International Equal Pay Day, celebrated on 18 September, represents the longstanding efforts towards the achievement of equal pay for work of equal value. This day marks the United Nations' commitment to human rights and against all forms of discrimination, including discrimination against women and girls. The United Nations estimates that across all regions of the world, women are paid less than men, with the gender pay gap estimated at around 20 per cent globally. Consequently, achieving equal pay is an important milestone for human rights and gender equality but much more still requires to be done.
The significant ruling in the case of Thandi and others v Next Retail Ltd (ET/1302019/2018) represents a step in the right direction for equal pay claims. In this case, an employment tribunal upheld equal pay claims made by over 3,500 female claimants who worked at Next retail stores whose comparators were men working in Next warehouses. At an earlier hearing, the employment tribunal found that the claimants’ work as retail employees in the stores was of equal value to the employees who worked in the warehouses.
The tribunal then required to ascertain whether Next had a ‘material factor defence’ under section 69 of the Equality Act 2010. This section provides that an equal pay claim will fail if an employer can show that the difference in terms is due to a material factor which, along with being relevant and significant, does not discriminate against the worker because of their sex.
To try and satisfy this defence, Next cited various factors which explained the difference in pay between the claimants and the male warehouse workers. These included, recruiting and retaining sufficient warehouse labour, incentivising high productivity within the warehouse generally and during peak periods of demand and business viability and performance of the Next group of companies. The company sought to argue that in so far as any of these factors put the claimants at a particular disadvantage when compared with the male warehouse workers, it was a proportionate means of achieving a legitimate aim.
However, the tribunal rejected these arguments and ruled that Next could have afforded to pay a higher rate of basic pay to retail staff. It highlighted that some competitors in the same industry paid their retail staff a higher rate of pay. The tribunal believed Next’s main focus was on keeping labour costs to a minimum while maintaining profitability. The tribunal was of the view that even if this argument was deemed to be a legitimate aim, the payment of a different rate of basic pay was not reasonably necessary to satisfy it. As such, the business needs were not sufficient to overcome the discriminatory effect of the lower basic pay. Ultimately, the factors put forward by Next would, in effect, be contrary to the underlying objective of the legislation.
While the Tribunal did not uphold Next’s defence to its basic pay discrepancies, they were partially successful in their defence in respect of a number of bonuses and premiums paid to warehouse workers, including attendance/productivity bonuses and a premium on additional hours. The tribunal found that these were based on legitimate business needs and were proportionate in the circumstances.
There is still a long way to go in order to address the gender pay gap but this ruling is a positive move in the right direction. It is anticipated that this judgment will be appealed by Next but, at least for now, it serves as a reminder to employers that market forces may not be a sufficient factor to rely upon in pleading the ‘material factors’ defence under the Equality Act 2010.
Further developments in this area are expected as the Labour government has made it clear that it wants to extend equal pay protection to minority and disabled workers. This is likely to sit alongside ethnicity and disability pay gap reporting, which is also an objective of the government.
For further advice on employment law issues, including equal pay claims, please contact the Thorntons Employment Law team on 03330 430350.
