Equal pay claims are notoriously complex. Such claims often involve multiple hearings, mountains of disclosure and detailed analysis of company pay structures and practices. Add 3,500 claimants to the mix and you could be facing over six years in the tribunal, as demonstrated by the recent Next judgment.
Back in 2018, a number of retail consultants in Next stores submitted claims arguing that they were doing work of equal value to higher paid men working in the warehouses storing the goods that Next sell.
A
ruling last year held that their work was of equal value to the warehouse operatives. It then fell to the ET to decide whether or not Next was justified in paying them differently (note that if an employer can successfully establish that there was a material factor which caused the difference in pay, and that that factor is not directly or indirectly discriminatory, an equal pay claim will fail).
After a meticulous comparison between 17 different contractual terms, the ET has now
concluded that thousands of (predominantly female) retail consultants should have been paid equally to (predominantly male) warehouse operatives in relation to:
- basic pay;
- unconsolidated awards;
- Sunday pay premium;
- night-time premium;
- overtime premium;
- paid rest breaks; and
- long service awards.
While the ET did not find that the difference in pay was a result of Next directly discriminating against the women, the material factors Next relied on to justify paying them differently, including market forces, were indirectly discriminatory.
Although the judgment holds no precedent value (being only first instance), it is an important reminder of the dangers of relying too heavily on ‘the going rate’ to set pay rates. If the pay differences arise from the market’s (historic) perception of the lower value of ‘women’s work’ compared to ‘men’s work’, relying on this as a defence is likely to be problematic.
The next stage will be for the ET to assess the amount of backpay due. As equal pay claimants can seek backpay from up to six years before the date the claim was brought, initial estimates put this figure at around £30 million. There will also likely be ‘piggy back’ claims, where men doing the same jobs as the lower paid women will claim the higher rate of pay.
A new era of pay transparency
Being able to claim for equal pay with someone performing a different but equal value role is not new. However, the claimants’ high-profile success in this judgment may empower more individuals to bring their own equal pay claims comparing themselves against individuals in other areas of the business. This poses a particular risk for organisations with roles that are heavily male or female dominated.
And although the UK is not subject to the Pay Transparency Directive, its adoption across the EU is likely to further raise employees’ awareness and expectations regarding equal pay and pay transparency.
Workers in the EU will have the right to request information on their individual pay level and the average pay levels (broken down by gender) for categories of workers doing the same work or work of equal value to them. As UK employees can bring equal pay claims in reliance on European counterparts, the increased availability of pay data within Europe could result in an uptick in equal pay claims with claimants comparing themselves with their higher-paid non-UK based peers.
EU employers preparing for implementation of the EU Pay Transparency Directive are watching the Next judgment closely too.
Firstly, it is a reminder that when creating or reviewing their job classification systems as required by the Directive, the equal value concept cannot be overlooked; fundamentally different functions can still be considered of equal value, if they require the same level of skills, responsibilities and working conditions.
Additionally, once functions are determined to be of equal value as agreed with the worker representatives, the Directive requires companies to provide objective justifications for pay discrepancies. In that context, relying on market forces is not without risk in the EU either, and must be scrutinised against the criteria established by the Enderby judgment of the Court of Justice of the EU.
The
Next case serves as a reminder that justifying pay gaps should be thoroughly tested against existing case law to minimise risks. Find out more on our dedicated webpage:
The EU Pay Transparency Directive.
There are a number of ways employers can manage equal pay risks, including by having clear grading systems and pay scales, using accurate job descriptions and carrying out an equal pay audit. To find out more, please speak to your usual Linklaters contact.