The legal framework around equal pay, enshrined in the Equality Act 2010, is notoriously complex although it sits behind a simple concept: that men and women should receive equal pay for carrying out equal work. The recent Supreme Court decision in ASDA v Brierley  UKSC 10 is a reminder to employers that internal organisational constructs, such as divisions, departments and even location - which was the focus in Brierley - are unlikely to prevent an employee being able to compare themselves for equal pay purposes with an employee in another part of the organisation. This can make it very difficult for employers to be able to identify where a potential challenge may come from. However, at a time when we are emerging from lockdown, is it an opportunity for employers to reset and take a more holistic rather than defensive approach to equal pay?
Many of you will be familiar with the background of this case, which has been running since 2014. By way of reminder, some (reportedly) 44,000 predominantly female ASDA shop floor employees (the Claimants) are seeking pay parity with predominantly male ASDA distribution centre workers (the Distribution Employees).
The legal issue
Under the Equality Act 2010, men and women should receive equal pay for carrying out work which is (i) the same or similar; (ii) rated as equivalent under a job evaluation scheme (JES); or (iii) of equal value. The Claimants in this case allege they carry out work of “equal value” to the Distribution Employees. The legal test requires the Claimants to compare themselves to a valid comparator who is of the opposite sex and a current or previous employee. They can compare themselves to a comparator working at a different establishment (i.e. location) but, if they do, the comparator must be employed on “common terms” (the Common Terms Analysis). The Common Terms Analysis was the matter before the Supreme Court.
The Supreme Court found that the Claimants do have “common terms” with the Distribution Employees for equal pay purposes. To do so they applied the North Hypothetical (named after Dumfries and Galloway Council v North  ICR 993): they asked the hypothetical question of whether the Distribution Employees’ existing terms and conditions would be broadly similar if they were employed to do their present job at the Claimants’ establishment.
ASDA had argued that there was no evidence to demonstrate that this was the case. However, the Supreme Court emphasised that the Common Terms Analysis is very much a threshold test to be considered at the outset of equal pay litigation. As a result it discouraged “prolonged enquiry” into the matter by Tribunals and explained that it was sufficient for an inference to be drawn from the relevant facts. The outcome being that cases where the Common Terms Analysis cannot be met are likely to be exceptional and limited to cases where differences in terms between establishments can be shown to be clearly rooted in geographical factors.
In addition, the Supreme Court confirmed that when carrying out a Common Terms Analysis it is not necessary for a Tribunal to do a line by line comparison of the terms and conditions of the claimants and their comparators. Equally, collective bargaining agreements need not be in place for a cross-establishment comparison to be made.
Implications for employers
On the face of it the Supreme Court ruling is a great victory for the Claimants. The effect of the decision is to simplify the Common Terms Analysis and reduce it to a threshold test, in turn shrinking a significant hurdle for any claimant on the road to equal pay success. For employers, it chips away at one of the technical defences available as part of its response to equal pay litigation. The Supreme Court judgment is likely to give the green light to the thousands of equal pay claims brought by other supermarket employees currently on hold within the Tribunal system and will most likely encourage a wave of fresh supermarket-related claims. Other retail employers, particularly those who run similar staffing models and pay structures to supermarkets, are a natural extension.
However the implications could spread much wider. The Brierley case continues to chip away at the concept that mass equal pay claims are a public sector phenomenon or, at least, a phenomenon only relevant to unionised workforces. The present case is the first case involving a cross-establishment comparison where the claimants and the comparators’ terms and conditions were not fixed on both sides by collective bargaining agreements.
Resolution of the Claimants’ claims is however still far away. Next, the Claimants must show that they carry out work of “equal value” with their comparators, a detailed and time-consuming process for both sides, requiring preparation and analysis of job descriptions for each role involved. After that, if the roles are found to be of equal value, it will be for the Tribunal to consider whether any pay difference between them is by reason of a material factor other than sex. In its statement responding to the Supreme Court ruling, ASDA stated that the difference in pay was due to the different demands of each job and the market rate for pay in these sectors.
The prospect of getting involved in such a process is daunting for any employer. Employers wondering what they can do to avoid it may wish to heed the Supreme Court’s reminder that “The aim of the equal pay legislation is to remove pay disparities that are endemic in some pay awards and which do not properly reflect the value of the work for which they are paid.” This points to taking a step back and revisiting a holistic approach to pay. As we emerge from lockdown we have begun to see calls for a revaluation of pay and status in sectors such as care, health & retail that have kept society going in 2020. A dramatic overhaul of base pay in this way will involve its own risks and challenges in terms of positioning but is certainly one answer to eliminating ongoing gender pay discrimination.
For those looking to take a different course of action, implementing a JES remains of enormous assistance. Alternatively, employers could conduct a simpler equal pay audit, helping them to identify pay discrepancies and either set them right or document their rationale for these differences.
In addition, the growing trend of transparency around pay, particularly through increased pay reporting, may in itself help to build a culture of trust and respect around pay which dissuades employees from resorting to litigation, assuming that employers are seen to be acting on any pay disparities identified by such reporting. Practically speaking, employers who maintain clear and transparent remuneration policies and practices which deal with pay, bonuses and overtime, maintain up-to-date and accurate job descriptions and take steps to ensure female and male workers do not become siloed into different areas of the business will be setting themselves up well in this arena.
If you would like assistance or advice on carrying out an equal pay audit, JES or any of the other suggestions in this Law-Now, then please feel free to contact us.
Article co-authored by Kate Bagger.