Dos and don’ts of positive action

In recent years, there has been an ever-increasing focus on creating and maintaining diverse workforces. It is an essential part of any comprehensive ESG strategy, and research from McKinsey in 2020 confirmed once again that more diverse businesses tend to perform better.

Against this background, many organisations are exploring whether they might be able to rely on positive action to improve the diversity of their workforce. This blog explains the dos and don’ts of implementing positive action in your workplace.

Legislative and regulatory backdrop

While the Equality Act 2010 is the main legislative source of positive action (which we will discuss further below), there are two interesting legislative and regulatory developments which may also shift how businesses examine their diversity strategy:

1. Political Agreement between EU Parliament and the Council on “Directive on improving the gender balance amongst non-executive directors of listed companies”

While it is not yet law, the directive, if passed, would:

• Dictate that in EU-listed companies 40 per cent of the non-executive directors, or 33 per cent of executive and non-executive directors, are made up of the “under-represented sex” – at present women.
  
  
• This would be coupled with requirements to favour the “under-represented sex” in deciding between two equally qualified individuals if that company is missing their diversity quota.
  
  
• Introduce a requirement to report on whether companies are meeting quotas, and
  
  
• States would need to legislate for sanctions that are “effective, proportionate and dissuasive” to ensure compliance if companies are not meeting the quota and not reporting.

This EU law will not automatically be incorporated into domestic UK law, however some regulators are beginning to ask for similar reporting.

2. FCA – Diversity and inclusion on company boards and executive management

The FCA has finalised rules requiring UK companies to report on whether they have met diversity targets for their board. The targets to hit will be:

• 40 per cent of the board should be women.
  
  
• At least one of the senior board positions should be a woman.
  
  
• At least one member of the board should be from an ethnic minority background.

If firms are not meeting targets, the FCA expects them to explain why they are not doing so. The FCA hopes that this will hold companies to account and increase transparency for investors.

What is positive action and how can it help businesses?

In short, the Equality Act 2010 allows for positive action not positive discrimination. Employers can give certain proportionate advantages to under-represented groups in particular circumstances but cannot treat them more favourably than other groups. The consequences of getting it wrong go beyond the legal: there are reputational considerations as well. For example, the RAF has recently come under fire for an alleged “effective pause” in hiring white male candidates in order to meet diversity targets, which the former head of RAF recruitment allegedly said were “impossible”.

There are two lawful ways employers can promote positive action:

• The general rule (section 158). To rely on this exemption an employer must show that it:
  
  
  • 1. Reasonably thinks that:
    
    
    • a. People who share a protected characteristic (PC) suffer a disadvantage because of that characteristic, or
      
      
    • b. have different needs to people without that PC.
      
      
    • c. Participation in activity by people who share a PC is disproportionately low.
      
      
  • 2. Has a legitimate aim of meeting or ameliorating one of three aims identified above, and
    
    
  • 3. Is acting proportionately.
    
    
• Recruitment and Promotion, otherwise known as the “tie-break” rule (section 159):
  
  
  • 1. The employer must reasonably think that either condition 1 a. or c. above applies.
    
    
  • 2. If acting to remedy 1 a. or c., an employer can prefer recruiting or promoting a candidate with a PC to one without a PC if:
    
    
    • a. The candidate with the PC and the one without are “equally qualified”,

    • b. There is no policy of treating people with a PC more favourably,

    • c. The action is proportionate.

For a more in-depth discussion on the provisions of the Equality Act, please see our previous blog post here.

Dos and don’ts of positive action

• Don’t recruit specifically to remedy a lack of diversity.
  
  It is unlawful to advertise a position or recruit exclusively for individuals with a particular PC. This is direct discrimination and as such cannot be justified.
  
  For example, in Amnesty International v Ahmed, the employer tried to argue that it was justified in not promoting the Claimant because of her ethnicity, due to health and safety obligations. The EAT rejected this argument and reaffirmed the sole question is to ask why the treatment occurred: if because of a protected characteristic it was directly discriminatory and therefore unlawful.
  
