UK: Employment Newsletter - May 2011


Recently we have been awash with reports on boardroom gender diversity. Last year, McKinsey published their report Women Matter, in which they concluded that companies with the highest share of women on their executive committees outperform companies with no women, both in terms of return on equity and operating results. This month, Odgers Berndtson published a report on senior women in financial services, which recommended (amongst other things) linking financial incentives to diversity achievements. This was preceded by Lord Davies' report in February of this year, 'Women on Boards'. Lord Davies urged the boards of FTSE 100 companies to double the number of women on their boards by 2015. This would mean an increase from 12.5% to 25% and would be an unprecedented acceleration. At the current rate of progress it would take (according to Lord Davies) 70 years to achieve gender-balanced boards. Lord Davies shunned quotas for the moment but promised to revisit this question if the 25% level was not reached by 2015.

Given that the increase in the number of women on FTSE 100 boards has plateaued over the last three years, it is difficult to see how boards are going to achieve the 25%. Lord Davies suggested that headhunters put together a code of good recruitment practice and that Board Chairmen publish 'aspirational goals' and disclose the proportion of women on their boards and in senior management each year.

But will charters, codes and goals actually achieve anything? We think not. There are already many codes of practice, goals and good intentions out there, yet nothing much has changed. Perhaps we should heed Einstein who famously defined insanity as 'doing the same thing over and over again and expecting different results.'

It goes without saying that board members should be appointed on merit. Boards need properly qualified independent thinkers, which is likely to be best achieved by sourcing members of both genders from a variety of backgrounds. Lord Davies rejected the idea of quotas because he felt that board appointments should be made on the basis of 'business needs, skills and ability'. But are quotas really so bad? No-one is suggesting that boards should appoint incompetent women, just that they should cast their nets wider and look harder for a more diverse range of candidates. Lack of pre-existing board experience should not be a bar to a new board appointment, provided the candidate can demonstrate other competencies required for board membership.

Quotas might just be an expedient short-term cure to our current board 'insanity'. This insanity was clearly identified by the Higgs Review in 2003, which found a worrying level of informality in the recruitment of non executive directors:

  • Almost half were recruited through personal friendships or contacts;
  • Only 4% had a formal interview for the role;
  • Only 1% had obtained the role through answering an advertisement.

Lord Davies commented that there was no evidence to suggest this had changed between 2003 and 2011. Whilst executive directors may be recruited and promoted with a greater degree of formality perhaps than non-executive directors, this is still a dismal picture and unlikely to change unless we do something radical.

Perhaps that 'radical thing' would be the introduction of quotas for a limited period, coupled with an accredited and tough training course for potential board members whose alumni would then be acknowledged to be fully ready to take up board positions. There is a passing reference to this in the Davies report where he suggests that 'a combination of entrepreneurs, existing providers and individuals need to come together to consolidate and improve the provision of training and development for potential board members'. Had Lord Davies actually set up such a training programme and set a quota, we might have been well on our way to more balanced boards.


After much delay, finalised guidance on the Bribery Act was published on 30th March. Under the none too snappy title 'Guidance about procedures which relevant commercial organisations can put into place to prevent persons associated with them from bribing', the document aims to assist organisations to avoid the new corporate offence of 'failing to prevent bribery'.

The offence of 'failing to prevent bribery' arises when a person associated with a commercial organisation bribes someone (including a foreign public official), intending to obtain or retain business or a business advantage for that organisation. 'Associated with' is widely defined and covers employees, agents and subsidiaries of the organisation and third parties who perform services for it, or on its behalf.

The organisation will be at risk of conviction of the offence unless it can show that it had in place adequate procedures designed to prevent persons associated with it from bribing. The Government's guidance as to what might amount to 'adequate steps' has therefore been eagerly awaited.

The Government has adopted principles-based guidance, which will allow a commercial organisation to tailor its policies and procedures so that they are appropriate to its size and resources. These principles are set out below.

