Equal Pay, Litigation and Reflexive Regulation: the Case of the UK Local Authority Sector
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Equal pay, litigation and reflexive regulation: The case of the UK local authority sector
Colm McLaughlin and Simon Deakin
Introduction Much of the literature on progressing gender equality in the workplace has been framed around the dichotomy between the ‘business case’ and regulation (Dickens, 1994; Özbilgin and Tatli, 2011). This mirrors similar debates in the broader sphere of business and society between ‘hard’ and ‘soft’ law. The discourse of ‘better regulation principles’ has encouraged a shift away from hard forms of regulation that have been described as overly prescriptive and inflexible. Purely voluntarist forms of governance, however, have been criticised as being ineffective (Dickens, 1994; Noon, 2007). This polarisation may be unhelpful in that law and voluntarist efforts can be interrelated. For example, law can play an important role in shifting managerial attitudes (McLaughlin and Deakin, 2012), while voluntary industry standards can sometimes become powerful norms possessing a ‘quasi-regulatory character’ (Klarsfeld et al., 2012: 312). Dickens (1999, 2007) argues for a role for ‘social regulation’ as a way of bridging the dichotomy, with unions playing a key role in bargaining collectively for equality. In this way, unions can move the framing beyond a purely economic one, introducing notions of justice and fairness, and giving voice to the interests and concerns of women. They can also use litigation, or the threat of litigation, as leverage in negotiating fairer outcomes and in moving employers beyond inaction. More recently, Klarsfeld et al. (2012) use Reynaud’s social regulation theory to highlight the multiple influences on diversity practice from multiple actors. There are parallels between the concept of social regulation and developments in the field of law where there is growing debate about the need for less direct legal enforcement and for more ‘responsive’ (Ayres and Braithwaite, 1992) or ‘reflexive’ (Teubner, 1993) regulation. In such an approach, legal rules would be designed to enable societal actors to give effect to the aims of legislators, but to tailor the implementation to the local context. Hard law remains in the background as a default when deliberation fails.
In this paper, we apply a reflexive regulation framework to the case of equal pay in the UK local authority sector in order to highlight both the potential of reflexive regulation but also some of its limitations. The public sector in the UK has been subject to the most significant increase in equal pay litigation over the last decade. While this has occurred in several areas of the public sector, including the NHS, the civil service, and the Police, it is in local government that much of the litigation has occurred, and this is where our research was focused. In order to address gender pay inequalities, local government employers and trade unions negotiated a national collective agreement in 1997, the Single Status Agreement, which was to involve a detailed job evaluation of every post. The process of job evaluation, the implementation of the new pay and grading structure, and how transitional arrangements were to be conducted were to be negotiated at local level. By negotiating a local level implementation, the actors were effectively deliberating about how best to give effect to the values of equal pay enshrined in the legislation. However, the entry of no-win, no-fee law firms into the field triggered significant levels of litigation and challenged the process of collective regulation by litigating against both employers and unions on the basis that their collectively
1 bargained agreements and related job evaluation processes were discriminatory. Both Wright (2011) and Gilbert (2012) highlight some of the potential pitfalls of job evaluation processes in their research, such as the potential for gender bias in-built into the scheme or in the application of the scheme to individual jobs. Whereas Gilbert (2012) is pessimistic about the potential of JES to deliver equal pay, Wright is more hopeful. Our research is more focused on the industrial relations issues underpinning the implementation of single status in local authorities, and how they shed light on the theory of reflexive regulation. In particular, we highlight the ambiguous role of litigation, which may act as a catalyst to self-regulation in some instances while undermining it in others.
The paper proceeds as follows. First, drawing on our earlier work (Deakin and McLaughlin, 2008; Deakin et al., 2012) we outline the theory of reflexive regulation and highlight some of its potential limitation. Second, we provide some contextual background to the SSA, early deliberations and the entry of a no-win, no-fee lawyer. Three key issues then emerge for the theory of reflexive regulation in the field of equal pay: the tension between collective solutions and hard law; the extent to which deliberation of the implementation of law can adequately address conflicts of interests and challenge existing power relations; and the bridging institutions that might be needed for reflexive regulation to function effectively.
Reflexive Regulation Reflexive regulation occupies a middle ground between purely voluntarist approaches on the one hand, and ‘command and control’ forms of law on the other. Voluntarist approaches assume that the interests of business will align with important societal interests through enlightened self- interest, but ignore the way in which such alignment is ‘contingent, variable, selective and partial’ (Dickens, 1999: 9). The ‘command and control’ approach, in contrast, relies on prescriptive controls underpinned by sanctions for non-compliance. This approach has also been criticised for being ineffective. In the area of equal pay, the ineffectiveness of ‘hard law’ is evident in the enduring pay gap, thirty years after the enactment of equal pay legislation. It was the limitations of hard law in the area of equal opportunities that led Hepple et al. (2000) to first suggest a role for responsive regulation in the context of discrimination law. At a deeper level, the critique of hard law is that there are limits to the effectiveness of the law to fully address issues within the economic and organisational spheres. The language of autopoiesis or systems theory is useful here. Autopoiesis suggests that various sub-systems are autonomous and closed, and thus the ability of one sub- system to influence another may be limited (Luhmann, 1995, 2004). Law has its own unique linguistic forms and institutional processes, and these translate only partially into the economic and organisational spheres. The more prescriptive the law, the less effective it is in bringing about the desired outcome, which often results in increasing legal ‘juridification’ and greater levels of detail and complexity (Simitis, 1987). Reflexive regulation offers a way out of this by matching the legal rules with the aim of the legislation through a process of enforced or stimulated self-regulation. Thus, the actors within the economic and organisational spheres adjust their behaviour as a result of the stimuli from the legal system. An example in the field of employment law would be the so called ‘bargained statutory adjustments’ (Davies and Kilpatrick 2004), according to which legislation creates space for employers and unions to negotiate collective agreements, which may vary statutory norms, within certain limits. The rules set out in the statute, supported by legal sanctions for breach, would operate as a default and so would apply as a last resort if the parties failed to
2 agree. The idea behind the design of the regulatory model is that the presence of the law acts as a stimulus to self-regulation which can result in agreement on norms suited to the local context.
