000 was also applied for failure to deal with grievances in accordance with the Acas Code of Practice on Disciplinary and Grievance Procedures, in the form of a failure to carry out the necessary investigations to establish the facts and to approach the grievance impartially.  However, the tribunal did not accept the claimant's contention that the employer's without prejudice offer prior to hearing the appeal against the grievance was also inappropriate.

Recommendations

M asked the tribunal to make recommendations that the employer put in place training and changes to various processes.  The tribunal concluded that it did not have power to make these recommendations as they would not have the required impact of obviating or reducing the adverse effect on M herself (given she would be remaining off work on PHI).  It rejected the contention that improvements to policies affecting colleagues at work would alleviate M's anxiety or depression.  In any event the recommendations had already been put in place by the employer.

The suggested recommendation for an apology was also rejected, the tribunal agreeing that this was owed from a moral perspective but noting that, for an apology to be effective, it needs to be "genuine and heartfelt" rather than ordered.  The failure to apologise was instead taken into account in the award for aggravated damages.

Equal pay audit

Where there has been an equal pay breach, the tribunal is obliged to make an order for an equal pay audit unless one of the exceptions applies, namely that:

• a compliant audit has already been done in the last 3 years,
• it is clear, without an audit, if action is required to avoid further breaches,
• there is no reason to think there may be other breaches,
• the disadvantages of an audit would outweigh its benefits, or
• the small or new employer exemption applies.

Following the liability decision in 2019, the employer had established a remediation programme in consultation with the FCA, including the preparation and annual review of job descriptions to sit within a new hierarchy of job levels, an annual equal pay review of fixed remuneration between those with similar roles in the same business line, a review of recruitment, performance review and assessment processes, and additional discrimination training for managers.  The employer did not intend to adopt pay transparency but would ensure employees had transparency of their own job level and the levels of colleagues they worked with.

The employer therefore sought to argue that it clearly understands what action is needed to prevent equal pay breaches without an audit, pointing to its voluntary annual equal pay reviews and remediation programme and claiming that historical anomalies had already been corrected.  It further argued that there was no reason for thinking there might be other breaches.  The tribunal rejected these arguments, noting that the employer's pay practice fell significantly short of the recommendations in the EHRC statutory code of practice, in particular because "it chose to have an opaque pay system in common with other financial sector organisations" and therefore there were likely to be others in the same position as M.  The remediation programme was clearly moving in the right direction, but the tribunal felt it had to recognise that "significant cultural shifts take many years" and it was notable that the employer had chosen to retain an opaque pay system, albeit with the introduction of increased transparency around its job hierarchies.  The tribunal considered that it had not been given sufficient information about the methodology of the employer's equal pay review, nor about how the employer would ensure that discrimination was avoided in relation to bonuses (which were not included in the review), to justify not requiring an audit.  It also rejected the employer's argument that the disadvantage of an audit, of duplicating the work already being done in the review process, outweighed the benefit, given that the employer could decide to do just the audit and not its voluntary review.

The employer was therefore ordered to produce an equal pay audit, suitably anonymised, for the calendar year 2021 by 30 June 2022.  This is to cover base pay, pension contributions, discretionary bonuses and any other allowances (but not benefits in kind) for everyone employed for any part of 2021 (pro-rated for those only present for part of the year or working part-time).  The report will need to include the reasons for any identified difference in pay and for any potential equal pay breach identified, as well as a plan to avoid equal pay breaches occurring or continuing.  Once the tribunal is satisfied with the audit (and the tribunal can order £5,000 for each occasion of failure to comply with its orders), the audit has to be published on the employer's website for at least 3 years and the employer must inform all current and former employees covered by the audit where to obtain a copy.

The potential for reputational damage and triggering of further equal pay claims as a result of publication of an audit is clear;  the ability of competitors to see pay information will also be concerning.  The case is a stark reminder that the risks of opaque pay systems will not necessarily be obviated by voluntarily putting in place an equal pay review process.