Employee-referral schemes and discrimination law

Date01 September 2015
Published date01 September 2015
Subject MatterArticles
schemes and
discrimination law
Michael Connolly
Employee-referral schemes (‘introduce a friend’) are in common usage in recruitment.
They carry a potential to discriminate by perpetuating an already unbalanced work-
force (say, by gender and ethnicity). With this, or course, comes the risk of litigation
and bad publicity as well as any inherent inefficiencies associated with discrimination.
This article is threefold. First, it examines the present state of the law. Second, it is
based on a survey of employers who use these schemes. Third, it analyses the range
of schemes (and any safeguards) found to be in use. The scrutiny showed that, where
the business is small and/or the recruitment rate via the scheme is low, there is little
risk of unlawful discrimination. But there is a risk. As the numbers involved increased,
seemingly small disparities can become significant and thus vulnerable to litigation. It
also found that, although a range of safeguards against discrimination were employed,
none monitored the existing racial/gender profiles involved, thus exposing the
schemes to potential litigation. The key safeguard is relatively inexpensive monitoring
of the protected characteristics (gender, ethnicity etc.) of the workforce, the relevant
labour market, the pool of applicants, and the recruitment rate (via the scheme). This
will highlight any patterns and suggestions of discrimination and will help identify the
Discrimination, patterns, referral schemes, word-of-mouth
University of Surrey, UK
Corresponding author:
Michael Connolly, University of Surrey, Guildford, Surrey GU2 7XH, UK.
Email: connolm@googlemail.com
International Journalof
Discrimination and theLaw
2015, Vol. 15(3) 148–177
ªThe Author(s) 2015
Reprints and permission:
DOI: 10.1177/1358229115579571
Over the past few years, it has become apparent that employers increasingly are using
employee-referral schemes for hiring staff.
The schemes reward staff for introducing
a ‘friend’ to fill a vacancy. The chief reasons, it seems, are a need to fill a skills gap
by casting the recruitment net as far and wide as possible and to save costs of expensive
recruitment agency fees,
and there are other ‘soft’ advantages (discussed below).
One characteristic of these schemes is that they have a tendency to reproduce the
existing gender/racial profile of the workforce. If this is unbalanced, by comparison say,
with the existing catchment area, these schemes could operate to exclude minority
groups and/or women.
This suggests that the schemes could be unlawful under discrimination law. In
essence, unlawful indirect discrimination occurs when an employer’s facially neutral cri-
terion (e.g. applicants must be 60tall) has an adverse impact on a protected group and the
employer cannot show the requirement serves a necessary business need (‘objective jus-
tification’). It is not necessary for liability that the employer has a discriminatory intent.
However, until recently, such schemes were beyond the reach of the UK’s discrimi-
nation legislation. Previously, an employer’s facially neutral practice could be chal-
lenged as discriminatory only if it amounted to a ‘requirement or condition’, which
was interpreted to mean an absolute barrier.
This meant that employee-referral schemes
were beyond the reach of the legislation because such schemes are most unlikely to
‘absolutely bar’ anyone from the job, as it is likely persons could apply through other
means. However, recent amendments to the legislation have replaced the word phrase
requirement or condition with ‘provision, criterion or practice’, which is broad enough
to encompass employee-referral schemes.
The aim of this project was, first, to examine the legal developments that carried the
potential to affect this area, second, to discover a range of schemes (including any safe-
guards) being practiced and third, to analyse them for their potential to discriminate on
racial and gender grounds. The matter was confined to sex and racial discrimination for
the sake of simplicity on this initial investigation, and as it was anticipated, those sur-
veyed were likely to be most conscious of these ‘first-generation’ grounds.
Interviewing process
To discover the range of schemes in operation, the project identified a number of busi-
nesses openly using the schemes. It will be seen below that a variable contributing to any
discriminatory impact of a scheme is the size of the business. Thus, 12 businesses were
sampled to represent small, medium and large employers.
All interviewees and businesses involved were afforded complete anonymity.
The choice of interviewees fulfils Moser and Carlton’s
necessary conditions for suc-
cessful completion of interviews, namely, accessibility,cognition and motivation.
Human resource (HR) managers have access to the information required. They will also
have an understanding of their role as interviewee either to provide a detailed description
plus an opinion from the employer’s perspective (HR manager) or to validate (by e.g.
concerning or correcting) the description and provide an opinion from the worker’s
Connolly 149

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