Hepple (2012) refers to a triangular relationship between three interlocking mechanisms for this approach to be effective. First, there must be internal scrutiny by the organisation itself of the issues identified by the regulation. In the area of equal pay this would involve transparency around payment systems and the pay gap. Legislation can encourage this process by requiring organisations to collate and disclose relevant information; this is the context in which mandatory pay audits have been put forward as one means of addressing persistent pay inequalities (Deakin and McLaughlin, 2008). Second, there must be deliberation between a range of stakeholders. And third, there must be some external assistance and, if self-regulation fails, enforcement by an outside agency, such as, in the present context, the Equality and Human Rights Commission. Theory suggests that reflexive regulation can avoid the rigidity and complexity of the ‘command and control’ approach while at the same time circumventing the inaction of purely self-regulatory approaches. The involvement of various stakeholders also increases the likelihood that outcomes will have greater legitimacy. Additionally, while there may be a range of potential solutions to a particular issue, a reflexive governance approach also encourages a learning process to take place about which solutions are more effective. So there is not only deliberation within an organisation, but also between organisations, and this process can be aided by benchmarking procedures and other ‘best practice’ dissemination mechanisms.
This approach does not imply there is no role for law. The law plays a role in setting the default rules, limiting the extent to which local implementation can depart from the default, specifying the involvement of representative stakeholders, and legislating for disclosure of relevant information (Deakin et al., 2012).
There are, however, a number of potential limitations to a reflexive regulatory approach. First, there is the danger that deliberation may underplay or even ignore conflicting economic and political interests, with the issues being addressed depoliticised. Existing power relations may be left unchallenged and abuses of power allowed to continue (McCrudden 2007). This is particularly pertinent for any discussion over equal pay, where conflicting economic interests are clearly visible and where distributive as well as deliberative negotiations might occur simultaneously. Distributive conflicts will exist not only between employer and workers, but also among workers. As Dickens (1999: 15) notes, historically collective bargaining has been poor at delivering equality, and indeed ‘traditional, white male-biased, union bargaining priorities have meant that collective bargaining has often served to perpetuate rather than challenge inequalities’. While unions now play a leading role in delivering equality, correcting existing inequality will challenge traditional pay structures and those that have benefitted from them. Second, deliberation on how to implement the law, may lead to a discussion among the stakeholders about how far to implement, or even whether to implement, thereby weakening the core values that are articulated in the legislation (McCrudden 2007). Finally, for this approach to be effective, functional ‘bridging institutions’ between the legal system and the organisational sphere need to exist. That is, institutions or mechanisms must be in place to facilitate effective deliberative decision-making (Deakin et al., 2012). In the equal opportunities and equal pay context these would include collective bargaining or other employee-based representation. However, given the systematic undermining of collective bargaining in the UK over the past thirty years, effective stakeholder involvement at workplace level is problematic, particularly in the private
3 sector. Effective ‘bridging mechanisms’ also require the necessary expertise at local level so that any negotiated implementation gives effect to the aims of the legislators. External agencies will play an important role in advising local level stakeholders.
Given these limitations, then, how effective is a reflexive approach to equal pay likely to be? The rest of the paper examines the implementation of the single status agreement in the UK local authority sector through the lens of reflexive regulation and attempts to shed some light on this question.
Equal Pay in Local Authorities The issue of equal pay among UK Councils, or local authorities, reached crisis proportions in the second half of the 2000s and shows little sign of abating. Some estimates put the liability for back pay in local government at around £3 billion (LGE 2006), though this is likely to be a conservative estimate given that Birmingham City Council alone recently estimated its potential liability at £757 million (Butler, 2012). Claims have been made that local authorities would have to cut services and sell off assets in order to meet their equal pay obligations. The trade union UNISON has taken in excess of 40,000 claims to the Employment Tribunal, the GMB over 25,000 and the no-win, no-fee law firm Stefan Cross Solicitors (the primary no-win, no-fee law firm in the local authority equal pay market) is reported to have had in excess of 30,000 equal pay cases on its books across the public sector. As Lord Justice Mummery noted (Hag & Ors v. The Audit Commission) ‘equal pay litigation in the ETs has now reached almost epidemic proportions’.
At the heart of the issue is a debate over whether litigation-based approaches are an effective means of addressing pay inequalities. To study this issue empirically we draw on semi-structured face-to-face interviews with senior HR representatives at six local authorities, five union representatives (two national, two regional and one local) and one no-win, no-fee lawyer involved in local authority litigation. Interviews were conducted between mid-2008 and mid-2010 and involved local authorities in England. We also make use of the extensive coverage of this litigation in the press and other media, and refer to legal decisions where relevant.
The background to our study is the 1997 national collective agreement, referred to as the ‘single status agreement’ (SSA), which was negotiated between the public sector unions and the local government employers to address historical gender inequalities within local authority pay systems. The catalyst for the agreement was litigation by public sector unions during the first half of the 1990s. In 1992, NUPE (amalgamated in 1993 to form UNISON) took a case on behalf of 1,300 workers in school dining rooms at North Yorkshire County Council. The case went to the House of Lords and the women were eventually awarded £2 million in back pay. This was followed by joint litigation taken by the GMB and UNISON on behalf of 1,500 school dinner workers against the former Cleveland County Council in 1995, which resulted in £4m for equal pay and £1 million for sex discrimination.
The SSA brought together the employment terms and conditions of various groups of workers – what was known as the ‘white book’ for manual workers and the ‘purple book’ of the administrative, professional, technical and clerical workers (APT&C) – to form the ‘green book’, or single spine of terms and conditions. While it was a national agreement with a national pay structure, actual spinal points for different jobs were to be worked out locally through a detailed job evaluation exercise
4 where each post would be evaluated against a range of criteria in a locally agreed joint evaluation scheme (JES).
