The new Equality Act 2010

Source: Stefanie Schmidt¸ PKF Malta

Bonus payments contain problems for hedge funds and their staff – not the height plays the main role when it comes to difficulties¸ but primarily the confidentiality. “How much did you make as a bonus last year?” Is answering this question even allowed when a fund manager is asked by a colleague?

The prohibition to disclose payment or bonus information is usually achieved through gagging clauses within the employment contract. All over the world¸ many hedge funds prefer to keep pay information confidential in order to prevent the belief of low paid employees they have been discriminated against.

At the moment¸ there are several different laws to protect people from discrimination on grounds of race¸ sex¸ disability¸ religion and others in the UK.[1] Since the new law came on October¸ 1st 2010¸ all the laws about discrimination have been in one place: the Equality Act 2010.

The point of this Act is to streamline and combine previous legislation to make things easier for businesses from this date on. These measures are obviously there to help protect minority groups and those who are discriminated against¸ which is unarguably good for their society as a whole¸ but the very unfortunate reality is that increasing protection for them inevitably hits small businesses hard¸ among other battles.

The Equality Act essentially keeps the law on equal pay between men and women as it was. It makes two specific changes. Firstly it provides that individuals who discuss their pay with one another to find out if there might be pay discrimination going on are protected from victimization¸ even if their employment contract requires them not to discuss their pay.  Secondly¸ it allows a claim of direct discrimination to be made in respect of pay even if there is no real comparator.

This means that UK fund managers – by contrast with their American colleagues who remain bound by gagging clauses – would no longer be bound by gagging clauses if requested by colleagues to provide information about their pay in relation to workplace discrimination.

The new law states that employees can only ask their colleagues about their pay if they genuinely believe they are a victim of discrimination on any grounds including all attributes referred to as ‘protected characteristics’.[2] Therefore employment contract clauses which seek to prevent employees discussing their pay will be unenforceable where an employee makes or solicits a “relevant pay disclosure”[3]. So the new law might help employees to such a degree as their employer will not be able anymore to take action against them for talking to colleagues or trade union representatives about their salaries and bonus payments.

Section 77 of the new provision makes a secrecy clause in an employment contract unenforceable if it is used to try to stop people talking about their pay in order to identify discrimination.[4]

However¸ the Equality Act does not provide employees with the right to divulge their pay or other work-related i