In this article we look at the hurdle cleared by the claimants, the key arguments both parties made and the potential wider ramifications for employers, both in the retail sector and beyond.
Many will be aware that the case concerns predominantly female staff in supermarkets who are seeking to compare their work to predominantly male staff based in Asda’s distribution centres. Given that the claimants and their proposed comparators work at different establishments, the claimants had to be able to show “common terms” applied across both establishments.
Asda had argued that as the retail and distribution locations were separate and the employees at the different locations had different terms and conditions of employment, the two groups could not be sensibly compared. This question, ie whether the retail employees could compare themselves to their distribution colleagues was heard as a preliminary issue, firstly in the Employment Tribunal (where the claimants were successful), then the EAT, Court of Appeal and eventually the Supreme Court.
In reaching their decision, the Supreme Court noted that the proceedings in the courts below them had “become markedly overly complicated”. The Supreme Court therefore sought to give some clear guidance on the point. As noted by the Supreme Court, the claimants must now show that they performed work of equal value for a lower wage in order to succeed with their claim. The story is therefore far from over. However, there are still some key learnings that retail clients and those in other sectors can take away.
The Supreme Court ultimately held that the ‘common terms requirement’ is a:
“threshold test with a limited function. The test is designed to provide a fail-safe to the employer that a case will not proceed if it relies on a comparison which can clearly be shown at the outset to be one that cannot realistically be made. Thus, the limited function of the threshold test is to “weed out”…comparators who cannot be used because the differences between them and the claimants are based on geographical factors, and possibly also historical factors.”
The Supreme Court noted that, for some cases, it will be clear that common terms apply because the comparators’ terms and conditions are the same or substantially similar, regardless of where they worked. In other cases, the question to be asked (known in legal circles as ‘the North hypothetical’), is:
“whether the comparators would be employed on the same or substantially the same terms if they were employed at the claimants’ establishment.”
In the Asda case, the Supreme Court suggested this could be “visualised” by envisaging the installation of a distribution centre adjacent to a large supermarket. If, having performed this exercise, it would be apparent that the distribution staff would continue to be paid the same as they currently were, then there were ‘common terms’ and the claim can proceed.
What action, if any, should retailers take next?
The Supreme Court’s decision means that employers will find it much harder to defeat an equal pay claim which involves a cross-establishment comparison at a preliminary stage. Essentially the decision serves to significantly ‘lower the bar’ in terms of the comparison to be made and it is likely that future claims will not be held up over this preliminary issue in the same way going forward (the original Employment Tribunal decision in this case was issued in 2016).
Asda remain defiant, stating that the difference in pay relates reflects the “distinct skill sets” between the two groups of workers. However, the decision represents a big step forward, not only for the Asda claimants but thousands of others already bringing claims against national retailers (including Sainsburys, Tesco, Morrisons and Next), and other retailers would be well advised to look carefully at rates of pay within their stores and distribution centres and if disparities exist, time should be spent identifying (and documenting) the reasons for any such disparity.
The Supreme Court was clear that there is still a long way to go (and various legal test to apply) before a final judgment is issued but with billions of pounds potentially at play, retailers who haven’t yet found themselves the subject to equal pay claims should be thinking carefully about any inequalities that exist within their pay structures and whether (and how) they should be addressed.