In Thandi and others v Next plc, it was found that market forces can be enough to justify indirectly discriminatory pay practices — employers are not bound to uplift pay of a group to which the same recruitment and retention pressures do not apply.
Facts
Sales consultants at the respondent, who are predominately female, received between £0.40–£3 less than warehouse workers, who are mainly male. Around 3500 sales consultants brought equal pay claims, alleging this practice was discriminatory.
Decision: Employment Tribunal (ET)
It was established that this was not a case of direct discrimination. In the view of the ET, the pay difference was not motivated by sex — both men and women worked in the warehouse, and they were all paid at the same rate.
However, turning to the question of indirect discrimination, it was found that the difference in pay had a disproportionate effect on women. This was based on evidence that during the relevant period, sales staff were 77.5% female, whereas warehouse staff were 52.78% male.
Indirect discrimination can be justified if it is found to be a proportionate means of achieving a legitimate aim. It was argued by the respondent that “material factors”, as permitted under the Equality Act 2010, justified the pay difference between retail and warehouse staff.
The material factors relied upon by the respondent included “market forces” and “market price”. It was argued that it was necessary to do this due to the difference in the labour market, and there was a business need to ensure the viability, resilience and performance of the Next group and subsidiaries. Failing to match the market price, the respondent argued, would make it difficult to recruit and retain warehouse staff, which would have a detrimental effect on business performance.
These arguments were rejected by the ET — the “business need” was not sufficient to overcome the discriminatory effect of the pay practices in place. The respondent, in the ET’s view, could have paid the retail staff more, so that they were in line with warehouse staff.
Whilst finding that some of the pay terms were indirectly discriminatory, the ET accepted that others could be objectively justified i.e. paying an extra £1 per hour to warehouse staff to incentivise them to stay with the respondent rather than moving to a local competitor who was paying more and paying triple pay to warehouse staff on public holidays, against the time and a half rate for retail staff.
The case was appealed to the EAT by the respondent.
Decision: Employment Appeal Tribunal (EAT)
The EAT allowed the respondent’s appeal in part concerning the equal pay claims. Going against the decision of the ET, it was held that the recruitment and retention pressures affecting warehouse work did not apply in the same way to retail staff. Therefore, differences in basic pay could be justified where the respondent had a legitimate business aim, i.e. that paying warehouse staff the market rate was necessary to recruit and retain sufficient employees.
The EAT upheld the respondent’s justification for the differences in basic pay and some associated pay elements. However, the claimants succeeded in relation to other elements, including paid breaks, overtime premiums and night-working premiums, which were not overturned on appeal.
The respondent has said in response to the judgment that it believes that the same rationale applies to items such as rest breaks, where the same legal principles apply. It therefore intends to seek permission to take the case to the Court of Appeal in relation to these terms.
