The Court of Appeal (‘CA’) decision is the latest stage in this long-running UK legal dispute over equal pay. Back in 2014, over 7,000 female Asda retail store workers brought claims in the Employment Tribunal (‘ET’) arguing that they were entitled to equal pay with male distribution depot staff, on the basis that their work was of ‘equal value’ to male workers.
UK legal framework
The Equality Act 2010 (the ‘Act’) provides that men and women should receive equal pay for equal work. Under the Act, an employee can claim contractual terms equal to those of a comparator of the opposite sex employed in the same employment and performing ‘like work’, ‘work rated as equivalent’ or ‘work of equal value’. The claimant and comparator must be in the ‘same employment’, meaning they are employed by the same employer or associated employers, either at the same establishment or at different establishments at which common terms apply.
Unlike other types of discrimination, the claimant in an equal pay claim must have an actual comparator, not a hypothetical one. However, case law has established that a man doing the same job as a female comparator does not actually have to work at the same place as the woman; it is enough that had he been transferred to do his job in the same establishment he would have remained employed on the same terms (known as the (North hypothetical’).
Alongside these domestic provisions, where the comparator is not in the same employment as defined by the Act, employees can rely on Article 157 of the Treaty of the Functioning of the European Union (the ‘TFEU’). This provides that Member States must ensure the principle of equal pay for male and female workers for equal work or work of equal value where pay inequality is attributable to a single source.
The female retail workers claimed that their work was comparable with the work of male distribution staff even though, on the face of it, the roles were quite different and they were working in different establishments. Asda claimed that its distribution and retail operations were fundamentally different, having evolved differently over time and with different objectives, physical environments and terms. Asda also argued that the North hypothetical should no longer apply and that Article 157 could not be relied on as having direct effect in equal value claims. As a result, it argued that there was neither a single source nor common terms.
Asda’s case was rejected at a preliminary hearing in the ET and at the EAT. Asda appealed to the CA.
Court of Appeal decision
The CA has upheld the EAT decision. It decided that the North hypothetical was binding authority and, in relation to the interpretation of domestic law, there were common terms between the distribution depot workers and the retail workers. The ET had taken the approach of analysing the differences and similarities between the claimants’ and comparators’ terms in great detail. However, the CA held that this was not the correct approach. Rather, the comparison should be between the terms applicable to each job, whether claimant or comparator, at the various establishments where people doing that job work.
Because the appeal succeeded on the analysis of the application of domestic legislation, it was not necessary to consider EU law. However, the CA agreed that there was a single source under the TFEU: in this case Asda’s executive board was capable of rectifying the inequality between the retail workers and the distribution workers. The CA recommended that if the decision is appealed to the Supreme Court, the application of Article 157 to equal value claims should be referred to the European Court of Justice.
Equal pay litigation in the UK is notoriously complex. With the number of claimants in this case now standing at around 30,000, this case is bigger in scale and potential value than most employment cases. While the CA’s decision resolves the existing confusion about with whom comparisons should be made, establishing that the roles are comparable is only the first step in this litigation. Asda may well appeal to the Supreme Court and, if there is a reference to the European Court of Justice, Brexit may well have implications (depending on the post-Brexit jurisdiction of the ECJ), although the EU (Withdrawal) Act will allow for ‘single source’ arguments to be made under domestic law. Even when the case returns to the ET for a finding on liability, there is still a lot to be decided: whether the roles are of equal value and, if so, whether any difference in pay is attributable to a material factor that is not sex discriminatory.
While the facts are specific to Asda, any employer with different groups of predominantly male or female workers should review its pay practices, whether or not these groups work at the same site. The intensive activity by many employers over the last year or two to report on their gender pay gap and analyse the reasons for it has shone a light on pay discrepancies between groups of workers. Employers are well advised to consider whether any highlighted discrepancies are justifiable or, if not, take action to address them.