Next store workers have been successful in their equal pay claims after comparing their roles with those of warehouse workers, raising a number of potential implications for employers.
Background to the Claim
A group of predominantly female store-based workers at Next filed an equal pay claim, arguing that their work as retail assistants was of equal value to the work performed by the predominantly male warehouse operatives, and on this basis, they claimed that they should receive the same pay.
Initially, they succeeded in proving that the two roles were of “equal value,” and now, the Employment Tribunal (ET) has determined that pay disparities could not be justified, potentially leading to compensation payouts of up to £30 million.
Next had argued that various factors, such as market forces, recruitment and retention challenges, and business viability and productivity, explained the pay differences. The ET had to assess whether these factors constituted direct or indirect discrimination.
Employment Tribunal Rules Against Employer
The ET concluded that these factors did not involve direct discrimination, as they were related to costs and profitability rather than being influenced by gender.
However, the ET found that indirect discrimination existed, based on workforce statistics that were sufficient to demonstrate that paying retail workers less had a disproportionate impact on women, especially when considering that pay benchmarking was conducted against a broader warehouse market dominated by male workers. Therefore, Next needed to justify these factors by proving they served a legitimate aim and were proportionate.
The ET’s findings on equal pay claims hinge on the principle that if two jobs of equal value are performed by a man and a woman, the employer must pay the same rate unless a material factor explains the difference. This factor cannot involve direct sex discrimination, such as intentionally paying less for a role traditionally associated with women’s work. If the factor results in indirect discrimination, where one sex is disadvantaged, the employer must justify it as a proportionate means of achieving a legitimate aim. These were the key issues the ET considered in this case.
Next contended that they used these factors to achieve viability, resilience, and successful business performance, arguing that paying warehouse workers at market rates was necessary for effective recruitment and maintaining workforce quality. This rationale in relation to warehouse workers’ pay was accepted by the ET, but it did not accept this as a valid justification for continuing to pay retail workers less for performing equal work. The ET determined that paying retail workers a higher basic rate would incur additional costs, but cost-saving alone is not a legitimate reason for unequal pay. Even if the objective was considered legitimate, it was not proportionate because the business necessity was not substantial enough to warrant the discriminatory impact of reduced basic pay. The ET expressed concern that allowing market forces to override equal pay legislation would perpetuate lower pay in certain sectors due to past discriminatory practices.
As a result, the ET concluded that Next was wrong to pay retail workers lower basic pay. The Employment Tribunal also identified unjustified disparities concerning special pay awards for warehouse workers, differing Sunday premiums, varied cut-off times for night premiums, differing overtime rates, the elimination of paid rest breaks for retail workers, and long service awards – all primarily driven by cost-saving motives, which could not serve as valid justifications.
However, the ET did find that certain bonuses and other premiums were justified, as they were tied to specific business needs at the relevant time, were not solely based on cost, and were proportionate. These included a productivity bonus for warehouse workers linked directly to output, where retail work could not be measured in the same way. Additionally, a £1 per hour bonus was paid during a period when warehouse pay significantly lagged behind the market rate offered by competitors, and an attendance bonus was implemented at a particular warehouse to retain workers and prevent them from joining a nearby competitor. A higher public holiday premium for warehouse workers was justified due to the warehouses’ 24/7 operating requirements, and Next demonstrated that it had difficulty staffing the warehouses otherwise.
Next has already indicated its intention to appeal the decision, so a higher court may reach a different conclusion.
Related Equal Pay Claims
In recent years, several major UK retailers, including Sainsbury’s and Tesco, have faced significant equal pay claims brought by predominantly female store workers who compared their roles with those of male warehouse workers. These cases are part of a broader trend where retail employees argue that their jobs, despite being different in nature, are of equal value and should be compensated similarly.
Similar equal pay claims are pending against other retailers, such as Asda, but the Next case is the first to reach a conclusion, garnering significant attention. However, it is important to note that the decision is from an ET and, as such, does not set a binding precedent for other cases. This case was also decided based on its specific facts, meaning that similar claims in the retail sector might not yield the same outcome.
In the Tesco case, which involves tens of thousands of claimants, the Employment Tribunal allowed the claims to proceed, ruling that the roles of store and warehouse workers could be compared under equal pay legislation. Similarly, in the Sainsbury’s case, the tribunal found that the female store workers could compare their pay with the male distribution centre workers, despite differences in job location and responsibilities.
These cases could lead to substantial financial liabilities for retailers if the claims are successful. The legal argument often hinges on whether the work done by the store and warehouse workers is of “equal value” and whether any pay differences can be justified by non-discriminatory factors. The recent Next ruling follows this trend, reinforcing the challenges retailers face in defending against equal pay claims based on gender disparities in different job roles.
Key Takeaways for Employers
Relying on “market forces” to justify unequal pay is risky, particularly if there is a noticeable gender disparity in the roles being compared. This is because market rates may be influenced by historical biases regarding the value of “men’s” and “women’s” work. Continuing to adhere to these rates could perpetuate pay discrimination. As seen in this case, ETs are increasingly aware of this issue, especially when market forces are used to justify broad structural pay differences. There may be less risk of an equal pay claim if a premium is paid to recruit a specific individual quickly due to market conditions, as this is a more targeted approach not based on work categories.
Cost-saving alone is unlikely to be a strong justification for unequal pay, particularly if the underlying goal is maximisingprofit rather than emergency cost-cutting to save a business. If two groups of employees perform equal work but are paid differently, this decision suggests that it is insufficient to argue that one group is paid more for recruitment and retention purposes while the other group is paid less due to cost concerns. Cost-saving can be part of the employer’s aim, but it must be combined with other factors (a “costs plus” argument). Instead of focusing on overall profitability, retailers may need to consider more specific factors, such as the profitability of individual retail stores, in the context of ensuring the sustainability of a physical retail presence.
Next successfully justified some bonuses and premiums by demonstrating that they were linked to the specific needs and challenges of warehouse work, such as additional payments during a period when they risked losing workers to a competitor. Employers are more likely to justify pay differences if they are connected to clear business objectives (not just cost-saving) and are limited in duration. Productivity bonuses were also deemed justifiable in warehouse work, where output could be measured, unlike retail work. Although immediate changes are unlikely pending an appeal, if the decision is upheld, there may be a shift towards equalising basic pay, with more role-specific incentive arrangements.
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For advice on any aspect of equal pay laws, including the potential implications of this latest tribunal decision, speak to our employment law specialists.
Author
Founder and Managing Director Anne Morris is a fully qualified solicitor and trusted adviser to large corporates through to SMEs, providing strategic immigration and global mobility advice to support employers with UK operations to meet their workforce needs through corporate immigration.
She is a recognised by Legal 500 and Chambers as a legal expert and delivers Board-level advice on business migration and compliance risk management as well as overseeing the firm’s development of new client propositions and delivery of cost and time efficient processing of applications.
Anne is an active public speaker, immigration commentator, and immigration policy contributor and regularly hosts training sessions for employers and HR professionals
