CMS Expert Guide on discrimination in the workplace in United Kingdom

The Equality Act 2010 (the Act) governs workplace discrimination law in the UK. 
There are broadly four types of discrimination under the Act: 

• direct discrimination; 
• indirect discrimination;
• victimisation; and
• harassment.

The Act prohibits discrimination because of specified protected characteristics, including sex, race, disability, religious belief, sexual orientation, age, pregnancy and maternity, gender reassignment, marriage and civil partnership. 

The Act defines “employment” broadly and protection extends not only to employees, workers and job applicants, but potentially also self-employed contractors where they are required to provide their services personally. 

An individual may bring a complaint in an Employment Tribunal (Tribunal) seeking compensation and/or seeking a declaration that discrimination has occurred. Unlike unfair dismissal claims, the compensation is not capped, and there is the potential for high awards depending on the conduct involved and the loss of earnings. 

In the UK there are several heads of damages which can be awarded in a discrimination or harassment claim. The two main heads of damage are injury to feelings and loss of earnings. Injury to feelings awards are categorised into bands (known as Vento bands) depending on how serious the conduct was. The lowest band starts at £990 for less serious cases with the higher bands ranging from £29,600 to £49,300 for the most serious cases and exceptional cases capable of exceeding £49,300. 

While the large compensatory awards make the headlines, the average Tribunal awards are more modest. In the year 2019-2020 the average Tribunal award for sex discrimination was £17,420.

There are no specific steps employers are legally required to take to prevent discrimination in the workplace. However, an employer will not be held liable for the discriminatory acts of its employees if they can demonstrate that they took “all reasonable steps” to prevent the discrimination and/or harassment. This is usually done by having in place an appropriate equality and diversity policy that is communicated to all staff and enforced. In addition, regular equality and diversity training is seen as an important part of the reasonable steps defence to ensure that employees are kept up to date on equality issues. 

Following a consultation process, the Government has confirmed that they will introduce a new duty on employers to prevent sexual harassment in the workplace, but no date has been scheduled for implementation of this new duty, and the detail of what this will involve is awaited.  

No, it is not a legal requirement, however it is best practice. The Equality and Human Rights Commission (the UK National Equality Body) in its statutory Code of Practice, recommends that employers introduce an equality policy, which is another name for a D&I policy. 

Yes there are risks in not having a D&I policy.

While a lack of a D&I policy is not a breach of a strict legal requirement, there can still be repercussions. If a discrimination claim is raised against an employer then a key focus of the Tribunal will be what arrangements the employer had in place to address diversity and inclusion within the workplace; a D&I policy is a fundamental part of that and having no D&I policy in place is likely to reflect badly on the employer. In addition, a central part of the reasonable steps defence (to avoid legal liability) will involve the employer referring to the D&I policy, and explaining that the policy is understood and followed in practice.

In addition, if an employer does not have a D&I policy and is involved in a procurement or tendering situation when bidding for work, this could well have a detrimental impact on scoring.

An increasingly important aspect is the importance investors place on diversity and inclusion; it is seen as a key aspect of the Social pillar in ESG. Investors and other ESG stakeholders as well as industry regulators are increasingly interested in how a company treats their staff and having no D&I policy is again likely to be viewed extremely negatively by potential investors.    

In the UK, employers in the private sector with more than 250 employees must publish their mean and median gender pay gap and bonus pay gap on an annual basis, and upload the figures to the government portal, where results can be compared. 

There is currently no obligation to report on disability and ethnicity pay gaps. The Government consultation on mandatory ethnicity pay gap reporting closed in 2019. After much delay the Government announced in 2022 that they would not legislate on this issue. Instead, the Government will publish guidance for employers who wish to report their ethnicity pay gap data voluntarily. A consultation which considered both voluntary and mandatory disability reporting closed in April 2022, and the outcome of this consultation is awaited. 

There are data protection rules which affect how employers can collect and use diversity data. In accordance with the UK GDPR, most diversity data is special category data, meaning stricter rules must be followed before processing this data, with greater security procedures in place to restrict access.   

Processing special category data requires both a general ground for that processing (under article 6 of the UK GDPR) and a specific exemption (under article 9 (2) of the UK GDPR). Employers therefore need to carefully consider the purpose of processing and what lawful basis is appropriate. 

At the start of any project to capture diversity data, we recommend that an employer should carry out a Data Protection Impact Agreement (DPIA) to identify the data protection compliance aspects. In addition, the processing and the purpose of capturing diversity data should be referred to in the employee privacy notice.  

There is no UK legislation imposing quotas on private sector companies. However, there are corporate governance rules which cover targets.

The Financial Conduct Authority (FCA) has published board diversity targets (and other diversity measures such as the disclosure of diversity data) which apply to accounting periods from 1 April 2022. Only certain companies are in scope. The rules cover UK and overseas issuers with equity shares, or certificates representing equity shares, admitted to the premium or standard segment of the FCA's Official List (or considering admission to such listings), including closed-ended investment funds and sovereign controlled companies, but excluding open-ended investment companies and shell companies.

The rules say that those companies in scope should include a statement in their annual financial report setting out whether they have met the following board diversity targets on a 'comply or explain' basis, as at a chosen reference date within their accounting period (and if not, why not):

1. At least 40% of the board are women. 
2. At least one of the senior board positions (Chair, Chief Executive Officer, Senior Independent Director or Chief Financial Officer) is a woman.
3. At least one member of the board is from a minority ethnic background.

There has also been Government driven voluntary initiatives to improve diversity at Board level involving targets. The FTSE Women Leaders Review (which takes over from the work of the Hampton-Alexander Review) recommends a 40% target for women on FTSE 350 boards by the end of 2025. In addition, the Parker Review of ethnic diversity at Board level recommended that by 2021 every FTSE 100 Board should have one director of colour.

There are various corporate governance rules in the UK which apply to different corporate structures. The provisions have different legal status and different consequences for failure to comply which are beyond the scope of this guide.To illustrate, we have highlighted the following D&I aspects of corporate governance rules:

• Listing Rules 
  The Listing Rules contain board diversity targets and an obligation to publish diversity data. (For more information on this issue please see response to question 9.)
• Section 414 of the Companies Act 2006 
  Quoted companies must include the number of people of each sex who are directors, senior managers or employees in their strategic report.
• Disclosure Guidance and Transparency Rules
  Certain listed companies with transferrable securities admitted to trading should publish a corporate governance statement which includes a description of the Board diversity policy.
• Corporate Governance Code
  UK incorporated premium listed companies should on a comply or explain basis report on the D&I provisions of the Corporate Governance Code.