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European Court confirms Tesco employees can make equal pay comparison based on EU law

03 June 2021

The European Court of Justice has confirmed that Tesco shop workers can rely directly on European law in order to compare themselves to distribution centre workers for the purposes of an equal pay claim.

Background to the case

The Equality Act 2010 (EqA) provides that men and women should receive equal pay for equal work. Employees can compare themselves with a comparator of the opposite sex who is performing either the same work or work of equal value.  

Several existing and former Tesco shop floor workers, who are mainly female, have brought equal pay claims. They are contending that their work is of equal value to that of more highly paid distribution centre workers, who are mostly men. The two types of job are done at different workplaces, meaning there is a question as to whether it is possible to compare the roles. 

The recent decision of the Supreme Court (SC) in Asda Stores Ltd v Brierley concerned whether a similar comparison between Asda workers could be made under the EqA. The SC ruled that it could in that case, because the Employment Tribunal (ET) had found that the distribution employees would have been employed on substantially the same terms if they had been employed at the shop workers’ sites, and there was no reason to overturn that decision. Although the SC said that this should not be a complex exercise, the EqA provisions on comparisons are rather complicated and difficult to understand.

In the Tesco case, the claimants wanted to rely directly on EU law instead. Article 157 of the Treaty on the Functioning of the European Union (TFEU) allows a comparison to be made between employees if there is a “single source” that is responsible for setting their pay. This approach means that it doesn’t matter if the employees do different jobs in different places, so long as a single employer is responsible for ensuring equal pay. The EqA does not contain the single source test.

The ET hearing the Tesco case asked the European Court of Justice (ECJ) to rule on whether EU law can be used directly to make this comparison. Tesco argued that this was not possible in the UK for equal value cases

The ECJ’s decision

The ECJ ruled that the TFEU imposes obligations on employers to ensure both equal work and work of equal value, and this is one of the foundations of the EU. The wording is clear and precise, which means that these provisions can be relied on directly by individuals in equal value claims in the national courts.

The ECJ also confirmed that where unequal pay can be attributed to a single source, the work and the pay of those workers can be compared even if they work in different establishments. Article 157 of the TFEU may be relied upon before national courts in claims about work of equal value carried out by workers in different establishments of the same employer, provided that the employer constitutes a single source for setting pay.

Implications

This decision potentially makes it much easier for equal pay claimants to compare themselves with employees working in different jobs in different locations. The SC’s decision in the Asda case had already indicated that it should not be a complex exercise for employees to compare themselves with those working at different establishments, with the SC describing this as a “threshold test”. The EU single source test is even simpler to apply - claimants in the UK can now rely on it in all types of equal pay claim, so long as one single employer is able to rectify any pay inequality.

It is worth noting that this is an ECJ decision which was delivered after the UK left the EU under the Brexit arrangements. Although the EU (Withdrawal) Act 2018 means that direct EU legislation in force immediately before Brexit remains part of domestic law afterwards, the domestic courts and tribunals are not generally bound to follow ECJ decisions which are made after the end of the Brexit transition period, but can take account of them if relevant, and are likely to exercise caution in taking any decision to depart from them. However, the UK-EU Withdrawal Agreement separately provides that ECJ decisions will be binding in full where they are made in relation to cases which were referred before the end of the transition period.  This means that Article 157 is still available to be relied on by UK claimants, and it seems unlikely there is much scope to argue that the decision should not be followed. The UK courts and tribunals will still need to assess how the decision should be applied to the circumstances of a specific case, and in particular determine whether there is, in fact, a single source capable of being relied on.  

It is important to remember that this is only the first stage of the equal pay claims in this case. The next step is to consider whether the roles are of equal value and, if so, whether any difference in pay is attributable to a material factor that is not sex discriminatory. The effect of the Tesco and Asda decisions is likely to be that legal arguments in equal pay cases will focus more on these potentially complex issues instead.

Lewis Silkin has extensive experience of advising clients on large scale equal pay litigation and we can also assist with gender pay gap reporting. You can find further information here or please get in touch with your usual Lewis Silkin contact.

K and others v Tesco Stores Ltd (C-624/19) – judgment available here.

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