In a landmark decision, the Employment Tribunal (ET) in Thandi and others v. Next Retail Limited and another found that, by paying its warehouse staff a higher rate of basic pay than shop floor staff, Next was in breach of the equal pay provisions of the Equality Act 2010 (EA), which imply a “sex equality clause” into every contract of employment.
Other retailers are involved in large-scale equal pay litigation on similar points, but this appears to be the first to reach a conclusion in the ET.
What do we mean by equal pay for equal work?
The EA provides that men and women should receive equal pay for equal work. Equal work includes “like work” (work that is the same or broadly similar); “work rated as equivalent” (where the employer has carried out a job evaluation study or scheme); and “work of equal value” (where the work does not fall under either of the first two categories, but which is nevertheless equal in terms of the demands made). It is usual for claimants to plead more than one category in the alternative, although only one category can succeed in any particular claim.
The Next equal pay dispute
This case concerned more than 3,000 female shop-floor workers who brought a claim against Next for breach of the EA because they were being paid less than warehouse staff who were mostly male. A previous ET had found that the work carried out by the two groups was of equal value. Once it had been determined that the two groups were doing work of equal value, Next needed to show that the difference in terms was attributable to a “material factor” which was not the difference in sex. The role of this ET was to determine whether Next could establish such a defence.
The material factors pleaded by Next included market forces and market price, difficulty recruiting and the viability of the business.
The ET found that there was no direct discrimination as Next was not paying men more than women – both groups were made up of men and women who received the same pay irrespective of their sex.
However, the ET found that there was indirect discrimination as paying the warehouse staff more than the sales staff had a disproportionate effect on women as they made up the majority of the sales staff and the minority of the warehouse staff. The ET then moved on to consider whether Next could objectively justify the difference in treatment and found that it could not as the reason for the difference in treatment fell to cost-cutting which could not, in and of itself, be a legitimate aim justifying discrimination.
Lessons for employers
Next has confirmed that it will be appealing the judgment and we will keep a close eye on future developments.
In the meantime, employers may wish to reconsider relying on market forces as the determinative factor for wages. Instead, it is important to consider basic pay in light of equal value work to ensure that any disparity in pay is not directly or indirectly discriminatory. For the purposes of compliance with the EA, market forces may fail to justify differences in payment, especially where they reflect historic discrimination and this would disproportionately impact one gender. Further, it is helpful for businesses to think outside the financial box by making an effort to understand the equality of a certain market. For example, a predominantly male market that perpetuates inequality should not be taken at face value, particularly where businesses seek to benchmark basic pay against that particular market. The fact that Next paid its warehouse staff a higher rate based on market rate was not helpful as the warehouse market was a predominantly male market and therefore itself tainted by discrimination.
If you have any questions or require assistance with an equal pay matter, please get in touch with your usual Dentons contact.