  • Procedures to prevent bribery are proportionate to the bribery risks the organisation faces and to the nature, scale and complexity of its activities. They are clear, practical, accessible, effectively implemented and enforced.
  • Those at the top level of management in the organisation are committed to preventing bribery by persons associated with it and foster a culture in which bribery is not acceptable.
  • The organisation assesses the nature and extent of its exposure to external and internal risks of bribery on its behalf by persons associated with it. This assessment is periodic, informed and documented.
  • The organisation applies due diligence procedures, taking a proportionate and risk-based approach, in respect of persons who perform or will perform services for or on behalf of the organisation.
  • Bribery prevention policies and procedures are embedded and understood throughout the organisation through internal and external communication, including training that is proportionate to the risks the organisation faces.
  • The organisation monitors and reviews procedures designed to prevent bribery and makes improvements where necessary.

Organisations will also find useful indicators in the Bribery Act 2010: Joint Prosecution Guidance of the Director of the Serious Fraud Office and the Director of Public Prosecutions. That guidance is worth reading in full, but it emerges clearly that factors pointing away from prosecution for bribery offences will include, for example, the fact that proper internal procedures are in place and have been followed and that there has been 'a genuinely proactive approach involving self-reporting and remedial action'.

Key messages for HR

Several key messages for HR professionals emerge from the two sets of guidance.

  • It is essential that the HR team works alongside other decision-makers in the organisation. The Act has a potential impact on the conduct of employees, consultants, suppliers, contractors, agents and any other third parties with whom the organisation establishes legal relationships. A coherent and organisation-wide approach that addresses both internal and external risks is much more likely to demonstrate that the organisation has taken 'adequate steps' to prevent bribery.
  • The HR team should endeavour to ensure that the requirements of the Act are understood and acted upon at the highest levels of the organisation.
  • The guidance advises a proportionate and risk-based approach. The HR team should be part of the process of identifying where the organisation is most at risk and identifying ways of reducing that risk. This may involve:
    • Devising an awareness and training programme for existing employees;
    • Incorporating awareness of the Act and its relevance to the organisation into induction procedures for new employees;
    • Assisting in devising robust reporting procedures for circumstances in which it becomes known that an offence has or may have been committed;
    • Ensuring that reward structures do not encourage conduct that could pose a risk to the organisation;
    • Including references to codes of conduct and expected standards of behaviour in service agreements; contracts of employment; relevant areas of the staff handbook (including disciplinary policies, whistleblowing procedures, procedures for claiming expenses and gift and hospitality policies); appraisal documentation and promotion criteria; and documentation used to govern relationships with third parties such as non-executive directors and consultants;
    • Reviewing due diligence procedures for the selection of employees, agents, consultants and other third parties who may act on the organisation's behalf;
    • Assisting in monitoring, evaluation and review of the organisation's bribery prevention procedures.

The aspect of the new law that has caused the most concern is its impact on corporate hospitality. The guidance contains useful indicators of when and in what circumstances hospitality is likely to fall on the wrong side of the line, the focus being on inducing 'improper performance' of public functions or commercial activities. HR departments will therefore need to assist in devising and promulgating gift and hospitality policies that give employees and others a clear steer as to what is and is not permissible in the context of each organisation's activities.

The full guidance documents can be obtained from the Ministry of Justice website at:

and the Serious Fraud Office website at:


In Morgan v The Welsh Rugby Union, the Employment Appeal Tribunal ('EAT') made an important distinction between the established, objective process employers should adopt when selecting employees for redundancy, and the less stringent procedure they are permitted to follow when considering potentially redundant employees for a genuinely new role. In both cases the employer must act reasonably to avoid a claim for unfair dismissal but, when selecting for a new role, an employer has more latitude to exercise judgment about which candidate would best perform the role.

Selecting employees for redundancy

Most employers are familiar with the steps they need to follow when selecting for redundancy. In brief:

  • warn affected employees in advance about potential dismissals;
  • be fair, objective and non-discriminatory;
  • consult with employees in good faith, using objective selection criteria which are applied fairly; employers should refer to a range of different attributes such as relevant skills, knowledge of business, technical knowledge, client relationships, future potential, attendance, disciplinary record and length of service;
  • consider ways to avoid or reduce redundancies by looking at suitable alternative employment.

In order to comply with this selection process, employers often devise a scoring system so that employees are scored on various selection criteria and then put at risk of redundancy based on their score.

The case of Morgan looked at the selection process outlined above in the context of two potentially redundant employees who were applying for a new role. It was recognised that in the context of selection for a new role, although the process should be objective, there would also be a substantial element of personal judgment involved.

