Equal Pay and Flexible Working Bill [HL]

My Lords, we are all grateful to the noble Baroness, Lady Morris of Bolton, for introducing the Bill and we share her aims. I am sorry to say that there are some fundamental flaws in the Bill, which I shall explain later, but we hope it will act as a spur to a new, reforming equality Bill to be introduced by the Government. The debate has been greatly enriched by well informed, powerful contributions by Members of the House of both sexes with great experience, to whom I pay tribute. If I do not refer to all their speeches, it is simply because of the time factor. We all agree that the principle of equal pay between men and women must at last be achieved in this country to avoid women being exploited as a source of cheap labour. We need to use the skill and talent of the entire workforce, including women and men who combine motherhood or fatherhood and childrearing with paid work. Those are the values underpinning the Bill. Barbara Castle’s Equal Pay Act was unsatisfactory from its birth. As the noble Baroness, Lady Prosser, said, it was a busted flush, and there is a need for root-and-branch reform. When I helped Roy Jenkins to create the Sex Discrimination Act 1975, we were not allowed to strengthen the Equal Pay Act because a deal had been done between employers and trade unions by which Harold Wilson’s Government regarded themselves bound. Although the noble Baroness, Lady Thatcher, made her maiden speech on equal pay, her Government did nothing at all until they were obliged by the European Court of Justice to provide for equal pay for work of equal value. The regulations that were introduced in the Commons by a drunken Alan Clark were strongly criticised by the Equal Opportunities Commission, on my legal advice, as being incompatible with European Community law. The noble Baroness, Lady Howe, will remember that when the regulations were debated in this House, the noble Lord, Lord McCarthy, remarkably moved an amendment declaring, "““that this House believes that the regulations do not adequately reflect the 1982 decision of the European Court of Justice and Article 1 of the EEC Equal Pay Directive of 1975””.—[Official Report, 5/12/83; col. 886.]" Apart from the Conservative Minister—I say Conservative so that we will remember who was on which side—no one spoke in support of the regulations, and the amendment was carried against the Government by four votes. Lord Denning, who decided key cases on equal pay in the Court of Appeal, referred to Barbara Castle’s Act as ““deplorable”” because: "““Its tortuosity and complexity is beyond compare””.—[Official Report, 5/12/83; col. 901.]" He pointed out that the regulations were not clear, intelligible or capable of being understood by ordinary people and ordinary tribunals. Since then, no Government have introduced legislation that would provide effective remedies for sex discrimination in pay. I was instructed by the noble Baroness, Lady Kingsmill, and others in the speech therapists’ case. It took 11 years for a group of speech therapists to compare their work and pay with those of hospital pharmacists and clinical psychologists. By the time the case was finally decided, all the documents had been lost, the women and men concerned had died, retired or changed their work, and the remedies that were awarded were of no practical value. The poor old union had had to accumulate thousands of individual claim forms because the procedure is ludicrous and it is not possible to make a collective claim on behalf of a group of people. It was indeed a busted flush. Women still earn significantly less than men; they face substantial penalties for doing part-time work, for taking time out of the labour market and for reducing their hours to care for relatives. As the noble Baroness, Lady Morris, noted, men are paid 17.1 per cent more than women for full-time work. The pay gap is even wider in the private sector, at 21.7 per cent. The disparity in part-time wages is 36.6 per cent and, to answer the question asked by the noble Baroness, Lady Howe, Britain has been placed 81st in the world on progress on equal pay for equal work. Women's educational attainment is higher than that of men, but that success is not properly reflected in their pay. We are squandering women's skills and talents, resulting in the inefficient use of human capital at a time of severe economic crisis. As the noble Baroness, Lady Morris, pointed out, the gender pay gap actually increased last year. I have great admiration for the Minister. Indeed, I have wanted for some time to talk to her about all this. I hope that she does not share the lukewarm approach to reform of equal pay taken by some of her colleagues and advisers. The Government have not yet shown signs of recognising that the Equality Bill must replace the 1970 Act with equal pay provisions that work in practice. So far, there has been a minimalist approach; they wrongly believe that that is in the interests of business enterprise. That is profoundly mistaken. Equal treatment without discrimination furthers the aims of business enterprise by tackling unfairness and inefficiency in the marketplace. Clause 1 of the Bill would amend the employer’s defence under Section 1(3) of the Equal Pay Act by making it a defence to an equal pay claim that a pay difference between a man and a woman is, "““objectively justified as reasonable””." Under Section 1(3), read in isolation from European law, where employers seek to explain the difference in pay between a man and a woman who are doing like work, equivalent work or work of equal value, they must show that the difference in pay is genuinely due to a factor that is not the difference of sex and that the factor is material—that is, significant and relevant. An employer cannot explain the difference by relying on a factor that is directly discriminatory, in that women are treated less favourably than men. Under the present law, employers are not permitted to argue that a directly discriminatory factor is objectively justified. If the difference in pay is indirectly discriminatory, because it has an adverse disparate impact on workers of one sex, it cannot be relied on by the employer unless it