The most significant inequalities related to the ‘white book’ or manual workers. A limited job evaluation for the ‘white book’ had taken place in 1987 but it had ignored the bonus system where many male dominated manual jobs had been receiving historical bonuses averaging 30 percent of basic pay, though in some cases the figures were much higher. The bonuses had been introduced as a way of getting around the incomes policy of the Labour Governments of the 1970s, which froze public sector pay. While the payments were performance related initially, in many cases monitoring ceased over time and they became part of the basic pay package unrelated to performance or productivity. These payments in effect were now part of their basic pay, as has been shown in numerous ET rulings since the mid-2000s. Hence, there were some obvious historical inequalities as well as potential hidden inequalities that the job evaluation processes was intended to unveil and eradicate. The original pay structures were to apply until after the job evaluation process had been completed, at which point workers would move across to their new scale point in the ‘green book’.
The SSA agreement can be viewed through the lens of reflexive regulation. The parties agreed to give effect to the Equal Pay Act by scrutinising their payment systems through a detailed job evaluation that was to be worked out at a local level between the key stakeholders. Deliberation and negotiation rather than litigation would provide the way forward to achieving equality, though the option of litigation remained in the background as the default rule if the parties were unable or unwilling to reach agreement on the implementation of SSA. As UNISON’s (1997) guide to negotiation on the SSA stated, ‘negotiation is better than litigation’, but if employers fail to agree ‘it should be made clear that they are opening themselves to equal pay challenges’.
However, despite the SSA being a significant achievement for the union, very few local authorities implemented single status in the initial five years. No date had been set in the 1997 agreement for implementation of single status and there were no penalties for failing to implement at the local level. The 2004 NJC Pay Implementation Agreement set a deadline of April 2006 for job evaluations to be completed, with the new single status pay structures to be in place by March 2007. Again, however, there were no penalties on the parties for failing to reach agreement by these dates, other than via litigating through the Employment Tribunals. The small number of local authorities that completed the job evaluation process fairly quickly seemed to have avoided the back pay issues other authorities subsequently faced. Most local authorities, however, took a long time to get the process under way. By the 2007 deadline, only around half of the almost 400 local authorities within England and Wales had implemented a new single status pay structure, and by 2009 this figure had increased to two-thirds of local authorities (LGE, 2009). Of the six local authorities we interviewed, one had completed the process by 2003, two had adopted a two-phase process and implemented phase one (the lower half of the new single spinal column) and were still working on phase two (though they still had some outstanding legal cases in relation to the implementation of phase one), one was still conducting job evaluations and had yet to implement a new pay structure for any of their green book staff, one authority had been unable to reach agreement with their unions and had unilaterally imposed a new single status pay structure, and one had not even reached agreement on conducting a job evaluation process (and only did so in 2011, by which time many services had been outsourced).
5 Inertia and resistance Given that the unions had been successful with litigation in North Yorkshire and Cleveland and had pushed hard for the single status agreement, it seems surprising that it took them so long to negotiate the implementation of the agreement. A combination of initial inertia and subsequent inability to reach agreement between employers and union at the local level were the most common explanations offered by our interview participants. While many authorities set up pilot projects during the first few years, the transition from pilot to full job evaluation was problematic. As one union official pointed out, agreement had to be reached at local level on the job evaluation methodology to be used, the format of the pilot studies, and so on, and each set of decisions had to work their way through various committee structures. ‘In local government [there are] processes for avoiding things; it’s like swimming through sand all the time’. A regional union official reported that at one council the JES had been completed but not implemented when the CEO announced an organisational restructure, which meant the process had to be re-started. At another council, the process of job evaluation had been completed but there was joint agreement that it had been done incorrectly and had to be restarted. Local authorities also vary significantly in the number of staff they employ. While some employ only a few hundred staff, many are very large employers with Birmingham City Council, the largest local authority in the UK, having a workforce of other 30,000 (excluding its education workers). The process of jointly evaluating every post in the council and allowing staff to challenge or appeal the result of the evaluation process is by its very nature a time consuming one.1 Several local authorities reported that the initial pilots were done on a paper system and were very time consuming, and it wasn’t until a computerised version became available that the process could be speeded up. Unions also accuse employers of not allocating enough resources to the implementation of single status. Several local authorities reported that they did not want to be the first council in the area to implement the job evaluation scheme given the size of the undertaking and thus were holding back so as to learn from the mistakes of others.
Inertia, however, is only part of the explanation. A more significant problem was that employers and unions could not reach agreement about what to do with the results of the pilot studies, and inertia turned to resistance as it became evident that implementation of the JES would result in some workers facing potential pay cuts (what have been referred to as ‘losers’) while other workers would see their pay increase (‘winners’), with the overall impact likely to be an increase in the overall wage bill. Many authorities initially tried negotiating on the basis of an overall ‘nil cost’ settlement, where the additional costs of winners would be offset by reductions for losers. Additionally, the job evaluation process had a significant and negative impact on the pay of clerical and highly paid professionals, some of whom were sitting around the corporate management table making the decisions about implementation, so it was not in their interests to implement it quickly. On the union side, it had been assumed that achieving equal pay would be achieved by ‘levelling up’ for those who were being underpaid, rather than ‘levelling down’. Pay cuts were not something that had been anticipated and nor were they something the unions could sell to their members, particularly as it was not the basis on which they had presented SSA to them back in 1997. Thus, employers wanted a settlement that would not increase the wage bill while unions wanted lifetime pay protection for any workers who would suffer wage cuts, and so negotiations over the JES became fractious and stalled in many local authorities. One authority noted that it was 2005 before
1 see Hartley v. Northumbria Healthcare NHS ruling for a detailed account of a JES)
6 their local union officials accepted that there would have to be pay cuts for some workers. In some authorities, employers wanted to use the opportunity of examining their pay systems as a chance to introduce other employment relations reforms or negotiate wider changes in pay and rewards, which further complicated the process of negotiations. While the media has frequently criticised the unions for being slow to act, unions and employers point to the cost of implementation as the primary reason why most local authorities were slow to implement the SSA (LGE, 2006).
