In amongst the many recent developments, you could be forgiven for missing an upheaval in the realms of equal pay. In the shadows of Uber, Brexit and the US elections, a tribunal in Manchester may have opened the floodgates for equal pay claims in the private sector, an issue for retailers with online and traditional bricks-and-mortar operations but with the potential for far wider application.

At a preliminary hearing, the tribunal held that a predominantly female group of Asda’s retail staff are entitled to compare themselves with a predominantly male group of distribution depot employees as part of an ongoing group equal pay claim in which the mostly female Asda shopfloor staff allege they are underpaid compared to their warehouse counterparts on the basis that their jobs involve similar duties and, whilst not the same, have equal value.

Asda had challenged the use of depot staff as comparators because they were paid under pay scales agreed after collective bargaining with the GMB (unlike retail staff), received different allowances, and worked on separate sites. The tribunal rejected their arguments and held that the comparison was permitted under both EU and domestic law.

Equal pay: a brief explanation

Equal pay claims cover the differences in contractual terms between men and women, including pay, overtime rates and bonuses holiday, sick pay and pensions. Sex discrimination laws cover non-contractual inequalities. There is no equivalent divide for other forms of discrimination.

Equal pay legislation works by incorporating “sex equality clauses” into employment contracts. These clauses apply where the employee is employed to do “equal work”, giving the benefit of more favourable terms enjoyed by employees of the opposite sex unless the difference is due to a non-discriminatory material factor. “Equal work” means (i) like (the same) work, (ii) work formally rated as equivalent, or (iii) work of equal value, assessed according to the skills of (and demands placed upon) employees, and the value to the employer. If successful, a claimant may be awarded back pay and damages.

What does the decision mean?

This is only a preliminary hearing, but it was an important one for Asda to win in order to support their position. This is not the end for Asda’s defence – the claimants still have to prove that their work is of equal value to the comparators’ – but it does reset the balance somewhat.

To put this in context, Asda’s main business is its retail operation. It has 630 stores where around 133,000 hourly-paid employees work. Initially its distribution and warehousing was all outsourced, but in the late 1980’s Asda started up its own distribution operation. It now has 24 wholly-owned distribution centres where 11,600 hourly-paid employees work. Currently, depot staff receive a higher hourly pay rate than retail staff.

The tribunal decision means that the predominantly female group of Asda’s retail staff are entitled to compare themselves with a predominantly male group of distribution depot employees. If the tribunal now goes on to find that the two groups of employees do work of equal value, and there are no genuine material factors to explain the discrepancy, it has been reported that the cost of Asda could exceed £100m. Asda is understood to be considering an appeal on this preliminary point.

Why care?

  • This is the largest equal pay action in the private sector (to-date, the high-value claims have emanated from the public sector, such as the recent Birmingham City Council settlement of reportedly around £1billion).
  • There are a large number of claims waiting in the wings – the claimants’ representatives say they have been approached by over 19,000 other potential claimants and other retailers face similar action.
  • If Asda loses, it could be forced to pay affected staff the difference in earnings going back six years and there may be additional reputational damage. Asda may also be required to complete an equal pay audit of its workforce.

What are the implications?

These claims demonstrate the complexity of equal pay claims and the difficulties, time and costs employers and employees face in pursing and dealing with such claims.

This case has wider implications for the retail sector; there are obvious parallels for companies who have shopfloor and warehouse staff with different gender groups and pay. Sainsbury, for example, already faces an equal pay claim and reportedly settled claims as early as the 1980s. However, it is easy to see where this principle could be extended; as between online and shopfloor retail staff for retail businesses with separate online and bricks-and-mortar activities, for example. Trade unions have been heavily involved in the litigation to-date

With the introduction of the National Living Wage, unsteady profits, and increasing challenge from online-only and overseas businesses, the traditional bricks-and-mortar retail sector is facing an already tough future. Adding these claims into the mix, along with the potential publicity and brand damage, won’t help matters.

What should employers do?

Employers should get ahead and assess whether there are any risk areas regarding pay. They should be carrying out pay audits and paying particular attention to pay rates where there is a concentration of one gender, and areas where men and women carry out the same or similar roles with different rates of pay. If there are differences in pay, bonus or other remuneration, employers should consider why those are and whether they are objectively justified and non-discriminatory.

With the introduction of gender pay reporting as of April 2017 meaning more information on gender pay is available, this issue is only likely to pick up steam.