The Next step in equal pay

With the government’s proposed workplace reforms looking to improve equal pay enforcement, many businesses are under pressure to take action on unlawful pay disparity. Here we look at how the tribunal claim against retailer Next could also encourage companies to reflect on pay gaps.

Background:

In 2018, Next staff submitted a claim citing equal pay for equal work under the Equality Act 2010. The trigger for the passage of the Equal Pay Act was the 1968 strike at the Ford factory in Dagenham. The impact of the strike has since been re-enacted in the film, Made in Dagenham, starring Sally Hawkins as head striker Rita O’Grady.

The women in the Ford factory were downgraded to unskilled workers and therefore paid less than men. Obviously displeased with this process, the women went on strike. The situation was only resolved when the Employment Minister at that time, Barbara Castle, intervened.

Taking action on pay disparity:

As the facts – and the film – show, laws were then made to ensure that pay rates for men and women performing similar work were not unnecessarily different. Discrimination laws were consolidated in 2010 and since then, the Equality Act has provided the legal structure on equal pay.

In 2018, predominately female sales consultants at the retailer Next, challenged the pay disparity between themselves and Next’s predominately male warehouse operatives.

It took until August 2024 for the tribunal to reach a decision, and it has now been determined that the pay disparity was unlawful. The decision the tribunal made could cost Next an estimated £30 million or more. However, it is how the court made this determination that is particularly interesting.

Determining unlawful pay gaps:

Under equal pay law, work of equal value must be paid equally, hence the term, “equal pay for equal work”. This is unless the difference in pay can be justified.

Next argued that it was not discriminating; pay rates were formed based on “market rates” and “business need”. However, the tribunal found that neither “market rate” nor “business need” was a valid defence for the pay disparity between men and women.

It was then up to Next to prove its determination was not due to sex discrimination, which it failed to do. The tribunal indicated that businesses may need a more compelling and justifiable reason in the future to avoid a similar fate. Next has since indicated an intention to appeal the decision.

Employers who believe that this type of claim is reserved for big business would be wrong. Although Sainsbury’s, Asda, Tesco and other supermarket chains have dealt with or are dealing with equal pay litigation, as well as councils such as Birmingham City Council, equal pay is not just a class action issue.

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Avoid falling short of equal pay legislation:

A sole employee can make a claim of equal pay against their employer, and the legal tests applied by the employment tribunal are the same as those applied to bigger businesses. So how do employers ensure they do not fall foul of equal pay laws?

An objective pay structure which uses criteria such as skills and competence is a good starting point. This would prevent offering managers the flexibility to determine pay rates for their own staff.

How to avoid pay discrimination in the workplace:

Larger companies are under a legal obligation to publish gender pay gap figures every year. There’s the opportunity to accompany the report with a narrative to give context to any gaps identified.

Typically, you would expect to see a decline in any pay gaps, year on year, by a business who took the equal pay concept seriously. It is worth noting that a gap does not always signify an equal pay problem. A gap should, however, always trigger an audit to see why exactly it has happened.

The government has pledged to improve equal pay enforcement as part of its employment law overhaul, so we should expect to see some changes in the not-too-distant future.