Equal Pay

Sharon Hodgson Excerpts

Wednesday 18th March 2015 Westminster Hall

[Emily Thornberry]

Perhaps I am not as much of an optimist as my hon. Friend. I was not at all surprised. Although the landscape is more complex, the effect is essentially the same: women and women’s work are still systematically undervalued in our country, and we have to be on our toes and be prepared to be imaginative and think laterally to tackle that. We have learnt, as was highlighted in the debate on my hon. Friend’s Bill, that we simply cannot leave it to good will; we need to be radical and brave and be prepared to tackle the situation head on. The change that the Government have agreed to, pushed for by my hon. Friend and many others, is a good start, but we need to go further. As I said, it is a shame that Ministers have dragged their feet, but I will not go any further than that. There is a lot that I could say, but I will be more generous.

As my noble Friend Baroness Thornton pointed out last week, of the 7,000 companies employing more than 250 people, just 270 have signed up to Think, Act, Report, but of those—this is what matters—only five have opted to publish data on their employees’ pay. It is clear, as she put it, that

“a voluntary approach on its own will not deliver the transparency needed to achieve a change in companies’ behaviour”.—[Official Report, House of Lords, 11 March 2015; Vol. 760, c. 668.]

It will seem like an obvious point to make, but when only five out of 7,000 companies—that is 0.07%—opt for transparency, we have to change the law. It took the Government some time to drop their opposition to the idea, but nevertheless, things have moved to a certain extent. However, now we have that, we have to look at what we are going to get in detail, because pay transparency and pay audits are good as slogans, but we need to know what they really mean. We should be celebrating the victory, but we need to go further and get rid of some of the more ridiculous loopholes that I have pointed out.

The law has moved since the 1970s in many ways, including the fact that instead of it being reactive—in other words: “If you don’t do this, you will get sued or taken to court”—Acts of Parliament have taken a more proactive role, beginning with the Human Rights Act 1998. I will not spend time going on about it, but that Act is a living, breathing legal document that puts obligations on organisations to comply with it, and to see their obligations under it and act accordingly. It seems an entirely different type of legislation from the type we have had in the past—and an entirely good one.

We can read across from that to the Bribery Act 2010, which said that if an individual in a company bribed officials, either abroad or at home, unless that company could show that it had systems in place to manage those employees, and therefore the employee was acting wholly outside the way in which the company expected their employees to behave, the company could be liable. We could read across from that to doing the same thing in relation to fraud; so if an individual behaved dishonestly for the benefit of a company, then unless the company could show that it had good management structures in place, the company should be liable.

What has happened with bribery has been really interesting. Experts have been going into organisations and making sure that those organisations have the correct management structures in place and are behaving in a proper way. To use a quote from the leader of my party, it is “responsible capitalism” in action. We can have legislation that brings in responsible capitalism and says to companies, “We expect you to behave in this way. Use your initiative, and get on with it. Stop being complacent and stop saying, ‘Well, it’s not against the law,’ or ‘You can’t take us to a tribunal,’ or ‘You can’t take us to court as things currently stand, so we are not doing anything about it.’”

We could do the same with an equal pay Act, which we should begin with a positive obligation on us all to ensure that equal pay is brought in over the next few years. Women have been waiting for long enough; the obligation should not just be on individual women taking their individual complaints to a tribunal and chipping away at the system one by one, piecemeal by piecemeal. We should all be obliged to ensure that if these women take their cases to a tribunal, they are treated like whistleblowers. If they take a case to a tribunal and they can show that on the face of things, they are a whistleblower, and that, in fact, there is systemic discrimination in that company, action should be triggered by that case. We should then have a more proactive law to ensure that the tribunal can say, “We want a pay audit.”

