Next retailer: a landmark case for equal pay

The employment tribunal held that employees working on the shop floor, who are predominately women (77.5% between 2012 and 2023), should not be paid less than employees working in the warehouse, the majority of whom are men (52.75% between 2012 and 2023).

This article sets out the law on equal pay, how this may be impacted following the Next case and highlights what the government proposes in its Plan to Make Work Pay.

What is the law on equal pay?

Under the Equality Act 2010, men and women must receive equal pay for doing ‘equal work’.   
For the purposes of equal pay law, ‘equal work’ is work which is the same, similar, equivalent or of equal value. In the Next case, although the job description of those working on the job floor and those working in the warehouse may have been different, the roles were classed as ‘equal work’.  

There will of course be circumstances where a difference in pay for equal work can be justified by a ‘material factor’; for example if someone is better qualified, or due to location where the cost of living is higher. If a woman proves she is doing equal work to a man, there is a legal presumption that any difference in their pay is because of their sex, unless the employer can show that a ‘material factor’ explains the difference. 

In the Next case, the employment tribunal accepted that the difference in pay rates was not down to direct discrimination, i.e. they did not pay shop floor workers less because they were predominantly women. Instead, Next argued that the reason (among others) was because this is the general position in the wider labour market – that is, generally, warehouse workers are paid more than shop floor workers – and to ‘reduce cost and enhance profit’. We know from existing case law that this, on its own, is unlikely to be a sufficient ‘material factor’ to justify unequal pay.  

Next was, however, successful in arguing that certain differences in terms were due to a material factor and were a proportionate means of achieving a legitimate aim, such as differences in furlough pay arrangements during the Covid-19 lockdowns.  

What’s next for Next? 

This case is the first successful equal pay claim of its kind against a UK national retailer and could see a precedent set for cases going forward. However, this is a first-instance employment tribunal decision and Next has expressed its intention to appeal the judgment.

As a result of this decision, Next may be required to pay more than £30m in compensation and back pay to the 3,540 claimants, which could go back as far as six years. The company will also need to review their current contracts for all shop floor and warehouse staff, to equalise hourly pay as well as ensure that staff are on equal terms for differing shift patterns including Sundays, night shifts and overtime. 

There are currently similar claims being pursued against five of the big supermarket chains: Asda, Tesco, Morrisons, Sainsbury’s and the Co-op, the claimants of which will no doubt welcome the Next ruling.

What does the government propose in its Plan to Make Work Pay?

The Labour Government also proposes in its Plan to Make Work Pay that it will ‘finish the business of ending pay discrimination at work’ and is committed to ‘tackling the gender pay gap which is narrowing too slowly’. Employers should therefore be aware that new measures may be introduced to enforce equal pay, and should take steps to evaluate their own pay arrangements to ensure that they are legally compliant.

For advice on equal pay matters, or any employment law queries, please contact a member of our employment team.