Next steps: Reflecting on retail’s latest equal pay casualty

Over 3,500 current and former employees have recently won a landmark equal pay claim against Next.

Following a unanimous ruling by an employment tribunal, the claimants won their six-year battle against the huge high-street retailer who failed to establish that paying its retail consultants (who are predominantly female) lower wages than its warehouse staff (the majority of whom are male) was discriminatory on the grounds of sex.

The facts

The case began in 2018, when a group of store-based employees brought an equal pay claim against Next on the basis that they were being paid less than their warehouse comparators. The claimants argued their work was of equal value to the warehouse-based staff and should therefore be paid at the same rate.  Despite the roles looking very different in their day-to-day duties, the tribunal concluded that their works were of equal value to their comparators.

 In accordance with current equal pay legislation, employees who are doing work of equal value for  the same employer must be paid the same unless the employer can show that the difference is due to a “material factor” which is not gender-based.

Upon the tribunal’s examination of the workforce between the years of 2012 and 2023, around 77.5% of the store-based staff were female and around 52.75% of the warehouse staff were male.

Some of the terms the claimants stated were favourable for their comparators included basic pay, Sunday and overtime premium and paid rest breaks.

Next put forward various arguments for the range of allowances and premium payments afforded to their warehouse-based staff, the primary reasons being market forces, recruitment and retention payments as well as business “viability” influencing the going rate for these roles.

Overall, the tribunal found that Next had established a defence against the claims for direct sex discrimination, in that there was no conscious or subconscious intention to pay women and men differently based on sex.

In relation to some of the terms, such as the public holiday premium payment for warehouse staff, the retailer argued that difficulties in sourcing sufficient number of workers to cover 24-hour needs warranted a premium to incentivise staff to work on these days. The tribunal found such problems did not arise for sales assistants on public holidays and therefore ruled there was a compelling business need at the time to adopt and maintain a difference in pay.  The tribunal took a different view on the Sunday premiums, ruling that whilst market forces and retention issues explained the differences in Sunday premiums being paid to warehouse staff, the business need was not sufficient to outweigh the detrimental and discriminatory effect overall.

Upon examination of various other terms in place the tribunal found that seven were indirectly discriminatory on the basis of sex, and the justifications put forward by Next were not sufficient to establish otherwise. The tribunal found that several of the aims put forward were in fact solely based on cost savings and therefore not legitimate or, as shown above, the business need was not sufficiently compelling to justify not applying the same equal terms for the store-based employees.

What does this mean for employers?

The case has brought to attention that such equal pay claims, previously predominantly arising in the public sector, are increasingly common in the private sector with the emergence of cases against retailers and supermarkets.

It must be noted that this case was reviewed on its own specific facts and therefore exactly the same approach might not be applied by the employment tribunals to other retail and supermarket giants who are currently facing equal pay claims (e.g. Asda and Tesco).

Employers should consider  their current pay data and workforce composition as it does not take a huge difference in female to male ratio for such claims to arise, as demonstrated by this case.

It is also important to remember that the legal requirement to provide equal pay to all employees applies to businesses of all sizes not just large supermarkets or retailers.

This case shows that employers must carefully consider and be able to explain any justification for paying male and female employees at different rates. The tribunal found for many of the terms, cost savings was the key reason for the difference in pay and this alone cannot be justified.  There must be a further commercial and objective reason for the difference in pay. Further, although market forces have been used as a defence many times in the past, this case indicates that there must be a sufficiently compelling business need for an employer to continue maintain differentials in pay on this basis, particularly because many market rates may be perpetuating a discriminatory differential caused by how certain jobs were viewed historically.

What’s on the horizon?

Following this first instance judgment, the claimants have been able to seek a back payment of up to 6 years and Next are estimated to be liable to pay around £30million. However, the retailer has indicated an intention to appeal the tribunal’s decision which means this may not be the last word on the matter.

This article was authored by Weightmans Solicitor, Lasya Nair. For further information, please contact Lasya at lasya.nair@weightmans.com.