Mr Morgan was employed by the Welsh Rugby Union (WRU) as a national elite coach development manager. Mr Schropfer was employed as a community coach education manager. A new post was created called National Coach Development Manager and the two employees were put forward for the job. A job description with a person specification was provided which stated that the individual should be qualified to at least WRU Level 4 and have experience of developing elite coaches. Mr Morgan was more qualified and had more relevant experience than Mr Schropfer. However, after an interview and presentation selection process, the committee unanimously appointed Mr Schropfer to the new role on the basis that his very clear vision for coaching development made him the best candidate for the job.

Mr Morgan claimed unfair dismissal, arguing that the appointment process lacked objectivity and fairness. The EAT considered whether this was the appropriate test to follow where an employer is considering employees for a new role. It concluded that at the stage of appointment to a new role, employers were not bound to follow an objective redundancy selection process as outlined above although their decisions must not be capricious or based on personal favouritism. Rather the process was more like interviewing candidates for a new job and an element of judgment could be used in assessing who would best perform the role. Interview processes and other techniques, such as presentations, rather than matrix scores, were justifiably used.

The process will still need to be reasonable in accordance with s98(4) Employment Rights Act, meaning that employers will still have to show that the process followed was reasonable in the circumstances. In practice, this means that employers will have to show evidence that the role is a genuinely new role and that there has been no bias or favouritism in selecting one candidate over another. Employers should keep records backing their decision process including details of the new role, a job description, interview questions and responses, and the reasons for the selection of a particular candidate over others. It would also be prudent to be as open as possible with candidates about the selection process and to ensure that interviewers are experienced at interviewing and can stand up to questioning about the reasons for their selection, if their decision is disputed at a later date.


In the recent case of De Belin v Eversheds Legal Services Ltd, the EAT upheld a Tribunal's finding of sex discrimination in a claim brought by a male employee, Mr De Belin, against his former employer, the law firm Eversheds. The case confirms that treating a woman more favourably than strictly necessary to compensate her for disadvantage arising from her pregnancy or absence on maternity leave may amount to unlawful sex discrimination against her male colleagues.

Mr De Belin was dismissed during a redundancy selection process in which his female colleague was given a maximum notional score on one of the selection criteria in order to compensate her for the disadvantage of being on maternity leave. The criterion was 'lock-up' (the time between when work is completed and when fees for that work are paid). The female employee was given a maximum notional score because it was not possible to measure an actual score for lock-up whilst the employee was not actually working in the office. The effect of this scoring was that the male employee scored less than his colleague overall, and he was put forward for redundancy.

Mr De Belin brought a direct sex discrimination claim on the basis that he was treated less favourably than his colleague on the grounds of his sex. The Sex Discrimination Act 1975 (SDA) stated that in assessing whether an act is discriminatory against a man 'no account shall be taken of special treatment afforded to women in connection with pregnancy or childbirth.' (The Equality Act 2010, which replaced the SDA, contains similar provisions.)

Whilst the EAT accepted that the protection of employees who are pregnant or on maternity leave may sometimes require them to be accorded treatment which is more favourable than that accorded to their colleagues (other women as well as men) it was necessary, because of underlying EU law principles, to restrict 'special treatment afforded to women in connection with pregnancy or childbirth' to treatment that is reasonably necessary and no more than that.

In this case, Eversheds' treatment went too far and there were alternative ways of removing the maternity-related disadvantage without unfairly disadvantaging Mr De Belin. The most satisfactory alternative would have been to measure the lock-up performance of both the candidates as at the last date that the female employee was at work.

Eversheds emphasised the difficulty for an employer facing the risk of a claim whichever course it chooses. The EAT said that an interpretation of the law which protected employers from liability whenever they gave special treatment to women who are pregnant or on maternity leave, however excessive or unfair to their colleagues, would provide a more distinct 'bright line'. But, it said, 'the price would be too high'. Using instead a test that requires the employer to adopt a proportionate means of achieving a legitimate aim produces 'the right balance' and allows a wide margin of discretion to employers as to the appropriate special treatment.

The case illustrates that an employer must perform a balancing exercise between protecting a woman in connection with pregnancy or maternity leave, and not treating her colleagues disproportionately unfairly.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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