Ms Thandi and Others v Next Retail Ltd and Next Distribution Ltd 2024 (1302019/2018)

On the 22^nd of August 2024, the Employment Tribunal passed judgment on a sex discrimination claim brought by Ms Thandi on behalf of over 3,500 Next retail consultants. The respondents were Next Retail Limited and Next Distribution Limited.

Background:

The Equality Act 2010 (EA) is the central legislative basis of discrimination claims. The EA’s main purpose is to protect people from discrimination in the workplace and wider society. The intention of the EA is to prevent discrimination by according protections to nine ‘protected characteristics’; section 4 describes these characteristics in terms of age, disability, marriage and civil partnership, pregnancy or maternity, race, religion or belief, sex, gender reassignment, and sexual orientation. The EA draws a distinction between direct and indirect discrimination; the former occurs when someone is put at a disadvantage or treated less favourably due to a protected characteristic (section 13) whereas the latter pertains to situations where a policy or rule that applies to everyone has a particularly adverse impact on someone because of a protected characteristic (section 19).

Since 2018, over 3,500 Next retail consultants have brought a joint equal pay claim against Next. Most of Next’s retail consultants are women (approximately 77%). However, over half of Next’s warehouse operatives are men. Next’s retail consultants receive between £0.40 and £3 less in basic hourly pay than Next’s warehouse operatives. Therefore, Next was accused of indirect sex discrimination on the basis of this pay disparity.

Proceedings and judgment:

Under section 66 of The Equality Act 2010, Next retail consultants (the claimants) submitted that their work is of equal value to warehouse operative’s work, so they should be compensated . However, Next (the respondent) relied on Section 69 of The Equality Act 2010 which they argued granted permission to the company to provide a different level of pay. This provision states if an employer can establish there was a material and proportionate factor that caused the pay difference which was not discriminatory, they have a defence to discrimination. Next relied on section 69 to assert that the disparity in pay was based on proportionate and material factors, those being retention concerns, the need for warehouse employees to work more unsociable hours, and the greater demands placed on their labour. The Tribunal addressed these assertions as follows.

Increased pay for retention:

Next submitted that warehouse operatives were paid more than retail consultants as they were much harder to retain. For instance, Mr Navarro stated that only 27% of warehouse operatives remained at the company after 12 months. Therefore, Next argued higher pay was imperative to retain warehouse operatives, so the company could operate effectively. However, the Tribunal rejected this argument for two reasons. Firstly, under cross-examination, Mr Kelly and Mr Maclntyre (Next’s witnesses) both agreed retention had become a much smaller issue since 2017. Secondly, Next presented misleading data concerning the retention of retail consultants. For example, they omitted to include involuntary leavers. Consequently, the tribunal could not adequately compare retention rates of retail consultants and warehouse operatives.

Increased pay due to unsociable hours:

Next submitted that their warehouses remained open 24 hours per day 7 days a week, including during public holidays. The company argued this justified paying warehouse operatives more than retail consultants to compensate them for the unsociable hours. However, the tribunal rejected this contention as well. They observed there was no obligation on warehouse operatives to work unsociable hours. Secondly, warehouse operatives who choose to work unsociable hours are already rewarded with increased ‘night shift premium’ pay. Therefore, this was ruled an insufficient reason for pay disparity.

Increased pay to meet demand:

Next submitted the rapid expansion of online sales had increased the demand for warehouse operatives. Conversely, the demand for retail store consultants has decreased due to the increase in online sales. For instance, Mr Miles stated demand for retail consultants has decreased by 18%, whereas demand for warehouse operatives has increased by 23%. Next argued this justified paying their warehouse operatives more to satisfy increased demand. Again, the tribunal dismissed this. They did not view this as a ‘proportionate’ reason to pay retail consultants less than warehouse operatives. They stated as the work done by both retained equal value, they should be paid the same regardless of demand.

Outcome:

Ultimately, the Tribunal rejected Next’s defences to the action resulting in a successful outcome for the claimants. Next was subsequently ordered to pay over £30 million in compensation, although Next has announced its intentions to appeal the decision.

Commentary:

This case sets an important precedent for future equal pay claims against large retail companies. Leigh Day, who represented Next’s retail consultants, is currently representing a further 112,000 retail workers. These claimants are from Tesco, Sainsbury’s, Morrisons, Asda and Co-op. Therefore, these companies and retail companies generally must ensure their levels of pay are justified to avoid equal pay litigation. As Next must pay over £30 million in compensation, the company needs to calculate how to finance this. If Next loses its appeal, the company stated it may close stores to finance the cost. Next has approximately 32,000 employees in the UK. Consequently, this could lead to employee redundancy.

Finally, the new Labour government is planning to strengthen employee rights. For instance, they plan to introduce a new Race Equality Act to ensure equal pay for people from ethnic minorities. Therefore, the outcome of this case coupled with legal changes to improve employee rights will likely cause an influx in equal pay claims.

Written by Nick Bowes