The involvement of no-win, no-fee law firms This situation was to be made significantly more complex with the involvement in early 2003 of Stefan Cross Solicitors, a Newcastle based no-win, no-fee law firm. Stefan Cross had previously been a solicitor and partners of Thompson’s, a leading trade union orientated law practice, and had represented unions on numerous occasions, including in the Cleveland case. His intervention into the equal pay area followed a European Court of Justice ruling, which increased the period of entitlement for back pay in equal pay cases from two to six years. This created the possibility of significant claims for victims of unlawful discrimination over pay. Up to this point, back pay had been not on the negotiating agenda. The focus of the negotiation between management and unions had been about rectifying existing inequalities in the pay structures and dealing with potential ‘losers’. All of the local authorities we interviewed stated that back pay had not been discussed until Stefan Cross had come on the scene. The Council we spoke to which had fully implemented the JES by 2004 had made no back pay settlement at all, and our interviewee told us that he had previously worked at another local authority that had also settled prior to 2004 with no back pay settlement.
While unions had been involved in litigation before this point, Stefan Cross’s involvement seems to have persuaded a number of unions to engage in litigation to a far greater extent, both as a way of getting employers to engage in serious negotiation of collective settlements and to prevent no-win, no-fee law firms enticing their members away from union representation by promises of generous back pay settlements. One HR Manager explained how there had been no discussion of back pay with the unions throughout their negotiations over the JES. However, following litigation in neighbouring authorities, several thousand equal pay claims were lodged from both the trade unions and a no-win, no-fee law firm within a short period of the JES being published.
Where unions did begin negotiating deals for back pay following Stefan Cross’s interventions, these were often for amount significantly less than the full six-year back pay entitlement. As one HR Manager noted, ‘it was simply a... compensatory sum that they would accept in return for giving up their right to make a claim’. Employers claimed they did not have access to unlimited funds and were threatening to outsource services and cut jobs. Unions argued that in negotiating a deal with management they had to balance a range of interests including potential job losses, pay cuts for losers and back pay. They also wanted pay protection for ‘losers’ going forward for a period of time. Some of the early agreements involving the councils we interviewed included pay protection of up to six years. It was this attempt to balance the needs of various interests that let to litigation against the GMB union in Allen v GMB (2005).
In Allen the employment tribunal ruling (which was later overturned by the Employment Appeal Tribunal but then upheld by the Court of Appeal) found that the way in which the union arrived at a negotiated collective settlement with the Middlesbrough Metropolitan Borough Council, constituted indirect sex discrimination and victimisation discrimination against their female members. The
7 agreement had attempted to balance a range of conflicting interests; back pay, pay cuts, and potential job losses through service cuts and outsourcing. In balancing the various interests, the GMB was found to have given greater weight to pay protection for the ‘losers’ than it had to ensuring full back pay for its female members. The Tribunal ruled that the GMB had been entitled to try to balance a range of conflicting interests, and that the approach it adopted was understandable: those receiving back pay were very grateful to be receiving a settlement, although part of the problem was that they had been unaware of how much they might have been entitled to had the union supported their claim before a tribunal. The losers, on the other hand, were extremely vocal in their opposition to any pay cuts. As one union official cited in the case noted, the losers had wanted ‘to string her up’. Thus, the union was adopting a strategy that would provide ‘the least protest from the membership as a whole’ (UKEAT/0425/06/DA). However, in the view of the tribunal, the agreed back pay settlement constituted merely 25 percent of a potential claim by the White Book claimants, who were not made aware of this. The tribunal was highly critical of the union for failing to give its female members adequate advice, for failing to inform them of the losses they were being asked to incur in return for greater pay protection for other, mostly male, members and for job security in the long run, and for using fear and manipulation to get them to agree to the deal. While the union was found not to have committed direct sex discrimination, the tribunal ruled that their approach constituted indirect sex discrimination (as those losing out were predominantly women) which the union could not justify in the circumstances. The tribunal was also critical of the GMB for accepting at face value the employer’s claim that they could not afford to pay more instead of pressuring them to find alternative ways of funding a fairer settlement.
Subsequent to the Allen case, employers have faced legal claims arising from the implementation of local level agreements on a number of grounds, sometimes with unions as co-defendants. One authority we interviewed in 2008 was facing three sets of litigation in employment tribunals: they had just finished a seven week hearing in relation their bonus schemes for manual workers and were awaiting a ruling; they had an eight week hearing over the legality of their job evaluation scheme booked in for 2009 (the accusation was that it was discriminatory in that one way of dealing with the losers was to adjust their scores, while the job evaluations of lower paid women was rarely challenged); and they faced a six week hearing in early 2010 in relation to their job enrichment scheme (this was introduced to deal with losers once they realised that pay protection was potentially discriminatory, but the accusation is that only the predominantly male losers had their jobs enriched). In some cases, local authorities are defendants in claims brought by trade unions on behalf of their members, in other cases they are co-defendants with unions in cases brought by lawyers on behalf of individual employees who argue that the unions and local authorities ‘colluded to delay and deny these women equal pay’.
A subsequent and significant case was the ET ruling in February 2012 of Brennan v Sunderland City Council on the job evaluation scheme. Here Sunderland Council was ruled to have implemented the JES in a ‘cynical’ manner so as to limit the impact on predominantly male employees whose entitlement to bonus had been removed through the implementation of single status. The ET concluded that the job evaluation exercise was designed to restore the pay of certain male roles because of a fear of significant industrial action. This was to be achieved through pay protection for a limited period, entitlement to ‘non-competitive interviews’ when promotion opportunities arose, and a commitment by the Council to job enrichment for those jobs affected by the loss of bonus payments. It had previously been assumed that the Hartley v. Northumbria challenge to the NHS JES
8 scheme within Agenda for Change had settled the issue of JES schemes being challenged but this ruling may lead to further challenges (Cloisters, 2012).
