The landscape of employment law has once again shifted as a result of a significant tribunal ruling in the case of Thandi and ors v Next Retail Ltd. Over 3,500 predominantly female claimants, all employees of Next retail stores, successfully claimed equal pay when compared to their male counterparts working in the company’s warehouses.
The claimants argued that their work as retail consultants in the stores was of equal value to the work performed by male warehouse operatives. After an earlier tribunal found that the claimants’ work was indeed of equal value, the employment tribunal was required to consider whether Next had established a lawful justification for the pay disparity under section 69 of the Equality Act 2010. The company attempted to explain the difference in pay by citing various factors, including market forces and business viability. However, the tribunal found that many of these justifications were driven by cost-saving measures rather than genuine business necessities, resulting in a ruling in favour of the claimants.
Key Findings of the Tribunal
The tribunal’s ruling addressed a range of pay discrepancies, including basic pay and certain bonuses and premiums. Significantly, the tribunal found that the factors used to justify the difference in basic pay, such as market benchmarking, disproportionately impacted female retail workers compared to their male warehouse counterparts. This highlighted the systemic issues surrounding gendered pay inequalities, particularly where women are more likely to work part-time or face challenges in working non-standard hours due to childcare responsibilities.
While Next argued that their aim was to maintain business viability, the tribunal determined that the company’s focus on cost-cutting was not a legitimate aim under the Equality Act 2010. Importantly, the tribunal concluded that Next could have afforded to pay a higher rate of basic pay to its retail staff, as some competitors did, but chose not to do so in order to maximize profitability.
Indirect Discrimination and the ‘Costs Only’ Aim
One of the critical elements of the ruling was the tribunal’s assessment of whether the factors cited by Next constituted indirect sex discrimination. The tribunal found that the disparity in pay between retail consultants (predominantly female) and warehouse operatives (predominantly male) amounted to indirect discrimination. The company’s reliance on market forces as a justification masked an illegitimate “costs only” aim. As the tribunal highlighted, allowing market forces to dictate pay in this manner would defeat the purpose of the Equality Act, which aims to eliminate discriminatory pay practices.
A Partial Victory for Next
While the claimants were successful in their claims regarding basic pay and certain pay premiums, Next’s defence was upheld in respect of bonuses and premiums paid to warehouse workers, such as attendance and productivity bonuses. These payments were found to be based on legitimate business needs and proportionate in the circumstances, allowing Next some degree of protection under the Equality Act.
Implications for Employers
The Thandi case serves as a wake-up call for employers across industries. The ruling emphasises the importance of ensuring that pay structures are not only compliant with the Equality Act but are also genuinely fair and equitable. The fact that Next’s reliance on market forces was rejected by the tribunal indicates that employers cannot justify pay differences purely on the basis of external market conditions, especially where those conditions disproportionately affect women or other protected groups.
At A R Brown & Co, we recommend that employers conduct thorough pay audits to ensure compliance with equal pay legislation. By doing so, businesses can mitigate the risk of costly and reputation-damaging claims, while creating a more equitable and motivated workforce.
This landmark ruling represents a significant step forward in the fight for gender equality in the workplace. It is a reminder to all employers of their obligations under the Equality Act 2010 to ensure that their pay practices do not disproportionately disadvantage one gender over another. The case also highlights the importance of considering the broader context of pay decisions, including how they impact different groups within the workforce.
For further advice on employment law issues, including equal pay claims, please contact Deborah Francis.
Disclaimer: This blog is intended for informational purposes only and does not constitute legal advice. For tailored advice specific to your situation, please contact a qualified employment law professional.