Next set to pay out over £30m in compensation payments following Equal Pay claim

Clothing and homeware retailer Next has lost an equal pay claim which has been ongoing for the past 6 years. The claim was brought by Next’s mainly female retail store workers, who compared their work to Next’s predominantly male warehouse workers.

This claim is estimated to have cost Next in excess of £30 million in compensation payments, with average salary loss claimed amounting to more than £6,000 per worker.

During the relevant period, women made up 77.5% of Next’s retail sales workers, whereas warehouse workers were 53% men.

Under UK law, men and women must receive equal pay for doing equal work. Equal work is classed as:

• ‘like work’ – work where the job and skills are the same or similar;
• ‘work rated as equivalent’ – e.g. using a fair job evaluation. This may be by reference to the level of skill, responsibility and/or effort needed to do the work; or
• Work of equal value – work that is not similar but is of equal value. E.g. this could be by reference to the level of skill, training, responsibility or demands, or working conditions.

It is therefore clear that even if two roles are not the same or similar, the work could be deemed to be equal work for the purposes of Equal Pay legislation. In the Next case, it was successfully argued that the retail workers and warehouse workers were undertaking work of equal value.

An employer can only justify differences in pay for equal work if they can point to a material factor which is not directly or indirectly discriminatory which explains the difference – this is known as the ‘material factor defence’ and can include things such as geographical differences (e.g. London vs the rest of the UK), if one individual is more qualified than the other, and/or if an individual works unsociable hours.

Equal pay law applies to contractual terms and conditions as well as pay itself, therefore it would include pension, working hours, annual leave entitlement and other benefits.

In the Next case, the Employment Tribunal held that the material factor defence was not made out by Next in respect of a number of contractual terms alleged to be unequal, including basic pay, Sunday pay premium, paid rest breaks and long service awards. Next had unsuccessfully tried to point to market forces and market prices – stating that warehouse roles command a higher rate of pay in the labour market. This was not accepted by the Tribunal and it was held that by paying retail workers less, there was a disproportionate impact on women (given the retail workers were predominantly female) and this treatment had not been objectively justified by Next – i.e. it could not show that the difference in treatment was a proportionate means of achieving a legitimate aim. The difference in pay was therefore also indirectly discriminatory.

A number of other similar claims are currently pending against other retailers including Tesco, Morrisons and Sainsburys. Despite not setting a binding precedent by virtue of it being a first instance Tribunal decision, the Next decision will likely be a judgment that many employees in similar scenarios will point to when bringing equal pay claims. Successful equal pay claims can have significant financial implications for employers, with employers potentially being liable for sums dating back up to 6 years.

If you have any concerns in relation to equal pay issues, our experienced employment team are well placed to provide any advice required.