Fears about possible discrimination claims has led some of the UK’s largest employers to ask staff whether they are gay.
Under new sexual orientation legislation that become law later this year, employees will be able to claim unlimited compensation for harassment, victimisation or unfavourable treatment at work.
Warnings from the government that ignorance will be no defence against compensation claims has led to a rush of inquiries from firms keen to monitor how many homosexual staff they employ, according to gay rights group Stonewall and employers’ organisation the Confederation of British Industry (CBI).
The in The Employment Equality (Sexual Orientation) Regulations 2003 builds on the sex and race relations legislation from the 1970s, which has given rise to record compensation payouts in the City.
Guidance on the new regulations states: "Organisations may consider asking a question about sexual orientation on their equal opportunities questionnaire."
Among those planning to ask staff about their sexual orientation are merchant bank JP Morgan. Law firm Eversheds is considering finding out how many gay and lesbian staff it employs while BT Group says "the jury is still out" on whether it will follow suit. The London Fire Brigade has put the question to its 7,000 staff, who answered anonymously.
But the plans have come under fire from civil liberty groups and lawyers, while Stonewall said that "this can be counter-productive if people do not feel comfortable about outing themselves in the workplace because the climate is not right and they don't think they will get the right response."
Some lawyers believe that it may be a breach of the right to a private life to require employees to disclose their sexual orientation.
The CBI's head of employee relations, Neil Bennett, said if the Government did not provide the right guidelines on what constituted discrimination there would be "a potential explosion of unnecessary tribunal cases".
He said: "It will be difficult to introduce measures to cope with an issue which is largely hidden."