Equal pay for Next staff
27 September 2024
An employment tribunal has determined whether Next’s sales consultants and warehouse operatives should be paid equally in accordance with the Equal Pay Act 2010.
Thandi and others v (1) Next Retail Limited (2) Next Distribution Limited
Facts of the case
Next’s shop-floor sales consultants are made up of a largely female workforce who are paid a lower wage than that of the predominantly male warehouse operatives.
Alleging that Next had breached the equal pay provisions of the Equality Act 2010, a group of sales consultants argued that their work was of equal value to the work carried out by Next’s warehouse operatives, and therefore they should be paid the same.
In June 2023, the employment tribunal accepted that the claimants were carrying out work of equal value to the warehouse staff. A further hearing therefore took place in May 2024 to determine whether Next could justify the difference in pay by establishing a ‘material factor defence’.
Employment tribunal’s decision
The employment tribunal found in favour of the claimants and held that Next could not establish the material factor defence in relation to the difference in basic pay.
Next argued that the difference in pay was due to factors such as market forces, recruitment and retention, and business viability and productivity. Both workforces were each made up of both men and women, yet all warehouse staff received the same pay regardless of their sex, as did all sales staff. This difference in pay was therefore found not to be directly discriminatory towards the sales consultants.
The tribunal, following an analysis of the statistics, determined that the difference was instead indirectly discriminatory. The sales workforce had a 77.5% female composition compared to that of the warehouse’s 52.78% male makeup. Whilst Next benchmarked pay against the wider market, the warehouse labour market had a significant imbalance favouring men.
Having established indirect discrimination, the tribunal was required to assess whether the pay differential was objectively justified. It was Next’s argument that paying warehouse staff more basic pay than sales staff was one way to achieve the legitimate aim of ensuring viability, resilience and the successful performance of its business. However, the driving force behind this was centred on cost-cutting and was therefore not found to be a legitimate aim to justify unequal pay.
Even if the aim had been deemed legitimate, the tribunal held that it was not proportionate as the business need was not sufficiently great as to overcome the discriminatory effect of lower basic pay. Certain other payments, such as bonuses and other payments, were however found to be justified by the tribunal on the basis they were specifically connected to the needs and challenges of warehouse work.
The Birketts view
As a result of the tribunal’s decision, it has been reported that Next is liable for around £30million as compensation for back pay. The case is set amongst a background of large equal pay claims in the retail sector, including some of the major supermarkets, and it is the first of them to reach a final decision.
It highlights the potential difficulty for employers who are seeking to defend such claims on the basis that they are paying the market rate for specific roles. It is important to note that tribunals will examine whether the underlying markets themselves may be embedded in historic discriminatory concepts, including outdated perceptions of ‘women’s work’ and ‘men’s work’.
The judgment further emphasises that saving costs alone is unlikely to be a justification for unequal pay. This will be particularly relevant in circumstances where the employer has the means to absorb the cost of balancing pay but opts instead to prioritise profitability. Although saving costs can be part of the employer’s aim, it needs to be combined with other factors for a difference in pay to be justified.
Whilst this is a first instance decision and therefore has no binding authority, this case can be regarded as a useful illustration of how a tribunal will consider the factors underlying any pay differences between different groups of workers. Next has already confirmed that it intends to appeal this decision, so it will be interesting to see whether the Employment Appeal Tribunal takes a different view to the tribunal.
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Liz Stevens
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Lucy Wolfenden
Services
The content of this article is for general information only. It is not, and should not be taken as, legal advice. If you require any further information in relation to this article please contact the author in the first instance. Law covered as at September 2024.