The implications for reflexive regulation The various strands of litigation have complicated the process of collective bargaining over equal pay and raise significant difficulties in relation to the theory of reflexive regulation. The following section explores three key issues. The first issue concerns the relevance in this context of the concept of ‘bargained statutory adjustments’. In the context of equal pay, rather than acting as a default or as a matter of last resort when self-regulation fails, the law acts in addition to the self-regulatory arrangements and may undermine collectively agreed settlements. Second, although considerable leeway is given to the collective parties to make their own agreements, negotiated settlements must meet certain standards in order to be legitimate. Achieving equal pay involves balancing diverging interests and challenging existing economic relations, and it is not clear how effective reflexive regulation can be in this context. Finally, there is the question of effective ‘bridging mechanisms’ and whether, given the complex nature of equal pay claims, the necessary expertise and support for collectively negotiated solution was available in all cases.
Collectively negotiated settlements The theory of reflexive regulation holds that certain issues are best resolved at a local level. In the context of working time and collective redundancy consultation, the relevant legislation has been drafted to allow collectively negotiated agreements to take precedence over statutory provisions. However, in the current context of equal pay law, negotiated agreements are not protected from legal challenge, and this has had a significant impact on the implementation of SSA.
Achieving equal pay requires payment systems be scrutinised in order for inequality to be identified and eradicated. While there are limitations to a job evaluation scheme in achieving equal pay, including the potential for sex bias (Gilbert, 2012), they can play a role in helping improve women’s pay (Wright, 2011). One HR manager we interviewed said the employer had conducted an equal pay audit before and after the implementation of Phase One of the new pay structures following the JES, as a result of which the gender pay had narrowed from 10.18 percent to 3.34 percent for the group of workers affected. More generally, interviewees from both union and management sides stressed that greater equality of pay could only be achieved through a negotiated settlement at the local level, with new payment structures shaped by a JES. The question of back pay is only one part of the equation.
Unions also claim that litigation by independent law firms is in many cases parasitic upon the job evaluations, which have been jointly conducted by unions and management. As one official put it, ‘no-win no-fee lawyers were waiting for the unions to do the hard work of negotiating... to get the ground work done for work related as equivalent claims and then moved in after the unions to mop up the back pay’. According to this point of view, no-win, no-fee law firms tend to cherry pick cases from the public sector where unions have been engaged in job evaluations, as opposed to tackling equally serious but less transparent inequalities in the private sector.
Unions themselves also significantly increased their levels of litigation. In some cases this was to force recalcitrant employers to engage with the issue, but often litigation had been initiated in the middle of jointly conducted job evaluations and negotiations over a new pay structure in order to stave off the entry of a no-win, no-fee law firm. Similarly, several councils argued that litigation
9 slowed down the process of resolving inequalities: HR resources were diverted to dealing with the thousands of claims arising from litigation when they could have been completing job evaluations. A further issue raised by union interviewees was that even if litigation was successful, it would still have to be followed by further negotiation with management over a new pay structure. As one union official stated:
We are not going to see that the intervention of no-win no-fee lawyers has led to any significant narrowing of the gender pay gap within local government. I would really like to be wrong on that but I don’t think we will find out in 10 years time it’s significantly had an impact. Single status will have had a much greater impact on narrowing the gender pay gap and in trying to improve job opportunities for women. What the intervention of no win no fee lawyers has done is to deliver back pay to individuals, a significant proportion of [which] has gone to lawyers, but the pay and equality will remain unless the unions negotiate single status.
Several union interviewees told us that, in their view, the ruling in the Allen case had had a significant impact on the way in which unions had subsequently approached the issue of equal pay in local authorities, with its main effect being to slow down the process of implementing single status. Facing the possibility of claims against them for discrimination, the unions had become hesitant to endorse agreements on back pay with local authorities, or to offer advice to their members about accepting a given management offer. When claims were being settled, unions began to act with lawyers present so that their members would be left in no doubt about the possible rights they were giving up. Additionally, unions began to advise their members to reject offers from employers, which the union would normally have considered fair, because of the possibility that an employment tribunal might eventually make a higher award. Thus the assessed future value of a claim, rather than the extent of past inequality, became the basis of the recommendations made by the unions to members. A further layer of costs was added by the need for local officials to seek legal advice from national officers at every stage of the process. The ‘equality proofing’ of local level agreements could, we were told, add several months to the process of reaching settlements.
This lack of willingness to endorse agreements was problematic for employers. Some authorities reported that it was:
...difficult to get the unions to agree to anything now because they feel they are potentially going to be litigated against... Although they are quite prepared to talk to us and give us their views on various issues, at the end of the day ... they are not going to agree anything... It will be more a case of the extent to which they disagree... [Allen has] slowed things down quite significantly. This HR Manager later added that in negotiating a deal with employers:
You come to a compromise... you come to a good deal that satisfies the trade union members, and it satisfies the employer side of things. And that is becoming increasingly difficult now because of the results of that particular case.... Irrespective of the ins and out of that case, the trade unions are worried about doing a deal with the employer.
10 For the unions, the need to refer settlements back to the legal process undermined the idea that collective bargaining was based on a series of compromises. If members, having voted on a deal, later went back on it and began to unpick it through individual litigation, the union’s position was undermined. As one union official noted, you never get everything you want in a collective agreement: ‘Everything at the end of the day is a shabby compromise…. but it’s done on the basis of this is the best we can negotiate; it’s not some of you can take it and some of you can’t. Once we take a vote on it, it’s implemented collectively, that the whole basis. Why would they bother negotiating with us otherwise?’