I know that the Government have changed the law, so that at the end of a tribunal there could be a pay audit, but what does the pay audit mean? It is not sufficient for a pay audit simply to be: “We’ve got 15 women doing the typing, and we’ve got 10 women doing administration, and we’ve got six directors and they happen to be men, and we’re publishing that.” We do not want that. What we want—what I want—is a skills audit to be done under that, so that we look at what skills the women have, in what way they are doing those jobs and what skills they are using. We compare jobs and do a proper jobs and skills audit, so we get under the skin of the box-ticking and look at how there may be a difference between the way in which men and women are paid in organisations.

A tribunal could trigger that after an individual woman has taken out a case. It could be done at the end of a hearing as part of the tribunal’s decision making, or—perhaps even better—at the beginning, when legal action is contemplated. At that point, as part of pre-litigation negotiations, a company or organisation might say, “Yes, we’ll do a proper, profound skills audit.”

[Mrs Sharon Hodgson (Washington and Sunderland West) (Lab)]

My hon. Friend is making a characteristically superb speech on the extremely important issue she has brought before Parliament today. What is her opinion on what we should do about tribunal fees? As she will be aware, they have had such a detrimental effect on the number of cases coming forward across all discrimination tribunals.

[Emily Thornberry]

If I may, I will answer that later—I have quite a lot to get through, but I will come to that in my speech. I want to pray in aid some more quotes from my hon. Friend the Member for Rotherham, who said—so I know I have a friend in this—

“Why should the burden be on women to investigate pay inequality and to ask their colleagues how much they earn?”

She went on say:

“We should not have to wait for whistleblowers”.—[Official Report, 16 December 2014; Vol. 589, c. 1301.]

That is absolutely right. It is not a rhetorical question, but is very apt in highlighting the unfairness of a system that puts the entire burden on individual women to root out discrimination. They are the victims; we should assist them, and our system should make sure that they are given proper assistance.

We need an equal pay Act that enshrines in law the principle that tackling the wage gap is a collective responsibility. Therefore, a company found guilty of discrimination should be ordered to do a proper, profound pay audit. One of the problems with the changes the Government have made so that a tribunal may have a pay audit done is, first, it is not profound enough, and secondly, it is silent on the issue of how it will be enforced, what the plan will be and how it will work. It is important that we have it as a complete package. It is not sufficient to pass legislation by way of gesture—although I am sure that that was not necessarily the entire motivation. We have to look at the situation carefully and see what is going to work. Without that basis, it will not be enough and it will not work.

Under the regulations, there are no guidelines on what constitutes an acceptable plan and the regulations are silent on enforcement and monitoring. What is more, tribunals are not obliged to order a full audit in all circumstances and may opt out of doing so if it is believed that—and listen to this, Mr Weir—

“the disadvantages of an audit would outweigh its benefits.”

So there we are: the audits may be too superficial, they may not be enforced, there may not be a plan, and in any event they can get out of it if the disadvantages outweigh the benefits. That is hardly the radical stuff that we need in the 21st century.

Given that the Government’s actions have demonstrated the inadequacies of a voluntary approach to tackling the pay gap, we need a new law that requires not only stringent monitoring but vigorous enforcement. In my view, audits should be overseen by the Equality and Human Rights Commission and carried out by experts. I am very pleased to have read the paper, which I believe is circulating today, from the EHRC. Although the commission might not agree with all my suggestions with huge enthusiasm, it seems to agree with at least some of them, so I believe that I am making progress. The resulting action plans should be subject to EHRC approval and continued monitoring, with the threat of referral back to the tribunal for non-compliance.

That is the stick, but I am not talking just about sticks. I am also talking about carrots, and the carrot is that we should actively encourage all companies to carry out regular pay audits and eliminate disparities wherever they arise, even if they are not ordered to do so by a tribunal. A voluntary profound audit and evidence of compliance with the recommendations of an approved plan would virtually insulate companies from any equal pay claims. Prima facie, if a company had done these voluntary audits, had a plan and was implementing it, that would be a defence to any claim of unfair pay. It seems to me that that would be a catalyst for a culture change that shifts the onus of rooting out pay inequality from the victims to the employers themselves.

