Supreme Court rules against Asda in Equal Pay case

What is this case about?

Equal Pay claims were brought by 35,000 Asda retail employees, mainly women, who argued that they should be paid at the same rate as their distribution colleagues, mainly men, who worked in the distribution depots.  

None of the depots were based at the same sites as the retail stores, so the Claimants and Comparators were considered to be working at different establishments. The depot and retail employees had different terms and conditions from each other and Asda argued that the claims should be struck out as there was a lack of “common terms” on which to base their comparison.

What is the legal test?

Equal pay claims are designed to ensure men and women are paid the same when:

1. They are doing the same work;
2. They are doing work rated as equivalent; or 
3. They are doing work of equal value.

To be able to pursue an Equal Pay claim there must be a suitable comparator, who can either be someone working at the same establishment or at a different establishment.  If the Claimants and the Comparators work at separate establishments from each other there must be “common terms” uniting them in order for the Claimants to rely on those Comparators.  In other words, to satisfy the “common terms” requirement it must be shown that the terms and conditions at the two establishments are broadly the same.

What was the Supreme Court’s decision?

The Supreme Court found that the requirement for “common terms” was a threshold test, to prevent cases which were clearly bound to fail from proceeding, however Lady Arden considered that cases where the threshold test will not be met will be exceptional.

Where there are no Comparators employed at the same establishment as the Claimants, and it is not clear on what terms they would have been employed, it is possible to apply the “North” hypothetical to determine whether the comparators would have been employed on broadly similar terms to those they have at their own establishment.

Lady Arden considered that the function of the Tribunal was to consider, hypothetically, the location of a depot which is next to a retail outlet and then to ask whether, relying on that assumption, the comparators would have been employed on substantially the same terms as they were currently.  A line-by-line comparison was not required: if the answer was yes, they would be, then that is all that was needed to satisfy the “common terms” test. 

The Supreme Court decision has clarified the threshold for the “common terms” test is relatively low. It will be surprising if it is a significant issue in future litigation.  The implication of the judgment is clear, far from being a fertile battleground upon which an employer can fight, it will only be in the most obvious cases that arguments on this point will be successful.

Asda’s retail workers still have a long legal battle ahead of them.  They have won the right to have their roles compared to distribution workers, to establish if they are of equal value. The next stage of this long-running case will be for the Employment Tribunal to consider if the roles are of equal value. After that the tribunal will consider if there were reasons other than gender behind the pay disparity between retail and distribution workers.

Equal pay cases are ongoing against other retailers, including Sainsbury’s, Tesco and Next, where the mainly female shop floor and checkout staff are seeking to compare their roles for the purposes of equal pay, to distribution and warehouse workers, who are generally men and paid more. 

While these big group litigation Equal Pay cases have shifted over the years from Public sector employers to large retailers with high numbers of employees, we expect to see the litigation move towards medium employers with less heavily unionised workforces in future.  Equal pay litigation is time consuming, long running and extremely expensive for employers. Employers should remember that it is also possible for individual Claimant’s to bring Equal Pay cases. Traditionally male dominated sectors such as construction, IT, finance and banking are all areas which may fall under the spotlight in years to come.

What should employers do now?

There are a number of steps businesses should consider in order to protect themselves against Equal Pay litigation:

1. Conduct an equal pay audit to review your pay scales/pay arrangements. Aim to have a pay structure which enables you to be consistent when deciding pay and conditions.  Make sure men and women who do the same work have the same job titles and pay, and up to date job descriptions which accurately reflect the work they do
2. Conduct a Job Evaluation study to check your current skill/salary evaluations. Compare pay between different areas of your business, even if on the face of it the jobs involved seem nothing alike.  Remember, even jobs which seem very different can be compared against each other in Equal Pay litigation, so if you have certain areas of your business that are male heavy and others that are female heavy, do you have similar pay levels between them?  If not, what is the reason for this? 
3. Have an action plan to resolve any issues discovered as soon as possible
4. Check your Gender Pay Gap - If you are required to produce one, this may be a good indicator of any imbalances in pay between the sexes in your business.  If your business is not required to produce a GPG Report (at present only those with 250+ employees are required to do so), consider producing one as a theoretical exercise to identify if your business may have an issue.
5. Have an Equality and Diversity policy in place and train staff 
6. Record keeping: If there are historic reasons, such as a TUPE transfer, which has resulted in pay disparities between parts of your business make sure this is recorded somewhere – equal pay litigation can look back over the previous 6 year period, by which time the reasons which might help to justify those pay decisions have often been forgotten.
7. Keep auditing your pay scales every 5-10 years to check that no inequalities are creeping in over time.