There were, at the same time, some signs that unions adjusted over time to the new context provided by the Allen case. Our later interviews, conducted in 2009 and 2010, suggest that initial anxiety to the implications of Allen gave way to acceptance once there was clarity about how to reach legally sound agreements, even if this might have been a matter of ‘crossing every t and dotting every i’. An early concern that the facts in the Allen case might have been relevant to a far wider range of agreements also gave way to a tendency to see Allen as exceptional. A union official, referring to Allen, commented that in their region they were ‘far too disciplined’ to make the same mistakes.
Later rulings provided clarity about the legitimate scope for agreement and have been seen as giving negotiators greater leeway. The Hartley v Northumbria NHS Trust case, where a challenge supported by a no-win, no-fee law firm to the negotiated Agenda for Change agreement in the NHS was unsuccessful, was seen in this light. The employment tribunal ruled in this case that the union’s decision to negotiate an agreement rather than litigate was ‘a sensible and enlightened decision in the best interests of their members as a whole’. Although the Brennan decision in 2012 raised the prospect of a further round of challenges to job evaluation schemes, the EAT’s ruling that the employer could not shift part of its liabilities on to the union which had negotiated the JES in that case, because of the absence of statutory authority for the apportionment of damages, reduced some of the potential risks for unions arising from this decision.
Diverging interests and the role of the union One of the potential limitations of reflexive regulation is that diverging interests might be ignored and power relations left unchallenged. In this light, the Allen and Brennan cases raise serious questions for equality outcomes. In the Allen case the union was found to have discriminated against its female members, while in the Brennan case the employer and union were ruled to have had negotiated an agreement that perpetuated the unequal pay that single status was designed to eradicate.
In this context, union respondents told us that it was simply part of their job to balance a range of conflicting interests, and to do so within the constraints of the limited financial resources of employers. As one union official noted, ‘we could have bankrupted local authorities over this... There is no point us getting our women members X thousand £s in the pocket if they get... three months notice and they’ve got no job to go to. I would argue that it’s about behaving responsibly’. Another union official described how the pressure applied by management was causing strains in relationships with union officials. He recounted a discussion with the head of a council over their negotiations:
11 He just leaned across the table and said why are you doing this to us? You are not doing this to councils in the south east of England or London where 15 years ago they privatised all their support services. But we did everything you wanted, we didn’t privatise the services and now you are doing this to us.
Several HR Managers accepted that unions had tried to arrive at realistic and sustainable deals given the finances of the council. Because the issue of back pay had not arisen at the time of the implementation of single status, given the then state of the law on arrears, no councils had budgeted for it. We were told that in agreements reached before 2005, back pay had been capped at around £10,000 per person. This was viewed as a compensatory sum for a past inequity, and not based on an assessed value of a potential claim. Amounts actually paid out were calculated on locally agreed formulae which took account of length of service and hours per week worked. At the time of our interviews, by contrast, it was normal for claims to be settled for three times this amount, and claims up to £100,000 were not unknown.
The no-win no-fee lawyer we interviewed claimed that unions had created these problems for themselves. He suggested that their focus had not been on the elimination of inequalities but on pay protection for the losers, followed by ‘job enrichment’ or the redefinition of job roles to maintain differentials, and the re-jigging of the JES scores of workers in the predominantly male grades. This interviewee referred to examples of new job titles being created for traditional male roles and to job evaluation scores being artificially raised:
The grade of gardener, they’ll call them... environmental operative... the refuse collector miraculously gets moved up the scale, either re-classified or just simply re- scored.... And if they can’t do that they’ll find a way during the pay protection to achieve this objective.... What’s happened in a lot of areas is that they’ve actually created a desert of no male jobs in the lower grades.... [which] means that the women have got no claims because they’ve got no men rated as equivalent to them.
He also contested the view that women workers whose pay was raised following the implementation of single status should have been regarded as ‘winners’, as they were only being put into the position that they should have occupied had the pay systems not been discriminatory. Additionally, had they been receiving bonus payments like their male comparators, their pay would also be decreasing, and thus they should be entitled to the same pay protection and job enrichment schemes. He noted that many successful claimants were low-paid women ‘working full-time in the most difficult circumstances for £12,000 a year... [which] is virtually poverty wages’.
He also questioned union practices in resolving issues involving divergences of interests between members. Where two members were on opposing sides of a dispute, as in cases of allegations of sexual harassment, the union would normally appoint a representative for both sides. However, in the context of equal pay, the unions tended to side, he suggested, with the male workers. In addressing equal pay, it failed to recognise the inherent conflict of interest between its own members, between the ‘winners’ and the ‘losers’. Instead, he argued, at local level they had largely focused on protecting the losers which resulted in maintaining the status quo.
Comments by other interviewees add some support to the idea that some union officials at local level prioritised protecting the losers, but they explained the logic of this position in terms of trying
12 to ensure fairness for all sides while maintaining industrial harmony. A regional union official accepted that some form of pay protection had been a priority for the union out of fairness for those who were going to suffer a pay cut, and that this was standard practice in other situations of pay restructuring. He noted that ‘putting in front of people a proposal, which results in the pay cut for anyone of any order, is difficult. [Members will say] I didn’t join the trade union and pay you £10 a month and you negotiate a pay cut... [They] were genuinely incredulous, they couldn’t understand, it was beyond their mindset’. This official had argued that a transitional arrangement based on a phased reduction in pay protection was an appropriate way of dealing with the issue. He also justified this approach by arguing that if an agreement had too many losers, it would not be voted through by the members. In his region, some initial job evaluations had indicated a third of the workforce would receive a pay cut of around 35 percent. Similarly, a national-level official pointed out that a collective agreement would not be agreed ‘if a large number have to suffer an immediate pay cut’ and that ‘transitional arrangement are common sense’. Transitional arrangements had, moreover, been built into the implementation agreement for the SSA; paragraph 12.2 stated that ‘in conjunction with local grading reviews the authority and the unions shall agree on the terms on which there should be protection against loss of remuneration’. However, as the UNISON (1997) guide to negotiating single status stated, this was to be only ‘for a period of years’ and it should not be ‘applied in a way which perpetuates gender discrimination’.
