Retail giant Next lost a major equal pay case this week, resulting in an estimated £30m bill to foot but what does this mean for businesses? Lawyers tell City A.M. that the ruling is a “worrying precedent for employers”.
The Employment Tribunal ruled on Tuesday that Next had failed to show paying its sales consultants, most of whom are women, lower hourly pay rates than staff in its warehouses, which are male dominated, was not sex discrimination.
‘Market rate’ argument
When it was at a hearing earlier this year, Next had argued that the market wage for a warehouse operative was greater than for a sales consultant and gender did not come into it.
However, the Tribunal ruled that when there are two labour markets doing equal work but the male-dominated market is paid more than the female-dominated market because of differences in the market rate, that reason alone is not a lawful defence in an equal pay claim.
Keely Rushmore, partner at Keystone Law explained that “paying the ‘market rate’ for a role has in the past been relied on – and accepted – as a defence to equal pay claims, but this case highlights the dangers of doing so.”
She added that the Next case “serves as a reminder that jobs that on their face seem very different, can be compared against each other under the equality legislation to see whether they fall foul of the equal pay requirements.”
Cases waiting in the wings
Caspar Glyn, chair of the Employment Lawyers Association noted that “there is large scale litigation against the supermarkets applying the same principles.”
“There is reason to think that other retailers may have operated in a similar way and may face claims based on the same principles,” he added.
Law firm Leigh Day have also taken legal action against Asda, Tesco, Sainsbury’s, Morrisons and Co-op, on behalf of a total of 112,000 staff over equal pay claims.
The outcome of the Next decision will result in a “worrying precedent for employers but especially the big supermarkets where similar equal pay cases are waiting in the wings,” explained Crowley Woodford, partner at Ashurst.
Rushmore stated that “these cases will always be fact-specific” adding “as it was at Employment Tribunal level, it is therefore not a binding decision, with Next indicating it will appeal the outcome,” she added.
Will Next get a second chance?
With roughly £30m on the line, Next has confirmed that it will seek to appeal on the decision, but does it have a shot?
Jessica Bass, partner at Oury Clark stated that “there are limited grounds on which Next can legally appeal a judgment.”
“Next haven’t confirmed the grounds on which they will be appealing, and they only have a limited period to lodge this,” she added.
Rushmore noted that “given the amount at stake and the future ramifications for Next, it is perhaps not surprising that it has announced its intention to appeal the decision, particularly given the Employment Tribunal, in its decision, criticised the employees’ expert evidence.”
“”Equal pay claims are legally complex and whether or not the appeal will succeed remains to be seen,” she added.
However, regardless of whether its successful or not, Woodford noted that an appeal “is a costly lesson for Next whether they win or lose in the Employment Appeal Tribunal”.
While Sam Bidwell of the Adam Smith Institute (ASI) told City A.M. that this decision “is an inappropriate intervention into the relationship between employer and employed.”
He argued that “businesses are best placed to decide how to pay their staff – the courts should not be intervening to impose an arbitrary pay scale on the basis of equalities legislation which, in this case, is not even relevant to the case in question.”
“This will create confusion and uncertainty for thousands of employers up and down the country,” he added.