Next loses equal pay case: implications for employers
The retailer Next has lost a six-year equal pay claim comparing the pay of warehouse and shop floor staff. The value of the litigation could be in excess of £30 million.
What is the background to the case?
According to equal pay law, claimants are entitled to be paid the same amount as comparators of the opposite sex who are employed either to do the same work, work that is rated equivalent, or work of equal value. Where there is a pay differential between a claimant and comparator, an employer can successfully defend the claim by showing that the difference in pay can be explained by a "material factor" (the material factor defence).
In the case of Thandi and others v Next Retail Limited, an Employment Tribunal has found that Next violated equal pay legislation by paying warehouse staff at a higher rate than shop-floor sales staff. The Tribunal had previously determined that the two groups were performing work of equal value. This hearing considered whether the material factor defence could apply.
The Tribunal's decision
Next attempted to plead material factors including market forces, market price, recruitment difficulties and the performance of the Next group and its subsidiaries. The Tribunal found that the material factors pleaded by Next were indirectly discriminatory and that the indirect discrimination could not be objectively justified. During the period of the claim, sales staff were predominantly female (77.5%), while warehouse staff had a slight male majority (52.78%), meaning that the lower basic pay for sales staff disproportionately affected women.
However, Next did succeed in defending some payments and bonuses that applied solely to warehouse staff. These were related to specific challenges Next faced in incentivising and retaining warehouse staff at the particular times at which the bonuses and one-off sums were paid.
Learning points for employers
This is a first instance decision, which does not bind other Tribunals. It is nevertheless an interesting decision, in particular in that it demonstrates the difficulties employers may face in attempting to justify a pay differential based on market forces alone.
Next has announced that it will be appealing the Tribunal's decision. We will continue to report on developments in this high profile case.