Appeal Judgment in supermarket’s equal pay claims; highlights cause for concern for employers
Employers need to be more aware of the risk of equal pay claims, following a recent decision of the Employment Appeal Tribunal.
Employers need to be more aware of the risk of equal pay claims, following the decision of the Employment Appeal Tribunal in the much-publicised case of Asda Stores v Brierley. Following the appeal Judgment, there is an increased risk of claims arising from comparisons made across different parts of an organisation or group of companies. The Judgment confirms that two very distinct parts of the workforce are able to compare their pay, even if they are located at different sites, in different parts of the organisation/group, and with very different pay arrangements.
This appeal arises from equal pay claims brought against Asda by about 7,000 employees. The claims are brought by members of the predominantly female retail workforce, alleging that they are paid less whilst doing work of equal value to some employed in the predominantly male distribution centres. Asda argued that the comparison should not be legally allowed to progress as the groups of staff worked in different establishments and they didn’t have common terms. It highlighted that the two groups worked in geographically different locations, and the terms which applied were historically and qualitatively distinct. The retail staff terms apply at stores only and are set by the board (or a subcommittee). The distribution staff terms are set mainly as a result of collective bargaining with the Unions by a different part of the organisation.
The Employment Appeal Tribunal has held that the Employment Tribunal was able to decide that these differences did not undermine the fact that the pay ultimately came down to a single source, and as a result their pay can be compared as part of an equal pay claim. Whilst many equal pay claims will be brought based on a comparison with others employed on the same site or from within a single employing entity, this is not technically required for a claim. What is needed is a single body responsible for the inequality in pay (although not necessarily a legal entity/person); and that body must be one that could restore equality of pay if they wished. Here the Tribunal had held that because the company’s executive board had the power to set pay and conditions for both parts of the workforce, that was sufficient to enable the comparison to be made (even though in practice it did not actively get involved in setting pay).
The appeal raised some incredibly complex legal issues relating to both the UK legislation and how European law applies directly to the UK. The EAT effectively agreed with the Tribunal who first heard the case. Notably the EAT rejected an argument that the wording in the Equality Act had narrowed the law from that which had applied under the Equal Pay Act. This case is highly likely to go on to be heard by the Court of Appeal and, indeed, the EAT acknowledged this and highlighted that the Court of Appeal will be better placed to decide whether some issues need to be referred to the European Court. So this is just one step in what will inevitably be very long running litigation.
What does this mean for me?
Potential equal pay risks can sometimes be hard to spot, but it is important to consider the risks across your organisation (or group of companies) as a whole. Whilst all cases will turn on their own facts, this Judgment reduces the scope for employers to argue that equal pay claims should not get off the ground because the comparators identified are employed somewhere else, under different terms, and/or in a different operational entity or part of a group of companies. This may be important because you might never have considered what you pay the two parts of the workforce as being related in any way. It can however form the basis for an equal pay claim, if your board (or your parent company’s board) can ultimately make decisions about pay (whether or not they ever do get involved).
Even if this Judgment is upheld on further appeal, there will be a number of arguments left to Asda, including whether any of the distribution centre staff really do like work or work of equal value to those working in retail stores, and whether the company’s reasons for paying different amounts satisfy the material factor defence. What is perhaps less usual about Asda’s arrangements to those found in many organisational structures, is that both the distribution centre staff and the retail staff are employees of the same company/group, whereas in many cases the distribution or logistics arrangements will be out-sourced so there will be no possibility of such an equal pay comparison being made.
It is always advisable to undertake equal pay audits to consider what you pay in different parts of your organisation/group. Why are different areas paid as they are? Do staff do work that may be considered of equal value? Do you have groups which are predominantly male and predominantly female, and is one of those groups paid less (traditionally it is the women’s work which will be paid less, sometimes because they don’t have the same robust Union representation)? If so, and one group is paid more than the other, what is your reason for doing so (the material factor)? It is important to know where risks exist and to consider whether pay gaps need to be closed (presumably over time). If in doubt about your reasons for difference or the comparability of different groups of staff, please do speak to your usual Weightmans advisor.
With the abolition of Employment Tribunal fees, collective equal pay claims are something we would expect to see increase and indeed we have already seen the numbers rising. Many of you in the public sector will be familiar with these issues, but for the private sector it may be that we see more challenges brought. Please ensure that you are forearmed.
If you have any questions about this Judgment or potential equal pay issues please speak to Phil Allen (email@example.com), Jawaid Rehman (firstname.lastname@example.org) who is one of our equal pay experts, or your usual advisor in the Weightmans employment, pensions and immigration team.