Equal Pay Battles Among Retail Stores

The fight for equal pay continues to gain momentum, with high-profile cases in the retail sector grabbing headlines.

Following the victory for Next’s shop workers, Asda is the next major retailer facing an equal pay lawsuit—one that could potentially cost the company billions. These cases are part of a broader trend that highlights the growing importance of pay equality in both the public and private sectors.

Equal pay, while often summarised by the phrase “equal pay for equal work,” involves a wide variety of factors. However, the intricacies of these claims are often misunderstood, leading to public confusion as decisions are made. By examining the types of claims businesses might face and their potential consequences, companies can better prepare for the challenges ahead.

History of equal pay legislation

Equal pay legislation has been evolving for decades, particularly in response to labour movements and legal milestones that aim to eradicate gender and other forms of pay discrimination. The Equal Pay Act of 1970 in the UK and later amendments introduced clearer legal pathways for workers to challenge unequal wages. Yet, recent cases, such as those against Next and Asda, show how complex these disputes can become, especially in sectors such as retail, where different job roles contribute in varied ways to the business.

The three claims under equal pay legislation

Under equal pay legislation, there are three main types of claims, each with its own complexities. Understanding these distinctions is key to grasping how workers and businesses approach equal pay disputes.

Claim one: like work

The simplest type of claim is that of ‘like work.’ This refers to situations where two people performing the same job role are paid different amounts. For example, two cashiers at the same store could make this claim if one earns significantly less than the other for performing identical duties. These claims are usually straightforward since they involve comparing the pay of employees with the same job description.

Claim two: work evaluated as equivalent

The second type of claim arises from formal job evaluation schemes, commonly used in the public sector but becoming more prevalent in the private sector as well. These schemes evaluate the relative worth of various job roles based on criteria like skill, effort, and responsibility. Jobs that score similarly on the evaluation scale are considered to have equal value, regardless of their specific duties.

For instance, in a hospital setting, a clerical worker and a nurse might be deemed to have jobs of equivalent value if their roles contribute similarly to the hospital’s operations. Workers can then bring claims if they discover that their pay does not reflect this equality. These evaluations often require external input and can be a proactive way for companies to avoid future legal disputes.

Claim three: work of equal value

The most complex and controversial claims, like those faced by Next and now Asda, are based on ‘work of equal value.’ This claim involves comparing two jobs that may have very different responsibilities but are equally important to the employer.

In the retail context, a warehouse worker and a shop floor assistant could argue that their roles, while different, are equally essential in driving product sales. Cases of this nature force courts to make difficult value judgments, taking into account factors like effort, skill, and decision-making responsibilities.

Consequences for retail brands

If the courts rule in favor of workers in the Asda case, the financial consequences could be devastating for the retailer. The potential payout could reach billions, with immediate costs including backdated pay for up to six years, along with interest at a statutory rate of 8% for up to three years. Beyond that, Asda would need to adjust its future pay structures to avoid similar issues, adding another layer of ongoing expenses.

How businesses can protect themselves

To safeguard against potential legal challenges, businesses should:

• Conduct pay structure reviews to identify and address discrepancies.
• Examine employee demographics to ensure that pay practices do not disproportionately affect certain groups.
• Implement job evaluation schemes to create clear, objective benchmarks for pay decisions.
• Engage employees in discussions about pay equity, creating a more transparent environment where concerns can be addressed proactively.

While job evaluations can provide clarity, they also pose risks. Findings could expose areas of inequality, which businesses must be ready to resolve swiftly. Failure to do so could lead to an increase in claims, as employees become more aware of potential pay gaps.

Legitimate pay discrepancies

Not all pay differences are unlawful. Businesses may have non-discriminatory reasons for paying employees differently, such as geographical location, seniority, or market demand for certain skills. For instance, in the Next case, the company argued that higher wages were necessary to attract skilled candidates in areas facing labour shortages. If companies can prove that such “material factors” influenced pay decisions, they may successfully defend against equal pay claims.

Summary

The drive for equal pay is accelerating, and recent legal rulings should serve as a wake-up call for businesses. Those that take immediate steps to review their pay practices, address inequalities, and improve transparency are likely to avoid lengthy legal battles and strengthen relationships with their workforce.

In an era where employees are increasingly empowered to challenge unfair treatment, businesses that act now will not only protect themselves from costly lawsuits but may also position themselves as employers of choice in a competitive market.