More than 3,500 current and former employees at British retailer Next won a six-year fight for equal pay on Aug. 27.
An Employment Tribunal ruled that Next failed to prove that paying its sales consultants, who are predominantly women, lower pay rates than its warehouse workers was not sexual discrimination.
The plaintiffs are entitled to back pay for up to six years before they brought the class-action suit forward and for the time since, which is estimated to be more than 30 million pounds ($39.6 million), according to Leigh Day, the law firm representing the workers.
Next plans to appeal the ruling.
In a statement to the BBC, Next said: “This is the first equal pay group action in the private sector to reach a decision at tribunal level and raises a number of important points of legal principle.”
The firm emphasized that no cases alleging direct discrimination against female staff were upheld and that the tribunal found “there was no conscious or subconscious gender influence in the way Next set pay rates.”
Case Details
Next workers brought forth the gender pay discrimination claim in 2018. After years of ongoing litigation, an Employment Tribunal in Leeds, northern England, ruled in 2023 that the work done by the women in Next stores was equal to the work in the warehouse in terms of the demands involved.
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Thus, Next needed to prove the differences in pay were material — or, a legitimate Wage Influencing Factor — in order to justify the pay differential between women and men at the company.
Next was able to establish this defense in relation to certain bonuses and other benefits, but it was unable to craft a defense for differentials in base pay. The crux of Next’s defense was that the pay for its sales roles were based on the market rates for such roles.
However, the tribunal concluded that, when it came to the differential in basic pay, Next could have afforded to pay its retail staff more but instead prioritized keeping its labor costs in check. Thus, it was deemed the pay decisions were based solely on cost savings for the business, which is not a legitimate aim that can be relied upon to establish the defense.
Next’s appeal will be intriguing to watch, as the tribunal did not rule the company discriminated based on gender. Thus, it could expand the scope of the UK’s “equal pay for comparable work,” standard. Further, it could signal to employers a need to re-evaluate internal job architecture and compensation philosophy to ensure pay rates for jobs are appropriately aligned to the business.
Key Takeaways and Considerations for Employers
The Next pay discrimination ruling represents a potential inflection point and comes amid a significant change in the UK government. The Labour Party has ambitious pro-worker goals set for its legislative agenda, which includes an expansion of required pay gap reporting to include race/ethnicity.
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In its Plan to Make Work Pay the Labour Party has outlined its intention to close the gender pay gap, which sits at 12.7%, “once and for all.” A key driver of the unadjusted or “raw” pay gap is often based on significant pay differences in industries/jobs predominantly occupied by men versus industries/jobs predominantly occupied by women.
The UK’s Employment Tribunals appear to be signaling a shift away from relying on these historical market norms as a reliable defense against pay inequity. And the Next case indicates that citing market forces will not by itself excuse the disparity between pay rates for roles that are predominantly held by men and those predominantly held by women.
Employers that rely on this argument are at risk of being viewed as perpetuating the kind of pay inequality that the legislation is intended to address.
The Next decision is the first in a string of similar cases expected to be heard in the Employment Tribunal in the coming months relating to the UK’s largest supermarkets and other retailers, but it has potential ramifications for employers across all sectors.
As noted above, the ultimate outcome of the case could have broad implications that will eventually extend to race/ethnicity and disability.
Next Steps for UK Employers
UK employers should audit existing job architecture and pay philosophy and practices. From there, conducting a true intersectional pay equity analysis will reveal any potential inequities that exist.
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Leveraging Trusaic’s premier pay equity software solution will enable you to identify root causes of inequities and provide data-backed insights on how to remediate them.
Our three-pronged approach is a cut above other solutions:
- Leverage the Regulatory Pay Transparency Reporting™ solution and easily complete required reporting by compliance deadlines.
- Leverage PayParity® and OpportunityParity™ to understand, explain, and resolve pay disparities. And now, with R.O.S.A., you can optimize the spend of your remediation budget to ensure you are maximizing the ROI of each dollar spent.
- Leverage the Workplace Equity product suite to communicate narratives and share salary ranges with confidence. Communicate the sources of your pay gaps, progress objectives, and corrective measures to employees and internal stakeholders. Show data-backed progress in your pay gaps over time.
Our comprehensive workplace equity software solutions and on-demand expert support is with you every step of the way. With Trusaic, you can proceed with confidence, knowing you are working toward achieving pay equity with the backing of methodology that is legally compliant.
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