Next Retail Limited: Employment Tribunal rules on equal pay

This blog will focus on the August 2024 judgment of Ms Thandi and Others v Next Retail Ltd and Next Distribution Ltd. Please note at the time of writing this is the latest ET judgment dated 22 August 2024 and it is not known if the matter will be appealed.  The blog seeks to explore the law with regards to indirect sex discrimination, rather than all legal matters which arose in this case.

The facts

The case focused on whether Next could justify the pay disparity between store-based sales consultants (predominantly female) and warehouse operatives (predominantly male).

Whilst the 2023 ET Hearing focused on whether the work performed by sale consultants was of equal value to that of the male warehouse operative, the 2024 ET shifted to consider whether Next could provide a justifiable reason for pay disparity between the two roles

The legislation

The key legislation which was considered by the Employment Tribunal (ET) includes section 13 of the Equality Act 2010 (direct discrimination) and section 19 of the Equality Act 2010 (indirect discrimination).

Whilst the ET did not find direct discrimination had occurred due to the protected characteristic, namely sex, indirect discrimination was found in some, not all of the terms explored in the judgment.

Section 19 of the Equality Act states: Indirect discrimination (1) A person (A) discriminates against another (B) if A applies to B a provision, criterion or practice which is discriminatory in relation to a relevant protected characteristic of B's. (2) For the purposes of subsection (1), a provision, criterion or practice is discriminatory in relation to a relevant protected characteristic of B's if— (a) A applies, or would apply, it to persons with whom B does not share the characteristic, (b) it puts, or would put, persons with whom B shares the characteristic at a particular disadvantage when compared with persons with whom B does not share it, (c) it puts, or would put, B at that disadvantage, and (d) A cannot show it to be a proportionate means of achieving a legitimate aim. (3) The relevant protected characteristics are— age; disability; gender reassignment; marriage and civil partnership; race; religion or belief; sex; sexual orientation.

Equality of terms is considered including Section 69(1) – the defence of material factor.

Six material factors were identified by the respondents, listed at paragraph 8 and then considered in turn within the judgment.

From paragraph 167 the ET considers case law, including Glasgow City Council v Marshall [2000] ICR 196. Lord Nicholls of Birkenhead considered this albeit with reference to the previous legislative provisions of Equal Pay Act 1970.

‘The variation between her contract and the man’s contract is presumed to be due to the difference of sex. The burden passes to the employer to show that the explanation for the variation is not tainted with sex. In order to discharge this burden the employer must satisfy the tribunal on several matters. First, that the proffered explanation, or reason, is genuine, and not a sham or pretence. Second, that the less favourable treatment is due to this reason. The factor relied upon must be the cause of the disparity. In this regard, and in this sense, the factor must be a “material” factor, that is, a significant and relevant factor. Third, that the reason is not “the difference of sex.” This phrase is apt to embrace any form of sex discrimination, whether direct or indirect. Fourth, that the factor relied upon is or, in a case within section 1(2)(c), may be a “material” difference, that is, a significant and relevant difference, between the woman’s case and the man’s case. When section 1 is thus analysed, it is apparent that an employer who satisfies the third of these requirements is under no obligation to prove a “good” reason for the pay disparity.’

The Tribunal considered expert opinion when considering the relevant factors.

With regards to direct discrimination, the ET found the respondents had established the defence under section 69(1)(a) EqA regarding the differential in basic pay. Namely the less favourable treatment was not due to the sex of the claimants.

Some of the key factors considered, included, factors 1 (market forces and market price), 2 (recruiting and retraining sufficient warehouse labour) and 6 (business viability, resilience and performance). The ET noted these factors placed the lead claimants at a particular disadvantage when compared with persons of the opposite sex, warehouse workers, for the purpose of section 69(2). With the burden under section 69(2) discharged by the claimants, the respondents had to establish the factor which explains the difference in pay was a proportionate means of achieving a legitimate aim.

The ET made the following interesting observations at paragraphs 268 and 269 with regards to the cost argument put forward by the respondents:

…‘The aim was just a financial one; the respondents could have afforded to pay a higher rate of basic pay to retail staff as some competitors did, but paramountcy was given to keeping costs in the labour budgets to their minimum. That enabled the first respondent and the Group to maintain and maximise profitability.’

…’The fact that the first respondent has made sustainable profits throughout the period, save for the year after lockdown, and could absorb the cost of the same basic pay for work of equal value is a judgment the Tribunal can pass with the merciless wisdom of hindsight. All that said, we are satisfied that with respect to basic pay the legitimate aim of viability, resilience and successful business performance [aim 1], fairly characterised, falls on the wrong side of the demarcation line, of costs only, with no element of costs plus.’

Whilst the savings of costs argument did not have teeth, the respondents were able to justify some bonuses and premiums by showing they were connected to the business needs and requirements of warehouse works. They were also able to argue productivity bonuses were justified.

The above does not constitute legal advice. Legal advice should be sought regarding your individual circumstances.