As employers try to move further and faster to advance diversity, equity and inclusion (DEI) initiatives in response to candidate and wider market pressures, many are seeking to capture meaningful data on the make-up of their employees and talent pool

It is often said that capturing and monitoring data is the best way to identify areas on which to focus DEI initiatives. One of the key challenges is navigating a web of regulation in order to take a joined-up approach globally. That makes it important for employers to understand what is possible in each territory.

In this article, we focus on what employers can – and must – monitor across the UK, drawing out unique and positive obligations to monitor in Northern Ireland, which often come as a surprise to global businesses operating there.

What are the rules in Great Britain?

Are employers required to collect DEI data?

 Whilst there is no legal requirement to undertake diversity monitoring, the Equality and Human Rights Commission Statutory Code of Practice recommends that all employers do so. Employers are also increasingly coming under pressure from candidates and shareholders to identify the importance and benefits of taking tangible steps to improve diversity and inclusivity within their organisations.

Employers who undertake diversity monitoring commonly frame their surveys to monitor characteristics protected under the Equality Act 2010 (i.e. sex, age, race, gender, sexual orientation, disability/health, religion/belief, marital/civil partnership status and pregnancy/maternity status). Some employers go beyond that (e.g. looking at socio-economic background), while others limit the data they collect to characteristics that they consider most relevant to their organisation.

We previously outlined specific considerations relating to collecting data in an insight covering gender, transgender status, ethnicity, disability, religion and belief, sexual orientation, age and social mobility monitoring. More recently, the UK Government has published guidance for those who choose to report on ethnicity pay gaps on a voluntary basis. This article looks at the new guidance and the wider legal issues for employers considering investigating their ethnicity pay gaps.

What are the data protection hurdles to collecting this data?

Much of the data collected as part of an equality monitoring exercise will constitute special category data for the purposes of data protection legislation. Processing of special category data is subject to more stringent rules than other forms of personal data. Our insight mentioned above sets out the headline considerations. However, in general, the UK (including Northern Ireland) has a more permissive approach than much of the rest of Europe, which includes the existence of a specific condition within the Data Protection Act 2018 allowing for the lawful collection and use of much of this data for the purpose of identifying and keeping under review the existence or absence of equality of opportunity or treatment between different groups.

There are, of course, limitations and additional guidance beyond the scope of this insight, which need to be considered. For example, employers must put in place security controls to ensure access to this information is on a need-to-know basis and must provide transparency information relating to DEI surveys through a privacy notice.
Many employers will also want to take a joined-up approach across Europe – where equality focussed grounds for processing are rarer – and/or globally. This might mean exploring other lawful bases and conditions – often requiring them to capture explicit consent from workers.

Are there other considerations?

Yes! Employers need to consider a host of regulatory and practical issues before rolling out and refreshing DEI surveys. Often overlooked is the requirement to ensure that data collected is not used to breach anti-discrimination obligations. Beyond security controls, employers should provide accessible rules and training for DEI teams and others responsible for reviewing, interpreting and actioning the data. There is also a very practical imperative on employers to take action once they have the data. A failure to be open and honest about shortcomings, and to take tangible action can corrode employee trust and buy-in.

What are the rules in Northern Ireland?

A legacy of the troubles in Northern Ireland and the Belfast/Good Friday Agreement which is often overlooked, particularly by employers based elsewhere, but with operations in Northern Ireland, is the requirement for employers of a particular size to proactively capture “fair employment monitoring” information about their candidates and employees.

What are the fair employment monitoring requirements?

The requirements are as follows:

• Where an employer employs 11 or more employees in Northern Ireland who work 16 or more hours each week, the employer must register with the Equality Commission for Northern Ireland (ECNI). This includes employees who are working remotely in Northern Ireland, which has become more common following the Covid-19 pandemic. Employers should make sure they proactively monitor home addresses for those working from home or following a hybrid pattern – and therefore based in Northern Ireland, to determine whether they have 11 or more employees in Northern Ireland.
• Registered employers should monitor the “community background” of their employees, applicants, appointees and apprentices, which means whether an individual is from the Protestant or Roman Catholic community in Northern Ireland, or neither (note that this is different to their actual religious belief) and their sex. Certain public authorities and employers with more than 250 employees are also required to monitor employees who have been promoted and those who have left the employer. The wording for the questions to be asked for these purposes is prescribed, so it is important not to divert from this.
• Each year, registered employers should prepare a "monitoring return" including the information described above in a prescribed form. It was recently reported that the number of people from a Roman Catholic and Protestant community background in Northern Ireland’s workforce were at an equal level for the first time. The annual monitoring return must be filed with ECNI.
• Completing monitoring questionnaires is technically voluntary, and employers are encouraged to use a fallback option known as the “residuary method” when an individual doesn’t select their community background. This allows employers to make a determination of community background on the basis of personal information on the individual’s file or application form such as their name, address, or educational background. This exercise goes against the prevailing logic of anti-discrimination legislation and can be uncomfortable, especially for non-Northern Irish native employers.
• A registered employer must review the composition of those employed in and ceasing to be employed in its workforce at least once every three years, which is called an Article 55 Review. It must review its employment practices to determine whether members of the Roman Catholic and Protestant community receive (and are likely to continue to receive) fair participation in employment in its business or whether affirmative action would be reasonable and appropriate. The Article 55 Review must be submitted to ECNI if requested. In practice, successive reviews provide not just a snapshot but allow for recognition of trends, whether helpful or not. As with the residuary method, the concept of affirmative action can be uncomfortable and unfamiliar and seeking out advice on the options available is always sensible.