These caveats notwithstanding, there is evidence that, at local level, unions were negotiating to protect potential losers on a longer term basis. As one regional union official stated: ‘we sought measures... to try and mitigate the damage and effects... where we could find ways of enriching the job which was in line with long established service development intentions in terms of modernising services’. He told us that at one council the union had succeeded in getting every job lifted out of the pay protection scheme through re-engineering and multi-skilling. He also acknowledged that ‘this is going to look a bit obvious if we are only modernising and improving and enriching those services where they were predominantly male before’. Hence, ‘we want every job looked at’ but he admitted that the losers were his priority: ‘we would seek for them to prioritise those areas because that’s where our members are going to be most adversely affected’.
One of the Councils we interviewed in the same area also confirmed that the priority for the unions they were negotiating with, at least initially, was reducing the impact on potential losers through pay protection and then job enrichment for when pay protection ended. In their 2004 agreement for phase one, ‘pay protection was a big issue for the unions at that time’. This employer had agreed to protect the bonus of ex-manual males for six years and place them at the top of their new scale. Additionally:
We agreed that we would look at modernisation of the jobs that were still in receipt of protection... and we have done quite a lot of work on that mainly around making jobs more multi-functional, more multi-skilled... It was part of the agreement that we would look specifically at the people who were still in receipt of protection.
This HR manager also confirmed that increasing the pay of winners had not been a high priority; their pay was to only increase ‘incrementally... up to their new grades’. She accepted that ‘looking back you can think that wasn’t a very good idea, but at the time that was part of the negotiation
13 with the unions to make it affordable for the council’. This Council had subsequently faced equal pay claims supported by no-win, no-fee law firm and by the unions in question.
A further point raised with us by union interviewees is that many women workers, particularly, in administrative grades previously covered by the ‘purple book’ agreement, were among the ‘losers’. The reason one council offered for not having implemented the first stage of single status was that administrative staff came out so badly under the job evaluation. They were worried about the industrial relations implications of this process and had not yet decided how to proceed. Thus, they would suggest that some of the issues they are addressing are not about gender but about industrial relations harmony.
An additional complication is the question of funding. Indeed, some respondents would argue that this is the nub of the matter; insufficient government funding to address what are historical pay inequalities (see also, Conley, 2013). For some employers, the cost of implementation, and the possible unfairness to users of local services resulting from the impact of settlements on local authority budgets, was undoubtedly a major barrier to reaching agreement with the unions for some employers. Although these councils faced a significant litigation risk, financial constraints meant that they had avoided attempts to engage in deliberation over the issue, hoping that the law might have changed in the interim or that the central government would intervene to provide financial assistance to implement the SSA. The attitude of one Council we interviewed towards paying out back pay was outright hostility: ‘they [the unions] wanted people to get a whole heap of money and going back six years; the council doesn’t have that kind of money.... [and if it] decides to agree to the demands we will have to cut a significant number of jobs, it’s that simple’. This was the Council that only agreed in 2011 to start the job evaluation process. Another Council we interviewed was also open about their strategy of fighting equal pay claims through the tribunals because of the potential costs of settlements, even though they knew they had a legitimate liability:
‘We had a case before Christmas which we will lose and it’s just a case of how much we lose by, the case is closed we are just waiting for the decision. And that was women comparing themselves to refuse collection people historically.... The reason we fought it was that we wanted to try and minimise the amount we had to pay, but we will lose that, it’s just a matter of how much.’
Union officials cited cases of other local authorities that had chosen to fight claims, at considerable costs in litigation fees, despite clear precedents having being set on the issue of back pay. One told us:
‘everyone is now getting a much clearer picture about what’s the scope of the GMF defence, how is it going to work, where is it not going to work, what kind of evidence will stand up to scrutiny in a tribunal, what wont.... there is still a huge grey area, but there are a certain number of cases where you think yes that’s clearly a case that looks like it’s going to succeed. But there isn’t always a correlation between the strength of the case and the ferocity with which the employer fights it.’
In some cases, employers had decided that the limited resources of unions for fighting claims, when compared to their own, made litigation unlikely.
14 While additional funding may have helped resolve some of these equal pay issues sooner, from the wider perspective of the effectiveness of reflexive regulation, it highlights the fact that some employers may choose not to engage in deliberation because of the economic costs involved.
Effective ‘bridging institutions’ Reflexive law theory identifies a need for effective bridging mechanism between the legal system and the organisational sphere. An issue here is whether local level actors had the expertise and capacity to undertake deliberation over equal pay. Hepple’s (2012) triangle involves external agencies providing assistance, and if necessary, enforcement. Unions at a national level did provide advice on a range of issues that, had it been followed, might have avoided some of the problems that subsequently emerged in the tribunals and in our interviews. UNISON’s (1997) advice on pay protection not perpetuating gender inequality has already been referred to. This advice specifically referred to ‘millions of pounds tied up in bonus schemes or other forms of pay discrimination’ that the agreement was seeking to address. It suggested that where ‘levelling up’ was not possible, there needed to be a ‘fair and equitable redistribution of funds’. With an eye to the potential disharmony this might cause, it stressed that equal pay issues be ‘discussed clearly and unequivocally with members’. Advice from UNISON head office in 2005 reiterated some of these points as well as other issues that had subsequently emerged in tribunal cases. It noted that altering JES scores retrospectively could threaten the integrity of the process. It suggested that re-training and enhancement of jobs for losers to protect their original pay was acceptable, although there was no recognition here this might perpetuate the gender pay inequalities. A subsequent UNISON (2010) publication prepared for the education sector pointed out the potentially discriminatory impacts of job enrichment and stated that it should be available to all members. It also suggested that pay protection should be offered to ‘winners’ as well as ’losers’, that is, to those female workers who, having been regraded, now had a comparable male worker who benefited from pay protection. The changing nature of advice from trade unions over time reflected the impact of ET rulings on the conduct of job evaluation in the public sector, as well as the difficulties at local level of giving effect to the principles of equal pay and non-discrimination, particularly when the issues were viewed through the lens of industrial relations harmony rather than equality.
