Are you at risk of an equal pay claim?

The big four supermarkets: Tesco, Sainsbury’s, Asda and Morrisons are all currently facing equal pay cases. The firm Leigh Day is representing thousands of employees seeking back pay for predominantly female retail workers who believe that they are receiving less pay then predominantly male workers in distribution centres. It is estimated that if all four supermarkets lose their cases they could be ordered to pay over £8billion in compensation. Cases have also recently been started against the Co-op and the retailer Next, also powered by the law firm Leigh Day through their Equal Pay Now banner.

What are the requirements for an equal pay claim?

The basic principle of equal pay legislation is that employees should receive equal pay for equal work. This is achieved by the law inserting a “sex equality clause” into all employment contracts to replace an employee’s less favourable term(s) with the equivalent more favourable term.

There are two main legal hurdles before a claim can be successful. The questions to be asked are:

1. Are the employees carrying out equal work?

There are three types of equal work:

• “like work”, which is work that is the same or broadly similar;
• “work rated as equivalent”, which is where an employer has carried out a job evaluation scheme and rated the roles as equivalent; and
• “work of equal value” which is where the work is different but nevertheless equal in terms of the demands made on the employees.

The last category is the basis for most equal pay claims, and forms the basis of the supermarket claims. The retail workers in the supermarket claims are arguing that their roles are of equal value and involve similar demands as roles in the distribution centres which are subject to higher rates of pay. The supermarkets have argued that these roles are in fact completely different and the roles in the distribution centres are much more physically demanding and thus attract higher remuneration.

2. If they are of equal value, is there a material factor defence?

Even if the work is of equal value, the employer may have a defence if they can show that the difference in contractual terms is due to a material factor which is neither directly nor indirectly sex discriminatory. A factor that is ostensibly gender-neutral but which, in practice, has a disproportionate adverse impact on women will need to be objectively justified by the employer. For example a common material factor relied upon by employers is market forces, that to recruit a candidate they had to pay a higher rate due to their position in the market.

What is the current position in the cases?

The Asda case is by far the furthest along which means it will carry a lot of influence in the other cases. It is also the largest with more than 44,000 shop floor workers claiming they have not received equal pay to their male counterparts.

In March 2021, Asda lost the first significant step in its fight against the equal pay cases when the Supreme Court ruled on a preliminary issue and found that Asda’s shop floor staff can compare themselves to distribution staff at their warehouses for the purpose of their equal pay claim. These claims will therefore now proceed to the next stage.

Shop floor workers, who statistically tend to be women, are claiming that their work is of equal value to work carried out by warehouse staff, who statistically tend to be male. They are claiming equal pay with warehouse staff on this basis.

Asda argued that the two roles could not be compared to each other as they are in different departments, and the warehouse roles were more difficult and are on different terms. The Supreme Court today agreed with the employees that they could be compared with warehouse staff.

In order to succeed, the employees will now need to demonstrate to the Employment Tribunal that, comparing themselves to the warehouse staff, their work is in fact of equal value. Asda will still have the opportunity to defend the claim if they can show that the difference in pay is due to a material factor which is not of itself discriminatory. A further hearing will be arranged to decide these points.

Although Asda staff will have to overcome further hurdles to ultimately succeed in their equal pay claims, this is an important judgment in this large equal pay case, which if successful will result in significant back payments to employees. In total when the claim was first brought Asda employed approximately 133,000 hourly paid retail employees. The difference in pay claimed in some cases is up to £3 per hour.

The outcome of the Supreme Court decision has implications for the other ongoing claims in the retail sector, which represent millions of pounds in potential back pay. This preliminary determination by the Supreme Court in the Asda case is likely to speed up the final outcomes in the other cases, as relying on the decision they may now be able to proceed straight to a final hearing instead of having to go through this preliminary process first as well. It is also a reminder for employers in other sectors that equal pay claims can be brought based on comparisons with other roles.

Beyond legal arguments in this case, there is a lot of support for the workers influenced by a political push for equality.

The implication for other UK business will be far reaching too as it could trigger various cases against employers for work which may not be similar but is of equal value. Unfortunately, this area of law is not clear cut and each case will very much depend on its facts.

Implications for employers

Equal pay is still a significant issue and is costly to get wrong, both in terms of legal claims and the negative publicity which can be significant.

Employers should review their pay rates across the organisation to ensure that they are complying with equal pay obligations, particularly where they have areas or roles predominantly staffed by women and others predominantly staffed by men as in these supermarket cases.

Employers should review their pay structures and consider their risk for claims based on the equal value of roles. Employers should look to address any inequalities, if these are identified, or consider how these can be justified by a material factor.

If you are concerned that you may be similarly affected please contact one of the Employment team.