As the changes took root, we could hope for a greatly reduced need for women to pursue claims against their employers via the traditional route set out in the 1970 Act, but inevitably it would be some time before the changes took effect, so, to answer the question asked by my hon. Friend the Member for Washington and Sunderland West (Mrs Hodgson), we would need measures to streamline procedures within the tribunals to make them more efficient.

We could begin by encouraging more negotiation as opposed to litigation. A number of high-profile cases in recent years have seen unions trying to come to agreements with employers and then finding themselves sued by claimants—disgruntled women who believe that the settlements are unfair. Obviously, that has had a chilling effect on the actions of many trade unions. Given that it is a risk, but we do need to ensure that there are more settlements, it seems to me that we need to take into account the limited financial resources of many employers. We also need to understand that they need to balance the sometimes competing interests of back pay for claimants with pay protection for existing male employees. A new equal pay Act should include codes of practice, which should have legal standing. Therefore, if a trade union and an employer came to an agreement, and that agreement complied with the code of practice attached to the new equal pay Act—a code requiring the parties to make sure that there was proper job evaluation that would result in a settlement—both the employer and the trade union, prima facie, should have a defence and should not be able to be sued. That in turn, hopefully, would release them to get back on the front foot and start negotiating some fairness and some equality in the workplace.

Let me now deal with the tribunals themselves. When we introduced the Equal Pay Act, there was a period of bedding in, and we should have the same with a new equal pay Act. I think that the whole Act should be jump-started with a period of five years during which there should not be fees for tribunals for equal pay claims. Also, we should consider carefully whether, if an equal pay claim is successful, there should be six years’ back pay, as there is under the current law, or whether we should change that back to two years, which was in the original Equal Pay Act.

I know that the European Court of Justice has said that, given that our old Equal Pay Act is based on contract law, we should give contract law remedies, which is six years, but I think that we have a very strong argument to make. If challenged, we could go back to the European Court of Justice and say, “This is a matter of public policy. We in Britain are doing something about ensuring that we get equal pay in our country, so during this five-year period, we wish to be able to bring in some more carrots and sticks and actually get some action.” We all know where we want to go. We need to make sure that we have a plan that works and will get us there.

It seems to me that that could reverse some of the damage that has been done. Let’s face it, employers fight absolutely everything, and one can understand why. The loss for them is so huge if they lose a case—they have to pay six years’ back pay, and if it is a collective action, that is a huge amount of money—but that is not to say that they should not be doing something. We have to find a compromise, a practical and pragmatic way through this. I suggest scrapping fees not for ever, but for five years, and there are other things that we should do.

I have no understanding of why the Government got rid of the short form questionnaire. Before an action began, employers had to fill in a questionnaire for a woman who wanted to make an equal pay claim, which would give some facts for the woman so that she could take out her case. The Government scrapped that, saying that it was red tape. That is clearly counter-productive, because if the individual woman employee does know the circumstances in which she is employed, sometimes she will have some grist to her mill—she will have some evidence enabling her to take her case to the tribunal properly—but quite often, surely, it will have the opposite effect and she will realise that actually she is not being discriminated against. What is the problem with transparency? Why should we not have people with equality of arms—equality of arms as best we can—going before a tribunal where we all know what we are talking about in advance of it happening?

A new equal pay Act needs to bring back a questionnaire. Two pages—it does not have to be 50, 100 or 200 pages —with some basic information, so that the woman knows where she stands. That seems to me to be very important. The questionnaire should include questions such as “Have actions been taken out against you in the past?” and “Have you had to pay compensation in the past?” That questionnaire would be a minimal burden on employers and a vital tool for women who are trying to embark on a challenge. We ought to be supporting those women, who in the end are our whistleblowers. In the recent equal opportunities review, Professor Bob Hepple wrote a case that, in my view, is unanswerable, saying how important it is to have a questionnaire brought back into law.