Data protection

The approach in Northern Ireland is broadly the same as that in Great Britain (summarised above). However,

• ECNI recommends that questionnaires should be completed pseudonymously using a unique reference number, which can only be matched to individuals by an appointed monitoring officer.
• Registered employers can rely on monitoring being necessary to comply with employment law as the condition (as an alternative to the equality of opportunity condition mentioned above), though that will only apply to the data that is strictly necessary to comply with fair monitoring obligations and not, for example, to monitoring race or ethnicity in Northern Ireland.

Fair employment legislation requires employers to retain monitoring information relating to all applicants for three years from the date of receipt of the application. For those appointed, this information should be kept for at least three years after they subsequently leave employment. In addition, all application forms and job-related documentation should be kept for at least 12 months.

What are the consequences of non-compliance?

It is a criminal offence to fail to file an annual monitoring return or to file an inaccurate return. ECNI can query Article 55 Reviews, which can lead to further enquiries and, if necessary, sanctions against non-compliant employers. In certain circumstances, an employer can be made ineligible for public sector tenders, although this is rare. Additionally, it is a criminal offence to share data about the community background of particular individuals unless a particular defence applies. Employers should therefore have robust access controls and security in place for this data.

Practically, if an employer has failed to do what’s required, the best course of action is to put in place a plan to resolve the position and to discuss this with ECNI.

Additional monitoring

Similar to the position in Great Britain, there is no legal requirement to carry out additional monitoring but this is increasingly popular. While there’s no date for this as yet, employers should note that when gender pay reporting is brought into force in Northern Ireland (see below), gender pay, ethnicity and disability reporting will be legally required. ECNI recommends voluntary monitoring of other characteristics including age, gender, disability, racial and ethnic group, marital or civil partnership status and sexual orientation and recently published a guide to employment equality monitoring relating to these characteristics and fair employment monitoring. Certain public authorities have additional equality duties in Northern Ireland requiring them to promote equality or opportunity and good relations, which goes beyond the protected characteristics.

MacBride Principles

DEI compliance can have a significant impact on transatlantic deals involving United States (US) and Northern Irish companies. Businesses in many US states (including New York and California) and cities are required to comply with the MacBride Principles, which sets a code of conduct for doing business in Northern Ireland, based around nine fair employment rules.

US companies subject to the MacBride Principles will often seek assurances that the Northern Irish target they are purchasing or investing in has complied with the principles – even though they have never been enforceable in Northern Ireland. Evidencing compliance with fair employment monitoring obligations is key to discharging these enquires during a due diligence process.

What’s coming up in Great Britain and Northern Ireland?

The existing gender pay gap reporting requirements in Great Britain, which have been in place for six years, were due to be reviewed in the first half of 2022. There is no sign of this having happened, but a review remains likely.

In Northern Ireland, legislation providing for gender pay reporting is in place but hasn’t yet been brought into force. There won’t be any progress until the Northern Ireland Assembly is restored and even then, some employers may be out of scope assuming that the requirement will apply to employers with 250 or more employees, as is the case in Great Britain and not extend to employers with 50 or more employees, which is a 2025 requirement in the Republic of Ireland. Employers who are in scope should note that when the requirement does apply, they will be required to carry out disability and ethnicity pay reporting, as well as gender pay reporting. For more detail, see gender pay gap reporting in Northern Ireland.

Adopting a global approach to diversity monitoring

As we explained in this insight, many international employers will want to take a global approach to diversity monitoring, in order to take a consistent approach and be able to monitor progress against diversity targets globally. However, as with many areas of employment law, it is difficult to adopt a one size fits all international approach to DEI monitoring. In some countries monitoring is strictly prohibited, whilst in other countries, whilst DEI monitoring is potentially lawful, it is extremely uncommon and counter-cultural. Further challenges are the differing cultural approaches to certain protected characteristics and how different countries are likely to recognise different ethnic groups. For instance, if monitoring the ethnicity of the workforce, using British categorisations on a global basis may well fail to identify the ethnic diversity issues in other countries.

Comment

DEI monitoring has become increasingly complex as more and more types of diversity are recognised while employers have become increasingly aware of the negative impact that using inappropriate terminology can have. Employers are right to be thoughtful about the questions they ask and the language they use, as well as specific jurisdictional considerations, for example, those relating to Northern Ireland described above. Nevertheless, there has certainly never been a better or more important time to get to grips with the diversity of your workplace, across all locations.