What Next? Workers’ equal pay claims succeed against Next
Thousands of current and former workers at Next have been successful in their equal pay litigation, which may result in compensation of up to £30 million being awarded to the 3,540 claimants.
This article summarises the findings of the Employment Tribunal (“ET”) and the key takeaways for employers following Thandi and others v (1) Next Retail Limited (2) Next Distribution Limited.
Background
If different jobs done by a man and a woman are of equal value, an employer must pay the same rate for both jobs unless there is a material factor which explains the difference in pay. The material factor itself must also not be directly or indirectly discriminatory.
These proceedings commenced back in 2018 and a previous ET decision had found that the groups of Next workers involved were conducting work of equal value. Therefore, the ET on this occasion had to rule on whether the difference in pay was potentially discriminatory and if so, whether it could be justified.
Was the disparity in pay discriminatory?
This claim was brought by a group of mainly female retail store workers at Next (the “Claimants”) who argued that they have been paid less than their male counterparts who work in the warehouse. The Claimants alleged that retail store workers at Next are underpaid for work that is of equal value to that being carried out by the workers in the warehouse; and a key component of the Claimants’ argument was that the majority of the retail store workers are female (77.5%) whereas the warehouse workers are predominantly male (52.78%).
This imbalance of male and female workers at each workplace displayed to the ET that paying retail store workers less had a disproportionate impact on women. The ET found that the disparity in pay was indirectly discriminatory, so that Next had to justify the disparity by demonstrating that it had a legitimate aim that its means of achieving that aim was proportionate.
Next argued that it had a legitimate aim in paying a lower rate of basic pay to the store workers as this was in line with the market rate for those roles and the difference in pay was necessary to ensure suitably qualified workers were hired and retained (in other words a “market forces” defence). Next also argued that the disparity in pay was justifiable to recruit and retain sufficient warehouse staff, to maintain the viability of warehouses which operate 24/7, to incentivise high productivity and high attendance in the warehouses and to improve business performance.
The ET’s conclusions
The ET found that Next had the means to pay the retail store workers more (as some competitors did) but that it prioritised financial gain and saving labour costs. Cost-saving alone cannot be a legitimate aim to justify a difference in pay. Even if the aim had been legitimate, the ET held that the payment of different sums to warehouse and retail staff was not a proportionate means of achieving it. This was because the discriminatory effect of lower basic pay for the retail staff outweighed the business need in question.
Next could not therefore establish the material factor defence to justify the difference in basic pay and the equal pay claims succeeded.
The ET was also wary that market rates for particular roles may be subject to historic prejudices (i.e. roles that were considered more akin to “men’s work” or “women’s work”) and ruled that Next could not rely on a market forces defence alone to justify the disparity in pay rates. Such an argument would defeat the purpose of the equal pay legislation.
As well as the gender breakdown between stores and warehouses, the ET also considered the breakdown of those working part-time. On average, 96% of retail staff were contracted to work fewer than 30 hours a week while over the relevant period, while 53.65% of warehouse operatives worked part-time. A reasonable explanation for this was that women are more likely to have childcare responsibilities and would find it difficult to work changeable hours or nights.
Compensation for back pay for up to six years will be assessed by the ET.
However, there were attendance and productivity bonuses and certain premiums (such as for public holidays and additional hours) which Next paid specifically to warehouse workers only. The ET ruled that these bonuses were justified as they were based on the business needs at that time, were proportionate in the circumstances and were not based solely on cost.
Comment
This is a ‘first instance’ decision which may be overturned by a higher court and Next has indicated that it plans to appeal the ET’s ruling.
Next has also recently stated that it may have to close stores if it loses on appeal, which may give an indication of the potential impact of equal pay litigation on a business and its employees.
Whilst the ET’s findings may be subject to further scrutiny from the Employment Appeal Tribunal, some key takeaways for employers at this stage are:
- The saving of costs alone will not justify differences in pay. Saving costs may be a valid component of why certain employees are paid less, but it should not be the only reason for lower pay.
- Market forces is not a guaranteed defence in equal pay claims. This is particularly so where market rates may be based on historic views of what is considered “men’s” and “women’s” work and may perpetuate historic prejudices.
- There can be instances where disparity in pay and/or bonuses and premiums can be justified, but there will need to be a legitimate aim and proportionate means of achieving it, which should not rely on saving costs or market forces alone.
Tesco, Sainsbury’s, Morrison’s, Co-op and Asda are also subject to ongoing equal pay litigation. Asda’s case is currently being heard by the Employment Tribunal and is expected to run for around three months. Please keep an eye on our website for updates regarding the Next and Asda ongoing equal pay litigation.
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