We should go further in streamlining the process. We should also bring in senior judges. Employment tribunals, if they are dealing with a large and complex case, should be able to bring in extra firepower—perhaps a High Court judge—who will manage the more complex cases and ensure that they move through the courts and do not get bogged down. It is extraordinary to hear it, but there is at the moment a case that is still trundling through the employment tribunal and is still going through preliminary issues—they have not even got to trial yet—and it is five years on. This is not Barbara Castle’s vision. We are so far away from it, and we need to look again.

I have been clear about my views on the inadequacy of the existing system of individual tribunal claims. We will still need to have a system in which individual claims can be brought, but much more support needs to be given to individual claimants and we need to streamline the process.

I have touched on the ridiculous loopholes. A new Act would need to clear away the fog that existing laws have created around questions about whom claimants can identify as valid comparators. It should simply state that comparators can be based on all operations of a single employer. There have been cases in which a woman has said, “I don’t get paid the same as the guy in the building around the corner,” and a serious argument has been put up, “Well, you’re not in the same building, so it isn’t a comparator.” That is just not right and we have to do something about it. It is not a realistic excuse for inequitable pay.

While we are at it, our new law should provide much greater clarity on the issue of succession. We should certainly get rid of the idea that a man succeeding a woman and getting more pay is not prima facie evidence that she has been discriminated against.

We also need to look at outsourcing. Oxford law professor Sandra Fredman has written that, under current legislation, a woman doing equal work at the same establishment as a better paid male comparator has no claim if she is employed by an agency or outside contractor. Given the massive rise in the use of outsourcing over the years, it is time that we gave statutory protection to victims of discrimination whose employers hide behind that anomaly. We should require that public bodies reach binding agreements with contractors, setting out and guaranteeing the terms and conditions for transferred employees. I have a number of ideas about how we can deal with other issues of fractured employment—for example, bogus self-employment. You may be pleased to hear, Mr Weir, that I do not intend to go into the details now, but I will publish them on my website for those who are keen to know more.

I do not suggest that my proposals will wipe away the lingering effects of centuries of discrimination and eliminate the wage gap completely and immediately. There are other things that we need to do, such as looking at flexible working. Some of the changes made by the Government have been good, but it is a curate’s egg: some of them have made life more difficult. If my mum falls over and goes to hospital, I will need to look after her while she is there and work out what support she will have when she comes out. If I ask my employer for flexible working and he says, “I’ll have a look at it, Emily, but I can’t get back to you for three months,” that is not flexible working, and it makes life very difficult indeed. We need to look at practical solutions for women’s real lives.

We need to tackle the continued problem of the clustering of women in low-paid occupations, which are related to traditional gender stereotypes. Two thirds of women are in 12 occupational groups, including catering, cleaning and personal care. Women may, as Annie Lennox and Aretha Franklin sang, be coming out of the kitchen, but unfortunately they have not got very far, and we need to make sure that they have the ability or the choice to go further. Even if they choose not to do so, we need to make sure that women’s work is properly valued.

We need better careers advice at the earliest possible stage in a girl’s education. We need to address the chronic shortage of women who take up STEM subjects. Some of the ideas that I have read from the CBI on that aspect of equality policy are welcome, but we need to do more. We should make efforts to increase the number of women who take up careers in those growth industries, but our work is not solely about putting more money in women’s pockets, important though that is. A much more fundamental principle is at stake: if, as a society, we do not make use of the extraordinary range of women’s talents, we are a poorer society in every sense of the word. Since the Government came into office in 2010, the wage gap has continued to shrink, but only by an average of 0.35% a year. By my calculation, if we continue on that trajectory, it will be another 55 years before the gap is finally closed. I hope hon. Members agree that women have been waiting quite long enough. We are no longer content to wait. We need to legislate, and we need to be bold. Let’s get radical. Let’s pass ourselves a new equal pay Act.

