Last week, in Thandi and others v Next, an employment tribunal ruled in favour of more than 3,500 current and former retail consultants at the fashion retailer, Next. The claimants had argued that Next had failed in its legal obligations under the equal pay regulations by paying its (predominantly male) warehouse operatives a higher basic pay than its (predominantly female) retail consultants.

In this week’s blog, we take a look at the knotty rules surrounding equal pay and what the future holds, both for the Next employees who are toasting their success, and the more general concept of equal pay.

Equal pay: the basics

The principle behind equal pay law is that men and women should receive equal pay for equal work.

Employees are entitled to contractual terms related to pay that are at least as favourable as those of a comparator of the opposite gender within the same employment – providing that both are engaged in ‘equal work’. This can include like work, work rated as equivalent, or work of equal value.

Determining whether different roles constitute work of equal value requires a tribunal to assess the demands of each job in terms of effort, skill, and decision-making. In the Next litigation, the tribunal concluded that retail consultants performed work of equal value to that of warehouse operatives.

Once a finding of “work of equal value” is made, the law imposes a sex equality clause into the claimant employees’ contracts. This clause adjusts the less favorable term to match the more favourable term found in the comparator’s contract. So, if the offending term is an hourly rate of £15 per hour and a comparator doing work of equal value has an hourly rate of £20 per hour, then £15 per hour will be replaced with £20 per hour.

The sex equality clause will only be disapplied if the employer can show that the difference in contractual terms is due to a material factor which is neither directly, nor indirectly, discriminatory on the grounds of sex.

In the Next case, the tribunal acknowledged that the difference in basic pay was not directly discriminatory (Next had not been paying the sales consultants less because they were women). However, the pay differential was indirectly discriminatory (as more women than men were sales consultants). Next tried to justify the difference in pay as being a proportionate means of achieving a legitimate aim. They said they needed to set basic pay for warehouse workers at the market rate to recruit effectively.  However, the tribunal held that Next could not rely on ‘market forces’. Such a defence was potentially itself tainted by historical attitudes about the value of men’s work versus women’s work.

What’s ‘next’ for the Next case?

Equal pay litigation is notoriously lengthy, with the Next case taking over six years to reach last week’s judgment. And it might not be over yet – Next have already said they will be appealing this decision.

Subject to any appeal, the next stage for the successful claimants will be to assess what they are entitled to. The sex equality clause has been applied by the tribunal to the impacted contracts of employment. Any resultant increase in pay, since it involves a change in contractual terms, will be permanent. The employees will also be entitled to rely on the clause to claim arrears of pay. Arrears can go back as far as six years before the date the claim was brought (in England and Wales) or up to five years (in Scotland). When this sum is multiplied across thousands of claimants, the impact on businesses can be devastating. The total amount payable by Next is currently estimated to be in excess of £30 million.

What’s next for equal pay?

Well, it’s not going anywhere fast (not that this area of the law does anything quickly!). In fact, a draft Equality (Race and Disability) Bill was announced in this year’s King’s Speech, aimed at delivering Labour’s manifesto commitment to “enshrine the full right to equal pay in law” for ethnic minorities and disabled people. So, the concept of equal pay may well be extended to cover not just sex, but race and disability too. The Bill will also introduce ethnicity and disability pay gap reporting, alongside existing gender pay gap reporting, for those with 250 or more employees.