  The EHRC Employment Code of Practice (“The EHRC Code”) gives some examples of more lawful action. For example, mentoring or shadowing schemes or specific training opportunities for the targeted group to increase recruitment or promotion chances.
• Do document your reasoning and decisions.
  
  The Equality Act says an employer must “reasonably think” there is a disadvantage, a need for different treatment, or low participation before safely using sections 158 or 159. Whatever basis you are relying on ought to be clearly documented. This should guide the legitimate aim and influence the positive action taken. The EHRC Code gives the example of an engineering firm which has identified low-participation of women due to gender-stereotyping and lack of visible role-models. As such they would be justified in running a careers fair exclusively for girls and women attended by female engineers.
  
  
• Don’t be too over-enthusiastic about the “tie-breaker” equal qualification route.
  
  In Furlong v the Chief Constable of Cheshire, the employer stated that all 127 candidates who passed the interview stage were equally qualified, allowing them to use s159 to recruit under-represented groups. The Tribunal rejected this approach stating that as a matter of “common sense”, not all 127 candidates could be equally qualified.
  
  In general, employers should exercise caution when applying the tie-break rule. There will almost always be questions around whether candidates are genuinely equally qualified, and if the rejected candidate were to cotton on to the reasons for their rejection, they may well bring a discrimination claim themselves. This is part of the reason organisations tend to favour positive action measures under the general rule, where the impact is more diffuse, rather than relying on a measure which has a direct impact on specific, identified individuals.
  
  
• Do act proportionately
  
  The method of implementing positive action will depend on what the business’ desired outcome is and what the employer is trying to achieve. The EHRC Code states that employers should consider whether it is an appropriate way of achieving their aim and balance the potential positive outcome against the discriminatory impact on others.

  Whilst not specifically a positive action case, Eversheds Legal Services Ltd v De Belin gives helpful insight into how Tribunals might approach the question of proportionality. In this case, the employer was carrying out a redundancy exercise and, when using scoring criteria covering the period of the employee’s maternity leave, gave her the maximum (best) score rather than a score based on her pre-maternity performance. This meant that the other male candidate selected for redundancy was made redundant. The Tribunal held this was not justified as it went beyond what was necessary to protect pregnant workers and caused injustice to other colleagues.

• Don’t have a knee-jerk reaction.

  There are lots of aspects of your organisation which might benefit from reflection and review through the diversity and inclusion lens. The EHRC Code recommends that employers review all of their policies to check for consistency with their Equality policy as a mechanism for change. Ultimately, the permitted forms of positive action may take a long time to bear fruit and trying to effect change overnight, while potentially well-intentioned, can create its own risks.

  In Bayfield v Wunderman Thompson (UK) Limited, to try and remedy its gender pay-gap of 44.7 per cent, the company decided to “obliterate” its reputation as a “boys club” full of “white, British, privileged, straight men”. In pursuit of this, two white male directors were selected for redundancy over a female director. The tribunal held that this constituted sex discrimination.

• Do keep your actions under constant review
  
  If all goes well, there might come a time when your legitimate aim is met. In this case, an employer will no longer be justified in taking positive action measures. Of course, you won’t know that unless you keep your actions under review. On the other hand, you may find gaps in your efforts or certain specific deficiencies that need to be remedied. Reviewing and documenting your review over time is essential to measuring the success (or otherwise) of your efforts.
  
  The EHRC Code gives the example that while an employer might find that there has been a positive impact of retaining most physically disabled people, there has been low retention of those with mental health conditions. At that point the employer may want to seek more specialist advice.
  
  
• Do remember you might have to take “positive action”
  
  Employers are under an obligation to make reasonable adjustments for disabled employees. As such, in certain circumstances treating a non-disabled employee or candidate less favourably will not be discrimination and failing to treat the disabled individual more favourably will be discriminatory.

With many thanks to Alex Evans, a current paralegal in the Employment team, for their help with producing this blog.

If you require further information about anything covered in this blog, please contact Charmaine Pollock, or your usual contact at the firm on +44 (0)20 3375 7000.

This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.

© Farrer & Co LLP, September 2022