--- Later in debate ---

[Mrs Sharon Hodgson (Washington and Sunderland West) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Weir, for what might be my last ever outing in Westminster Hall—that might be true of all of us here for today’s debate.

I congratulate my hon. Friend the Member for Islington South and Finsbury (Emily Thornberry) on securing this timely and important debate and on the work she has done on the issue over the years. Like her and the other hon. Members taking part in the debate, I am passionate about the topic. My hon. Friend’s research and insights are a testament to her dedication to the cause. What she has proposed and the things she has highlighted show why we can never take a back seat and hope for the best. I am proud, as I am sure she is, that the Labour party and Labour movement have always been true to that belief and are committed to continuing that tradition long into the future.

I am pleased that my hon. Friend the Member for Rotherham (Sarah Champion) was able to attend part of the debate, because she introduced an excellent ten-minute rule Bill a few weeks ago on the section 78 transparency clause. I am pleased that that eventually spurred the Government to act on the matter, after five years of sitting on it, and I am pleased to say it went through in the House of Lords last week.

In government, Labour was a strong advocate of gender equality in all sectors of society. We closed the gender pay gap by a third when we were last in office, oversaw a rise in the number of young women going into higher education—when they overtook boys for the first time in history—legislated to protect women from abuse at home and in the workplace, and, in one of the last acts of a Labour Government, in 2010 we passed legislation that would have made huge strides in tackling the gender pay gap by making large companies publish their hourly pay rates by gender. We were also the party that 45 years ago passed the very Equal Pay Act that we are discussing today. Decades have come and gone since the Act became law, but the problem it attempted to solve is still, sadly, very much with us, and today’s debate is a timely reminder of that.

On average women earn 81p for every pound a man earns, and recent figures cited by the Equality and Human Rights Commission show that women in full-time employment in 2014 earned almost a full 10% less than their male equivalents. That is truly shocking. Things are even worse for women in part-time work, where they earned just under 38% less than male full-time employees. The overall gender pay gap for all employees was 19.1%. It seems ridiculous to think that after 45 years of work and 15 years into the 21st century women are still not on equal terms with their male counterparts.

Last year, thanks to the debate led by my hon. Friend the Member for Rotherham, I was fortunate enough to meet some ladies who worked at the Ford plant in Dagenham. The Minister was also present—as was my hon. Friend the Member for Islington South and Finsbury. Anyone who cares about this issue was there. Those women famously went on strike to fight for equal pay, and their actions went a long way to bringing about the first Equal Pay Act, in 1970. Speaking to them it was fantastic to see women still so passionate, committed and hopeful of success, but it was also tragic that after so many years have gone by the imbalance has only been decreased, never destroyed.

Last week, my colleague, Baroness Thornton, highlighted contemporary examples during the debate in the House of Lords on gender and pay, such as the woman working in advertising whose end-of-year bonus was a £100 Liberty voucher, while her male counterpart received £2,000 cash; or the lawyer who was asked to take a pay cut to avoid redundancy, only to find out that none of her male colleagues had been asked to do the same; or the woman who worked in the media and, overhearing two male colleagues boasting about their salaries, realised that both were being paid an average of £10,000 more than she was, despite the fact that she had the same experience. Such gross inequalities are commonplace and things need to change.

Over the years women have had to contend not only with lower pay, but with the problems of glass ceilings, sexual discrimination and a tendency to be penalised in the work force for having children. We have made progress in those fields over the past decades, but too many women are still caught in a culture in which they are told that they have to choose between being carers or having a career, or they have had it drummed into them that they cannot achieve the same things as a man. That mentality holds back our society and all women. We know that companies with more women on their board routinely outperform their rivals, so any glass ceiling that limits a woman’s rise to the top also limits a company’s performance. Glass ceilings should be shattered for the good of everyone. As well as championing equal pay, Labour is committed to opening more boardrooms to women and will legislate to do that if companies do not understand the enormous benefits of doing it themselves. All those problems are linked, and none of them can be solved overnight. Only through dedicated and consistent hard work and pressure can we achieve meaningful and long-lasting success, so it is disappointing that over the past five years we have seen the cause slide down or, more accurately, slide off the political agenda, and it is no wonder that more problems have been caused as a consequence.

