Equal pay and the checkout: supermarkets facing £8 billion in claims

Answer

In 2014, 7,000 predominantly female Asda retail store workers brought a claim to the Employment Tribunal arguing that they can compare themselves to higher-paid, predominantly male staff at distribution centres to make an equal pay claim. The claim has been through the Employment Tribunal, the Employment Appeal Tribunal and the Court of Appeal (Asda Stores Ltd v Brierley and others (2019)). In January 2019 the Court of Appeal held that the predominantly female supermarket staff can compare themselves to their male counterparts in distribution centres in order to make an equal pay claim.

The potential financial and reputational damage to Asda and other supermarkets facing such claims amounts to £8 billion in some estimates. This reflects all 500,000 store workers across Morrisons, Tesco, Sainsbury's and Asda who are making a claim. The recent Court of Appeal decision in the Asda case was on the preliminary issue regarding whether the claimants could make the comparison to the other staff on higher wages. It did not consider if their work was of equal value.

UK legal framework

The Equality Act 2010 implements the principle of equal pay for equal work for men and women. To bring a claim, the claimant must identify a comparator of the opposite sex performing equal work. Section 65 of the Equality Act states that equal work can be (i) like work, (ii) work rated as equivalent, or (iii) work of equal value.

The comparator must be working for the same employer as the claimant and must be at the same establishment or another to which common terms and conditions apply. The "common terms" need not be identical, just "broadly similar" (British Coal v Smith (1996)). Moreover, the male and female employees need not actually work at the same physical location. It is sufficient that if one were transferred to do their job at the other's place of work, they would remain employed on broadly the same terms (North v Dumfries and Galloway Council (2013)). This is known as the ‘North hypothetical’.

EU law

Alongside UK law, Article 157 of the Treaty on the Functioning of the EU (TFEU) states that "men and women should receive equal pay for equal work or work of equal value". The employees' terms and conditions must come from a "single source", so one body can rectify any pay issues (Lawrence v Regent Office Care Ltd (2003)).

On the facts of this case, Asda's executive board qualifies as the single source of pay decisions. However, the Court of Appeal recommended that the application of Article 157 to equal value claims such as this case should be referred to the European Court of Justice if the claim were to rely solely on EU law.

Asda

At the Employment Tribunal, Asda argued that as the jobs were different roles at different locations and evolved to serve different needs, the claimants could not argue their work was comparable. The tribunal sided with the claimants and held that Article 157 has direct effect and that the single-source of Asda's executive board was sufficient to bring a claim. Moreover, the terms at different sites were set by the same employer and were largely similar.

When considering the North hypothetical, the tribunal held that similar terms would apply if distribution staff did their jobs at supermarket locations. This was upheld in the Court of Appeal. Moreover, the Court of Appeal held that the North hypothetical was binding authority and there were common terms between distribution workers and store workers. Hence, the claimants can now bring a claim to determine if they were doing equal work.

Equal work

If and when the case is fully heard (Asda is appealing to the Supreme Court on whether the claim can be brought), the claimants will have to argue that they are doing equal work and therefore merit equal pay. Section 65 of the Equality Act 2010 lists the three categories of equal work:

1. Like work

This covers work which is broadly similar and focuses on the actual work undertaken.

2. Work rated as equivalent

This requires a job evaluation scheme/study which assesses the demands made on a worker and whether these are different for men or women. It analyses each job and assigns a numerical score from the most valuable role downwards. Jobs are grouped into salary bands according to the numerical score and all jobs within a particular band are "rated as equivalent".

3. Work of equal value

This is based on the effort, skill and decision making required for each role.

The claimants in the Asda case argue that customer-facing roles require a high skillset and place enhanced responsibility upon the employees on the shop floor to deliver the public face of the brand. Hence, they perform work which requires equal effort, skill and decision making to the work carried out in distribution centres, which merits equal pay.

Material factor defence

If the work is deemed of equal value, Asda will argue that it can justify paying men more than women for equal work, as this is due to a material factor that is not directly or indirectly discriminatory (section 69 Equality Act). Asda may suggest that the anti-social hours of distribution centres and technical skillsets needed to move goods around a warehouse, such as operating machinery, merit higher pay than those on the shop floor, regardless of sex.

Next steps and 'piggyback claims'

Asda will now apply to the Supreme Court for permission to appeal against the Tribunal decision that the roles are comparable. If not granted, then the claim regarding equal pay will be heard in full. In addition to the financial damage of a finding in favour of the claimants who are largely women, the claim has already been added to by men who also work in supermarkets and are affected by unequal pay. It was held in McAvoy and others v Llewellyn and others (2009), that a man can bring a ‘piggyback claim’, using as his comparator a woman who has brought a successful equal pay claim.

The big four supermarkets are potentially exposed to huge reputational damage, as well as an £8 billion liability on the issue of equal pay. Moreover, this is a problem they are already struggling to overcome. The gender pay gap at the 10 largest UK supermarkets in 2018 was 12%. Yet most UK supermarkets continue to promote their self-image as equal opportunity employers and mark International Women's Day. It remains to be seen if the impending case will find that supermarkets are underpaying female staff, or if the pay differentials are not related to sex.

Other industries and employers are no doubt looking on with intrigue and concern. As this case moves upward to the Supreme Court on appeal, there are comparisons to be made with shop floor workers in fashion stores and their colleagues in distribution sites, and between front of house restaurant workers and kitchen staff. Hence there could now be similar claims, bringing vast reputational and financial penalties for employers across a range of industries.

Alexander Davidson is a trainee solicitor at Taylor Wessing.