The Equality Act (October 1 2010): need to know for small businesses

The new Equality Act comes in today (October 1 2010), and all of you with employees or providing goods or services to the public need to be aware of the changes to previous legislation. There aren't endless major changes, but there are some significant ones. The point of this Act is to streamline and combine previous legislation to make things easier for businesses from now on. But the Act is, of course, provoking concerns from small businesses - more on which below.

These measures are obviously there to help protect minority groups and those who are discriminated against, which is unarguably good for our society as a whole, but the very unfortunate reality is that increasing protection for them inevitably hits small businesses hard when they're already drowning in a sea of red tape, among other battles. Employers already spend on average seven hours a week handling HR, and the British Chambers of Commerce estimates it will cost £189m for businesses to implement the Act. Here's what you need to know:

Key changes

• The headings of age, disability (which includes mental health and people diagnosed as clinically obese), race, religion or belief, sex, sexual orientation, gender reassignment (people who are having or who have had a sex change, transvestites and transgender people), marriage and civil partnership, and pregnancy and maternity are now to be known as 'protected characteristics'.
• There are now seven different types of discrimination:
  • Direct discrimination: discrimination because of a protected characteristic.
  • Associative discrimination: direct discrimination against someone because they are associated with another person with a protected characteristic. (This includes carers of disabled people and elderly relatives, who can claim they were treated unfairly because of duties that had to carry out at home relating to their care work. It also covers discrimination against someone because, for example, their partner is from another country.)
  • Indirect discrimination: when you have a rule or policy that applies to everyone but disadvantages a person with a protected characteristic.
  • Harassment: behaviour deemed offensive by the recipient. Employees can claim they find something offensive even when it's not directed at them.
  • Harassment by a third party: employers are potentially liable for the harassment of staff or customers by people they don't directly employ, such as a contractor.
  • Victimisation: discrimination against someone because they made or supported a complaint under Equality Act legislation.
  • Discrimination by perception: direct discrimination against someone because others think they have a protected characteristic (even if they don't).
• You can no longer ask a prospective employee about their health before offering them work, unless you can prove you're doing so to check whether the employee can carry out an essential task (such as heavy lifting for a removals company) or to monitor diversity. You can screen health once you've made a job offer - but then of course you're opening a whole new can of worms if you rescind your job offer on the grounds of a disability, as you are then liable to be taken to tribunal too. 'Health' means physical disabilities and mental health problems. This also means you can't ask how much time an employee has taken off work in their previous jobs in an interview.
• You can't treat someone unfavourably because of something connected to a disability. The standard example going round here is spelling mistakes because of dyslexia.
• Disabled people can now claim a particular rule or requirement disadvantages people with a certain disability.
• You can't discriminate against someone who is or has changed their gender (the 'gender reassignment' protected characteristic) - for example, if they take time off work for the process.
• Mothers are allowed to breastfeed in public (on premises) - they can't be asked to go to a more private place.
• Age is still the only protected characteristic by which you can justify direct discrimination, because you can argue that treating someone differently because of their age is allowed as long as it means you're doing it to meet a legitimate aim. You can also still have a default retirement age of 65 (unless/until the retirement age legislation changes, which it may do in the coming years).
• Tribunal judges can recommend changes to the practise of an entire business rather than just to the way an individual is treated.
• Staff are now free to discuss wages with each other.
• People making claims can now bring a 'dual discrimination' claim, meaning the tribunal assesses the impact of the two protected characteristics in conjunction ('young Polish') where before they considered each protected characteristic separately ('young' and 'Polish') - which often didn't reveal the full extent of the discrimination, as discrimination on two grounds is often worse than just one. However, only two characteristics can be combined, no more.

The worries for small businesses

• Risk of an increase in tribunal claims. It will be easier for employees to claim they have been discriminated against.
• More red tape and confusion for business owners.
• All these cumulative factors are provoking deep concern that business owners will be put off employing people for fear of the red tape and risk of tribunal it could later incur.
• The most talked-about change is the ban on asking prospective employees about their health/disabilities as part of the interviewing process. Even thought employers can screen their health once an offer of work is made, if they then rescind the offer the candidate then has further grounds for discrimination. While this obviously protects people with physical and mental health problems, it will be cause for concern for many employers who want to know how much time an employee made need off work before employing them, or how their condition could affect their ability to work.
• The liability of business owners for offence caused by people they don't directly employ, such as contractors or people visiting their premises, is another big stickler (this is the 'harassment by a third party' rule). It means you could be held responsible if a customer on your premises tells racist jokes. How this liability will work in practice, and how hard the tribunal courts will come down on business owners stranded by this unfortunate situation (which will often occur through no fault of their own) remains to be seen.
• The definition of harassment now means an employee who simply overhears an offensive comment, even if it's not directed at them, can hold you legally responsible for it. You need to be extra vigilant and make sure everyone in your team understands the rules and implications for you.
• Dyslexic workers could claim they have been discriminated against for being barred from carrying out certain tasks because they are prone to spelling mistakes.
• If you discipline an employee for taking too much sick leave they can claim they're being discriminated against.
• Carers of disabled or elderly relatives can claim discrimination by association if they feel they've been discriminated against or mistreated in the office because of their home duties. (There are six million carers in the UK.)
• As employees are now legally entitled to discuss their wages with one another, there will more pressure to pay everyone on fair terms.
• Dual discrimination will now make those claims stronger than claims that were previously made for only one protected characteristic.

Reactions from the business world

David Frost, director-general of the British Chambers of Commerce:

"At a time when the government is trying to create as many jobs as possible in the private sector this legislation will put people off for fear of getting it wrong. The Equality Act is a very complex bit of legislation. If small businesses get this wrong they end up in an employment tribunal."

Spokesperson for the Institute of Directors (to the Daily Telegraph):

"The health provision is undoubtedly an extra burden on businesses. All business will need to be very clued up on the ramifications of what the new regulations are - if you have a whole HR team that's fine, but a lot of our members are small businesses and they don't have that."

Business owner Daniel Priestly, Triumphant Events:

"While I agree with the act in principle, I think the timing is very poor. Anything at all that makes employing people more risky, more complex or more time consuming should be put on hold until employment numbers are on the rise. It makes more sense to get people employed right now.

"Also this act could have the opposite effect than its intention. For example, people who have a disabled relative are potentially going to find it harder to find a job or promotion if it's known that they are a carer in any capacity."

Resources

• The Equality Act 2010 in full
• The government's Equalities Office page on the Equality Bill, outlining the key changes and points

Smarta Business Builder

To help you on your business journey, we've created Smarta Business Builder, the complete online tools package for growing your business. Website Builder, Business Plans, Accounting Software, Legal Documents and Email - all in one place - from just £20 per month with no contract! Try it out today.