As I briefly alluded to, the Government’s record comes up extremely short on addressing inequality. Their record on the gender pay gap in particular can be described only as woeful. The coalition inherited a section of the Equality Act 2010 that would have made all large companies—companies with more than 250 employees—publish their hourly gender pay rates in their annual reports. That requirement was designed to build on existing equalities legislation, thereby boosting transparency and shining much needed light on the issue, which would have forced companies to look at themselves, see the extent of the problem and work towards addressing it. Sadly, the huge value of that section was either completely ignored or totally lost on the coalition Government, who refused to enact it. However, as I am sure all hon. Members present are aware, with two weeks to go before Dissolution, and facing a likely defeat in the House of Lords on Labour’s push for the enactment of section 78, the Government performed another policy U-turn and finally saw the light. I hate to question what may have been a truly Damascene experience for the coalition, but I fear it was a victory for political pragmatism more than for the ideals and values of gender equality. Although the outcome is extremely welcome, the last-gasp way in which it was achieved is sadly symptomatic of a Government who place no priority on equality legislation.

During the past five years, we have seen consistent inaction in the face of repeated calls from the Opposition to do more, or indeed to do anything. One has to wonder how much more we could have achieved on equality if that time had not been totally wasted by the Government. The recent victory only brings us back to where we were in 2010 and, sadly, we have regressed in some areas. The overall gender pay gap fell by a third under Labour, but that rate has slowed dramatically under this Government. The gap actually increased in 2013, partly because the so-called economic recovery saw a rise in low-paid jobs in sectors dominated by women, such as care, and a rise in insecure zero-hours jobs in which women also outnumber men.

Since 2010, the number of equal pay claims brought against employers has fallen from just over 37,000 a year to around 17,000, with the most dramatic fall happening since the coalition’s introduction of tribunal fees. That fall came as no surprise to many Opposition Members, who predicted that it would happen. We were not scaremongering, as we were accused, but it was utterly shocking, none the less. Women are now being put off fighting for equal pay, and the message that the introduction of tribunal fees sends out to women across the country is extremely damaging for the cause. I am interested in the proposals to address the situation suggested by my hon. Friend the Member for Islington South and Finsbury. As she knows, Labour fought against the introduction of tribunal fees and, when we are back in government, we will introduce reforms to ensure that cost is never a barrier to justice.

Equal pay should not have been something for which we had to fight for so long. In truth, more should have been done in the 45 years since the 1970 Act was passed to keep it fresh and doing what it needs to do. My hon. Friend expertly raised a number of issues, and they all need to be addressed. I am sure none of us believes that the Act cannot be improved to meet the new challenges of modern Britain. In her proposals, she made many points and cited many examples with which it is hard to disagree, and I would welcome a much deeper look at those issues. That is why I am pleased that Labour supports a review of the Equal Pay Act to see which areas are working, which areas need improvement and which areas are either redundant or need entirely new provisions to make them fit for our modern world.

The goal of the Equal Pay Act to deliver the promise of equal pay has not changed since 1970. We need to establish whether that means amending the Act or introducing something new, and we believe a comprehensive review is the best way to do that. The Equality and Human Rights Commission recently announced that it is also in favour of such a review, and the commission’s experience makes it perfectly placed to ascertain where best to take the Act from here. I am sure the commission will want to see my hon. Friend’s work when it undertakes that process.

Sadly, this debate is as necessary today as it was in the 1970s. The more momentum we can build for reaching the goal of equal pay, the better for every single person in our society. We may have lost five years to complacency and inaction, but we now have a chance to push on and complete the work for this generation and for generations yet to come. Labour is committed to that fight, and I look forward to a time when such debates are consigned to the realm of history, not politics.