The Equality Act 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 “equal value”. There are three situations where this could be the case:
- Where a man and a woman are doing "like work" – this would cover jobs that are the same or broadly similar.
- Where a man and a woman are doing "work rated as equivalent" – this applies to jobs that have been placed in the same grade or rating after a job evaluation study.
- Where a man and a woman are doing "work of equal value" – this means that the work is not essentially the same job, but it has the same demands in terms of factors such as effort, skill and decision-making.
A woman bringing an equal pay claim must be able to compare her terms with those of a man. A comparator can be an actual employee who works (or has worked) for the employer or, if there is no actual comparator, a hypothetical comparator.
An employer can defend an equal pay claim by showing that any difference in pay is due to a “material factor” other than sex. The reason relied upon must be genuine. If the “material factor” itself has a discriminatory effect, then the employer must show that it is objectively justified. This is a complex area of the law which we have written about in more detail here.
In terms of bringing an equal pay claim, the proceedings have 3 key stages: first, determining whether the roles can be compared; second, determining whether the roles have equal value; and finally (if the previous stages succeed), determining whether there is another reason why the roles should not be paid the same. The Next case which we look at below has now passed the second of these three stages.
‘Equal Value’ in the Next Case
In 2018, store-based staff, who are predominantly female, brought an equal pay claim against the retailer Next. They argued that their work was of equal value to Next’s warehouse-based employees, who are predominantly male.
This claim could have enormous ramifications for the company: Next employs more than 15,000 sales consultants at its stores and there are currently over 2,000 Claimants signed up to the claim. Warehouse workers are generally paid more than Next’s store-based staff and it is estimated that the average award should the claim succeed may be approximately £6,000 back pay per employee. A finding in the Claimants’ favour would mean that their contracts are automatically changed to ensure equal pay going forward.
At an earlier stage in proceedings, Next conceded that the two types of role could be compared. However, they denied that the work undertaken was of equal value. A Preliminary Hearing took place on 22 May 2023 to decide whether the work of the three named lead Claimants was of equal value to that of their chosen comparators.
Expert analysis
To assist in making its decision, the Tribunal obtained an expert report prepared by independent employment experts. The experts carried out a detailed analysis of the work undertaken by three lead Claimants and that of their chosen comparators. This was done by reference to an Assessment Scheme comprised of eleven specific factors that were common to both roles.
Those factors included knowledge, planning and organising, communication and customer service, and physical demands. Each of the eleven factors was rated and scored according to five levels:
- A High Scoring 70 points
- B Moderately High Scoring 55 points
- C Standard Scoring 40 points
- D Moderately Low Scoring 25 points
- E Low Scoring 10 points
The Assessment Scheme also allowed for each score to be modified by adding or deducting 5 points where there was evidence that the work undertaken was higher or lower than the standard level of demand or responsibility for that level.
Equal value tests
Once the rating assessment had been carried out, the experts undertook a comparison of the Claimants and their comparators by applying three tests, each indicative of work potentially being of “equal value”:
- Test One: This looked at the overall score achieved, assessing whether the Claimant scored within 3 percentage points of each of their comparators.
- Test Two: This looked at how many of the eleven factors were comparable. Was the Claimant assessed as equal to, or higher than, their comparator(s) across six or more factors?
- Test Three: This was a factor-by-factor analysis, awarding 0 where the Claimant scored the same as the comparator for that factor, but +1 or more if they had scored a level above or higher, and -1 or more if lower. Equal value was indicated by a cumulative score of 0 or greater.
None of the tests applied was intended to be definitive in establishing equal value or considered in isolation. Rather, they were intended to be considered together and interpreted as supporting evidence. However, in the experts’ view, where two or more of the three tests indicated that the Claimant’s role was of the same level or higher than that of their comparator, there should be a presumption of equal value.
Having completed its analysis of the job descriptions sent by the parties and any earlier findings of fact by the Tribunal, the experts concluded that the work undertaken by the Claimants was of equal value to their comparators. In relation to their comparators, the work undertaken by the Claimants met or exceeded the threshold in all three tests.
The Tribunal considered this conclusion, together with the experts’ answers to written questions, and unanimously agreed with the conclusions. The Tribunal noted that whilst not formally conceding the findings and opinions, Next did not challenge the report.
The next stage is for the Tribunal to consider Next’s material factor defence, with this hearing likely to take place in March 2024.
Implications for Employers
The Next claim is certainly not the first equal pay claim to be brought against other major retailers which seek to compare the pay of store-based employees with warehouse and distribution centre staff – numerous major supermarket chains are facing similar challenges. However, it has reached a later stage than the other similar claims and is therefore likely to be the first to reach a final hearing. This means that employers who are facing or who may face similar claims will be watching with interest.
Employers facing similar complaints may take comfort from the fact that the Tribunal’s decision on equal value was based on the specific working arrangements in place at Next and that each claim is determined on its own facts. However, it will inevitably also cause apprehension, as is not difficult to see how a similar analysis, applied to other retailers with similar arrangements, may lead to the same outcome.
The decision highlights the importance of identifying where such differences in pay exist and putting into place a plan to address them unless they can be explained on an a non-discriminatory, objectively justifiable basis. It would be prudent for employers to undertake an equal pay audit to achieve this, and review all pay structures to ensure they are transparent, logical, and applied consistently. Any such audit should consider types of work that may be of equal value and not confined solely to employees undertaking the same role.
Miss M Thandi and Ors v (1) Next Retail Limited (2) Next Distribution Limited – judgment available here.