The Employment Tribunal has held that the retailer Next was in breach of equal pay law by paying warehouse staff a higher rate of pay than shop-floor staff. During the relevant period, sales staff were 77.5% female, whereas warehouse staff were 52.8% male. This was enough to show that paying sales staff less basic pay than warehouse staff had a disproportionate effect on women, especially given that Next benchmarked warehouse pay against the predominantly male market for warehouse staff.
The Employment Tribunal held that the difference in pay was not objectively justified. Next could have afforded to pay more to sales staff but had opted instead to maximise profitability. Keeping the wages of sales staff low was motivated entirely by cost-cutting, which could not on its own, be a legitimate aim. Even if its aim had been legitimate, the payment of different sums to warehouse and retail staff was not a proportionate means of achieving it. The business need was not great enough to overcome the discriminatory effect of lower basic pay.
Next had unsuccessfully argued that the warehouse labour market had a significant imbalance favouring men, so Next's higher pay for warehouse staff reflected this predominantly male market. The judgment however highlights the potential difficulty for employers who are seeking to defend equal pay claims on the basis that they are paying the market rate for specific roles.
The judgment emphasises that there must usually be a more compelling business reason than cost-cutting alone to justify lower pay in particular sectors due to indirectly discriminatory practices. This case is a reminder that employers need to show that saving money was not the sole aim of keeping salaries low. This will be particularly relevant in circumstances where, as here, the employer could have absorbed the cost of balancing pay but chose instead to prioritise profitability.
Perhaps unsurprisingly, Next has confirmed that it will be appealing the judgment. While the decision is fact-specific, several retailers including Asda and Tesco are facing similar actions by sales staff. Depending on the outcome of an appeal, this case could have serious ramification for Next, as well as other employers.
