Judgment is pending on an appeal by the Lord Chancellor, Lord Irvine, against a ruling that his appointment of a friend to the position of special adviser amounted to indirect discrimination.
Irvine did not advertise the 73,000-a-year advisory post. A tribunal last year ruled that this amounted to indirect sexual discrimination because Irvine's circle of friends, from which potential candidates were drawn, contained more men than women.
The original case was brought by solicitor Jane Coker, who argued that she was suitably qualified to undertake the adviser's role, but was not given the opportunity to apply. The verdict on Irvine's appeal is likely to be reached soon.
Although the implications of Irvine's case could be restricted to the public sector, it is suggested that if the ruling holds, it would become necessary to advertise all vacancies in order to pre-empt accusations of discrimination.
Not advertising vacancies is commonplace in financial services, where headhunters and informal networks are crucial to fill top jobs. However, the system is open to abuse.
According to equal opportunities lawyer Makbool Javaid, there is a dangerous lack of transparency in the absence of a competitive process. 'Many jobs are never advertised and no one knows about them until suddenly up pops somebody who has been appointed.'
Javaid argues that using headhunters can lead to discrimination. 'Headhunters move in certain circles and have people in mind with whom they are familiar. Invariably these are people of a certain type who they subjectively assess to be suitable. But these people will not necessarily be the best person for job, and because there isn't a competitive process involved, others don't have the chance to put their names forward. Headhunters can be a barrier to diversity, because they are risk averse and perpetuate prejudice.'
Headhunters strongly contest suggestions that they stifle diversity. One says: 'Our clients demand a complete mapping of people in the relevant market. Based on objective criteria provided by the client, we have to justify why each potential candidate is on the short list, and every search looks at completely different people. For every new position we have to reinvent the wheel. By no means do we make repeat calls to the same group of people all of the time.'
Those filling junior positions may be more guilty of discrimination. One City of London recruiter recalls that several years ago it was common for secretarial agencies to receive calls asking for good-looking secretaries.
It is not only headhunters that may have their wings clipped by a ruling against Irvine. Jane Amphlett, an employment lawyer with the law firm Manches, says that Irvine's problems stemmed from his use of the old boy network as a source of recruits.
Similar uses of the old boy network in the City are now going to be called in question.
More importantly, the use of all informal networks could be interpreted as discriminatory. Situations in which a leader moves first and is followed by his/her team, could become a bone of contention unless situations are advertised.
This could create problems. One banker says: 'It's only natural for me to want to recruit the people that I've been working with over the past few years. I know that they work well and that we work well together. But given that they are all men, I suppose I could be accused of indirect discrimination.'
When it comes to filling top positions, relying on advertising is seen as impractical. One leading headhunter says: 'It would never work. The people that we approach are not thinking of moving. They will not be reading job advertisements. By definition, they are doing well in their roles and we are offering them a job opportunity that they would not otherwise be aware of.'
Advertising may also merely perpetuate the problem. According to a recruiter in an investment bank: 'A headhunter operates in the City circle, which is largely white English male, and therefore their circle of contacts is white English male. But if you advertise in the Financial Times, this, too, will reach a group mainly constituted of more white English males. Using headhunters actually contributes to diversity because it enables you to recruit outside the circle that you know.'
However, employers and headhunters using objective search criteria to identify candidates should be unaffected by the ruling. 'When positions aren't advertised, search firms and employers may be accused of indirect sex or race discrimination. But they will have an opportunity to justify their decision,' says Manches'Amphlett.
At headhunter Baines Gwinner, Anthony May is confident that justification would not be a problem. 'We could quite easily provide an audit trail showing that we are extremely objective in choosing who we look at. The ruling will simply mean that headhunters have to look better at what they are doing and how they interpret clients' objectives.
'A transparent methodology should be employed to determine who is approached.'