It also highlighted the limitations of local level deliberation where actors lacked expertise. As the lawyer we interviewed suggested, one explanation for some of the legally questionable agreements that were entered into was inadequate guidance from regional and national offices: ‘how... a manual worker [or] a home carer branch representative is supposed to negotiate with a double qualified personnel officer and finance director in relation to a new pay scale I don’t know’. A regional union official suggested that training was paramount. This official’s region of the union had set up an equal pay unit and invested in training its staff:
I wanted all my staff, all my relevant staff, fully trained on the technical aspects of it. I wanted them to know what they were doing and I wanted them to prioritise it.... We were saying this is the biggest thing that has happened to the trade union movement, to women in the public sector in our working lives pretty much... there was more concern with getting all of that in place rather than rushing off half cocked to do a botched job.
15 As a result, he was confident that all of the local agreements in his region would stand up to any legal challenge.
Conclusion This paper has examined the crisis of equal pay in the UK local authority sector from the perspective of reflexive regulation. The theory of reflexive regulation suggests that local level actors may be best placed to give effect to the aims of legislators, rather than prescriptive controls underpinned by sanctions. The negotiation and implementation of the Single Status Agreement between unions and employers in the local authority sector in 1997 can be seen in this light. However, the complications that have arisen in the implementation of the agreement throughout the 2000s also highlight some of the limitations of a reflexive approach for addressing equal pay. First, the reflexive technique of providing for ‘statutory bargained adjustments’ does not fully apply to the case of equal pay. According to the method of inserting scope for adjustments in the legislation itself, the law acts as a default when collectively agreed settlements cannot be reached, and negotiated settlements are protected from legal challenge. In the case of equal pay, however, the law operates less as a default than a norm with potentially overriding effect, and collectively agreed settlements have no such protection from challenge via litigation. The potential for tension between collectively agreed settlements and individual rights was brought into the open with the involvement of no win no fee law firms, but it could be argued that they have delivered equitable outcomes for clients and prompted unions to be more proactive on behalf of their women members.
Second, while it would be easy to argue that primacy should be given to collectively bargained agreements, this would be to ignore the issue of diverging interests and inherent power inequalities that underpin unequal pay systems, which can be underplayed or ignored in deliberative negotiations (McCrudden, 2007). The resolution of equal pay issues here involves a challenge to existing pay relativities, which reflect power imbalances as well as sex stereotyping. Although attempting to reconcile the interests of different groups within the workforce is a legitimate goal of collective bargaining, the courts have applied a strict test of proportionality in judging whether agreements have struck an appropriate balance. As both the Allen and Brennan cases and our own research highlight, there are clearly questions around the extent to which some of the local level agreements gave effect to the values enshrined in the equal pay legislation. The agreement reached in the Allen case was successfully challenged as being discriminatory, on the basis that the process of negotiation did not give full weight to the equality principle. Similarly, the job evaluation process in Brennan was found to be discriminatory in reducing the impact on potential ‘losers’, thus serving to perpetuate the discrimination the process was intended to overcome. Had these agreements not been challenged, then the outcome would arguably have been a failure from the point of view of the goals of the Act. The details of negotiations as presented by some of our interviewees also raise difficult questions for the stakeholders as to the extent to which they gave full weight to the values of the equal pay and sex discrimination legislation. There are clearly difficulties for unions in balancing a range of competing interests in these situations. No one envies union officials having to negotiate pay cuts for some of their members, and it is understandable that some may wish to limit the effects as much as possible. However, the achievement of equal pay requires a redistribution of resources and a challenge to existing relativities, particularly given that the financial context does not always allow for ‘levelling up’.
16 Finally, our analysis raises the issue of effective bridging mechanisms between the legal sphere and the organisational sphere, and the extent to which local level actors have the expertise necessary to fulfil the role ascribed to them. Equal pay law is highly complex and difficult to apply, and there is evidence that, at local level, the implementation of the SSA within the framework set by equal pay law was far from straightforward. Having said that, on the union side there was also plenty of evidence of scrutiny and training from regional and national level, particularly following the involvement of law firms, and in light of important legal rulings. On the employer side there were reports of networking groups sharing best practice on the process of conducting and implementing job evaluations, dealing with back pay, pay protection and related legal issues, which fits with the theory of reflexive regulation that local level deliberation should not occur in isolation but should be informed by information sharing and best practice.
While some commentators have noted that recent legal rulings have made “bargained outcomes on equal pay risky for UK trade unions… [and serve as] a reminder to trade unions of the limitations of collective bargaining” (Conley, 2013: 12) our research shows that these developments have not ruled out collective settlements per se, but have highlighted the need for settlements to be fully equality proofed and for those involved to have the necessary skills and training to engage in deliberation. This complex and seemingly unending process of resolving back pay in the public sector highlights the limits of the law and the way in which legal rules translate incompletely into the economic context. On the one hand this supports the need for more reflexive solutions so that equal pay is achieved through local level negotiation rather than complex litigation. Paradoxically, however, it also highlights that reflexive approaches do not always deliver the outcomes intended by parliament, and that the tribunals and litigation have also played an important role in delivering equity for some very low paid women.
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Cases Allen and ors v. GMB [2008] EWCA Civ 810 Brennan and others v. Sunderland City Council and others [2012] 2503297/06 and others Hag and ors v. The Audit Commission [2012] EWCA Civ 1621 Hartley v. Northumbria Healthcare NHS Foundation Trust [2009] ET/2507033/2007 North Yorkshire County Council v. Ratcliffe [1995] ICR 833.
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