Asda and retail industry reeling from latest blow from the Supreme Court

The Supreme Court has today delivered its latest blow to Asda in the ongoing equal pay claim finding in favour of employees working in its retail stores against the retail giant in the latest interim stage appealed to the Supreme Court.

Whilst it is important to note that this isn't the final judgment, it is a further considerable win for the claimants who have already conducted a lengthy claim with Asda seeking to frustrate the progression of the case at each hurdle. Despite wheeling out legal heavy weights such as Lord Falconer and Lord Pannick QC at various stages of the claim, the arguments put forward by the retailer have failed to find favour with the Supreme Court and the claim continues to progress.

The potential financial exposure for Asda should the claim be successful is considerable, with claims for equal pay and the associated back pay for affected staff being estimated at anything between £6 and £8 billion. The success of the claim to date has spurred similar claims against Tesco, Morrison's, Sainsburys and Next, with each claimant success in the Asda case buoying those associated claims and expanding the financial exposure in the retail sector beyond that which we can probably comprehend. Essentially, the impact of this case is massive.

This particular appeal relates to the issue of comparators. Having already fought and won the right to bring the group claim, the claimants were faced with the challenge from Asda that they couldn't legally use the male comparators identified as the basis of the claim. The claim centres around the differentiation in pay between those employed in the retail stores, which are prominently female, and those in distribution centres, which are predominantly male. The male distribution workers earn between £1-4 per hour more than the retail workers. Asda sought to argue that the male counterparts can't be valid comparators as the terms and conditions of their employment differ to those in the retail offering.

The legal detail comes down to an interpretation of s.79(4) of the Equality Act 2010 which requires common terms to apply where the comparators are employed at different establishments (as in this case). As the terms and conditions of employment differed, Asda argued that the distribution workers could not be comparators.

The Supreme Court offered a definitive response confirming simply that the terms and conditions of employment must be broadly the same at both establishments, and that where there are no comparators employed at the claimant's establishment, and it is not clear on what terms they would have been employed, the Court will apply what is known as the North hypothetical. The North hypothetical considers whether the comparator group would have been employed on broadly the same terms to those at their own establishment if they had been on the same site as the claimants. The Court stated that the common terms requirement was intended to operate only within a very narrow compass where the difference in terms and conditions are wholly or mainly derived from the physical separation of the comparator's establishment. It is not intended to prevent claims merely because, as events have turned out, there are different employment regimes. What the Court is saying here in basic terms is that if there is a material reason for the differentiation, such as comparators earning higher salaries due to being based in a location with inflated living costs such as London, the comparison can't be made. If the role wouldn't change as a result of operating it out of the claimant's establishment the comparison can stand.

Notably, the Supreme Court made a strong statement as to the value of such arguments which may discourage employers in the future seeking to rely on the technicality. It stated that 'If in the absence of firm case management the threshold test is elevated into a major hurdle mirroring other elements of an equal pay claim, the purpose of the equal pay legislation will be thwarted, and the pay disparities will not be investigated.' A clear statement as to the need to address pay disparities, and ensure legal technicalities do not prevent that. Jason Braier, Employment Law Barrister at 42 Bedford Row, stated that this expression by Lady Arden will be 'music to the ears of those representing equal value claimants, used to unconscionable delays between presenting the claim final determination.' A clear indication to the tribunal and civil system that such technical comparator arguments should no longer hold up claims.

The next step for the claimants in the Asda case is to establish that the work of those in the retail provision is of equal value to the distribution provision and this is well underway in the tribunal. From an employer's perspective, equal claims are moving beyond directly obvious comparators to that of roles of equal value, much harder to address and much harder to quantify. The nature of these claims is to address the historical valuation of what is stereotypically deemed to be 'men's work' over and above that seen to be 'women's work' despite the fact that the roles can have equal value to an organisation. Given that roles traditionally occupied by women are more likely to operate on a part time basis, the impact on the gender pay gap is also increased. As can be seen by Lady Arden's reference to the purpose of the equal pay legislation, the Supreme Court appears committed to realising the intention behind the legislation. Given that it was initially introduced in 1970, in many ways it is about time and a welcome move, albeit creating difficulties for employers. It is clear that the Court are not prepared for the transformative effect of the structural protection to be thwarted by legal technicalities.

As such, it is a prime time for women with concerns about salary differentials to seek legal advice. And although it is a difficult situation for employers to address, there are steps that can be taken to address the issue and mitigate risk. Employers would be strongly advised to carry out robust audits into salary scales, and look beyond obvious male comparator roles in order to protect themselves from what could amount to considerable financial difficulty. Whilst it may appear to be a cost prohibitive move, compared to potential future liabilities it is no doubt economical in the long term. It has the additional benefit of positively impacting the gender pay gaps of many organisations and demonstrating a commitment to equal pay and investing in employees will inherently attract talent to the organisation and impact overall on performance.

At Forbes, we have experienced discrimination lawyers who can advise individual claimants on the right to equal pay, and carry out detailed equal pay audits focussing on the developments into equal value and anticipating inevitable legal developments to ensure that organisational risk is minimised as far as possible.