Lord Davies issued his report about female representation on corporate boards in February last year, which led to the Department of Business, Innovation and Skills publishing draft regulations entitled "The Companies Act 2006 (Strategic Report and Directors' Report) Regulations 2013" in October 2012.
Quoted companies will be required to prepare a strategic report each financial year showing the number of persons of each sex who are directors, managers and employees of the company.
This is intended to put pressure on companies to increase the number of women occupying senior roles and this will have an impact on recruitment.
An equally qualified man and woman each compete for the same role. The woman is offered the position - what would the man do?
Under the Equality Act 2010, sex is a protected characteristic. Pursuant to sections 13, 19, 27, 39(1) and 39(3), sex discrimination in the context of recruitment is unlawful.
The man would be quick to point out that he had been discriminated against and he would probably allege direct and indirect discrimination. In this scenario, direct discrimination occurs where a man is treated less favourably because he is a man. Indirect discrimination occurs where an employer applies to a person a provision, criterion or practice which is discriminatory in relation to his being a man.
Does an employer have a defence?
Pursuant to section 159 of the Equality Act, positive action in the context of this recruitment scenario would be permissible where an employer reasonably thinks that: (i) women suffer a disadvantage connected to being a woman; or (ii) women's participation in senior roles within listed companies is disproportionately low.
Such positive action entails treating a woman more favourably in connection with recruitment or promotion than a man because the woman has the protected characteristic and the man does not.
The aim of such positive action must be to encourage women to overcome or minimise disadvantage and to participate in senior executive roles. This positive action defence only applies where: (i) the woman is as qualified as the man; (ii) the employer does not have a policy of treating women more favourably in recruitment; and (iii) taking such action is a proportionate means of achieving the legitimate aims set out above.
In practice it should be relatively easy for an employer to demonstrate the "disadvantage" and "disproportionately low" number of women represented within senior roles.
Drafting job specifications
One hurdle is the assessment of whether one candidate is "as qualified as" another. The expression "candidates of equal merit" is used in guidance published by the Government.
There are two approaches employers can take regarding job specifications: (i) make them very brief; or (ii) make them very detailed.
Brief job specifications give an employer greater flexibility. Where certain skills and experience differ significantly between candidates, it might be easier for an employer to decide that the skills and experience exhibited by one candidate are more relevant and desirable for the role than those exhibited by the other. The downside is that an employer's decision may be easier to challenge, particularly where a disproportionately low barrier to apply for the role has been set.
Very detailed job descriptions, on the other hand, tend to give rise to paper trails demonstrating objectivity. The downside is that qualitative differences between candidates will not necessarily be captured.
The positive action argument cannot be relied upon to justify a general policy of hiring women rather than men in order to reach a certain quota, as it is not permissible under the Equality Act. The positive action defence is more appropriate for an allegation of direct discrimination than indirect discrimination.
Accordingly we are advising employers not to adopt a "hire women to fulfil a quota" policy. The existence of such a policy would be evidence of a discriminatory provision, criterion or practice on which a claim for indirect discrimination could be based.
It is unfortunate that the objective of the draft regulations does not fit comfortably within the operation of existing discrimination law. Employers are bound to bear in mind their soon-to-be-published female representation statistics when devising their recruitment policies.
Legislation aside, the issue facing companies seeking to recruit more diverse boards is the pool of available talent. By ensuring a greater number of women apply for senior roles, e.g. through advertisements in journals likely to be read by women, an employer need not engage in overt positive action, it may simply appoint the best candidate applying for the job and it is more likely this person will be a woman.
Lucy Money is a solicitor specialising in employment law at City law firm Fox.
Fox is a specialist employment and partnership law firm based in the heart of the City of London.