is objectively justified. That means under European law that it must be shown to be appropriate and necessary in accordance with the well known European principle of proportionality. In other words, the employer must show, because of European law, that the means employed are proportionate to the employer's aim. Clause 1(2) is fundamentally flawed for at least three main reasons. If the Minister disagrees with me, I hope that she will explain why. First, it would in some circumstances place an increased burden on employers, because they would be required to satisfy the test of reasonableness even in relation to factors that are not discriminatory. Ironically, that would add to the employer's burden quite unnecessarily. Secondly, it suggests that factors that are directly discriminatory would become open to justification as being reasonable, yet it is quite clear that under EC directives and as a fundamental tenet of our domestic discrimination law, you cannot justify direct discrimination. Thirdly, and perhaps most importantly, it would substitute a weaker test of ““reasonableness”” for that of objective justification in cases of indirect discrimination. As the noble Baroness, Lady Prosser, and others have said, that would clearly be incompatible with Article 141 of the treaty and the equal pay directive. In other words, Clause 1(2) would not simplify and it would undermine the effective enjoyment of equal pay for equal work. Therefore, I agree with the noble Baroness, Lady Gould of Potternewton. Clause 1(3) proposes that, where employers are found to have breached the Equal Pay Act, they should be required to conduct and publish a pay audit. I agree with the noble Baroness, Lady Prosser, that that would not be of any great practical value. The case for mandatory equal pay audits recommended in the Hepple report and included in my Equality Bill has, I hope, been made out, provided that it is applied in a flexible and sensible way and only to large and medium-sized employers, and provided, as the noble Baroness, Lady Gould—I think—said, there are transitional measures to allow employers and the trade unions in good faith to move towards equal pay, where the audit discloses problems that need to be dealt with in an orderly way. The current law’s reliance on individuals bringing equal pay claims to bring about widespread equal pay has not succeeded in achieving its objective, as several noble Lords have pointed out. Not only does the system fail to bring about equal pay, it clogs up the tribunal system with hundreds, perhaps thousands, of women lodging complaints about the same employer and the same set of facts, as in the speech therapists’ case. Pay systems are just that: they are systemic. Only a comprehensive pay review based on an audit of the entire pay system will bring about the necessary change. I remember, in one of the early equal pay cases in the House of Lords, one of the Law Lords saying to employers that that case should warn employers to look at their pay systems properly, identify where there are clusters of women in particular parts of the sector and make sure that they eliminate direct and indirect discrimination in pay. That has not happened and, because of that, local government employers, for example, have accumulated vast liabilities for damages, which now put them at serious risk of not being able to do their other jobs properly. The use of the audit is so that the employer knows what is happening and can take remedial steps rather than accumulating vast liabilities. It also keeps the lawyers away, one hopes. The voluntary approach to equal pay reviews has had little impact during the 38 years since the Equal Pay Act was enacted. A survey published last year by the Equality and Human Rights Commission found that only 23 per cent of private sector organisations had completed or were planning an equal pay review, compared with 43 per cent in the public sector. Successful equal pay claims are notoriously difficult to bring and require employer and employee to go through a tortuous and lengthy procedure. Requiring only those employers who have lost in an employment tribunal to undertake an equal pay audit is punitive and is not an effective means of bringing about the necessary change, as several noble Lords have pointed out. Press reports suggest that the Government are now proposing to require public sector employers to publish the gender pay gap within their organisations; that is, to compare the average pay of men and the average pay of women. I hope that that is incorrect—it seems to me to be dotty; it would be a crude measure and of little practical value to address the underlying problems of the pay gap. In the first place, it would not reveal the causes of pay discrepancies between comparable groups of male and female workers. With access only to those crude figures, employees would remain in the dark about whether the pay gap is caused by undervaluing female-dominated jobs, a glass ceiling that prevents career progression for women or overt discrimination. Moreover, any such measure that excluded large and medium-sized firms in the private sector, in which the vast majority of people are employed, would not be a serious attempt to address the pay gap. I hope that that rumour is incorrect. Like all other noble Lords who have spoken, including the right reverend Prelate the Bishop of Southwark, who made a powerful speech, we strongly support the principle of flexible working for the reasons expressed by, in particular, the noble Baroness, Lady Morgan of Huyton. She made me think about whether we need to consider age limits much more carefully. I therefore cannot say that we give unequivocal support to this proposal, although we obviously support the principle of flexible pay. We look forward to learning from the Minister the Government’s views of the Bill and whether she is authorised to tell us what the Government think is the best way forward to secure equal pay and eliminate sex discrimination in the workplace. The noble Baroness, Lady Vadera, has been unfairly attacked for observing green shoots in the economy; I hope that she will be able to share her vision of springtime in Whitehall in this important area.