Quick Hits
- Female retail employees in the UK sued Next Retail Limited for paying them less than male warehouse workers for work of equal value.
- The Employment Appeal Tribunal (EAT) determined that recruiting and retention needs at warehouses were legitimate reasons for the pay differential.
- The EAT found the pay differential was a proportionate response to a legitimate aim.
The UK’s Equality Act 2010 prohibits employment discrimination based on sex, sexual orientation, pregnancy, age, race, religion, and other protected characteristics. It requires employers to give men and women equal pay for equal work. Unequal pay can be justified “if it is in pursuance of an objective which is legitimate and where the means chosen are proportionate to that objective,” the EAT explained.
Background on the Case
The claims were originally brought by 3,540 female retail sales employees working in Next’s shops. In 2018, they sued under the Equality Act 2010, alleging they were paid less than male employees in Next’s warehouses. Over the relevant time period, about 77 percent of the company’s retail sales employees were female, and about 22 percent were male, while about 47 percent of warehouse employees were female, and about 53 percent were male.
At the first hearing, the Employment Tribunal (ET) determined that the work performed by the retail sales employees was of equal value to that of the warehouse operatives, in terms of effort, skill, and decision-making. The burden of proof, therefore, shifted to Next to explain the differential in pay between the two roles.
Next argued that it paid warehouse employees more based on material factors, including business viability and resilience, retaining and recruiting warehouse workers, maintaining 24/7 operations in the warehouse, incentivizing high productivity, and incentivizing good attendance records. It said that the same commercial pressures did not exist with retail sales roles as they did with warehouse jobs because the two different roles related to separate labour markets.
The ET held that business viability, resilience, and market-related considerations were not viable justifications for setting different pay rates as they were “all about cost” and that those reasons could not, without more, provide objective justification for the pay differential.
Employment Appeal Tribunal Decision
The EAT concluded that there was no direct sex discrimination in this case, so it looked to the question of whether indirect sex discrimination occurred due to a neutral policy or practice putting a protected group at a particular disadvantage.
The EAT concluded that the ET was correct in finding that the female claimants demonstrated a particular disadvantage because of the statistical differences between the claimant and comparator groups. However, it held that the ET erred by focusing primarily on the company’s cost-saving considerations in setting different pay rates. It found the ET failed to assess whether the pay differential was a proportionate response to the genuine business need to recruit and retain warehouse staff. The proportionality determination calls for a “critical evaluation” of business practices and needs, the EAT noted.
The EAT also found that the ET erred by requiring the company “to establish separate and distinct aims for both the higher and lower levels of pay,” rather than a single aim that was the reason for the unequal pay. The EAT also dismissed the claimants’ cross-appeal.
Lessons Learned
This case illustrates that employers in the UK can point to genuine recruiting and retention concerns in specific labour markets to justify pay differential between roles that are of equal value.
The EAT held there was sufficient evidence that gender had nothing to do with the unequal pay rates in this case. Going forward, documenting pay decisions is critical, as it may assist an employer to defend equal pay litigation.
Not only is equal value a principle in UK pay equity law, but the concept of equal value is the cornerstone of the EU Pay Transparency Directive. Information and updates on the progress of the directive’s implementation across the European Union can be found using Ogletree Deakins’ Member State Implementation Tracker.
Ogletree Deakins’ Pay Equity Practice Group and the London office will continue to monitor developments and will post updates on the Cross-Border, Pay Equity, Retail, Trucking & Logistics, and United Kingdom blogs as additional information becomes available.
Daniella McGuigan is a partner in Ogletree Deakins’ London office.
This article was co-authored by Leah J. Shepherd, who is a writer in Ogletree Deakins’ Washington, D.C., office.
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