By way of a reminder, the vast majority of the employees who brought the equal pay claims were female retail store workers who argued that they carried out work of “equal value” to employees who worked in distribution centres. The majority of those employees employed in distribution were male and were paid more than the store workers. Although Asda contested that the two areas were not comparable because they were each run by different departments and the methods for setting the rate of pay was different for each department, the ET found that the female retail workers were entitled to compare themselves to the male distribution centre workers.
The judgment from the recent failed appeal to the EAT provides the reasoning for why the employees were permitted to make such a comparison. Initially, the EAT pointed to EU law of equal pay, specifically Article 157 of the Treaty on the Functioning of the European Union (TFEU). Article 157 was found to be effective where there is a single source of pay for the claimants and comparators. Therefore the comparison was permitted, dismissing Asda’s argument that different methods of deciding salaries for different departments prevented comparison.
Secondly, the ET was entitled to consider the terms of employment for each group to assess whether they were comparable. In this case, the terms were relatively similar indicating that the two groups were comparable for equal pay purposes.
Finally, the EAT allowed the so-called “North hypothetical test”, named after another equal pay case from 2009. The essence of this test is that if there is no real comparator at a claimant’s place of work, they are entitled to use a hypothetical comparator. When applied to the facts of this case, the question facing the tribunal was: if other distribution staff had been employed in retail stores, would they have been employed on broadly similar terms to the actual distribution staff? The EAT found that they would have been and, based on these findings, dismissed Asda’s appeal against the ET decision.
What does this mean for you or your business?
This decision does not provide much clarity for employers as neither UK nor EU law allows for hypothetical comparators. The “North hypothetical test” was based on the Equal Pay Act 1970 which was partly replaced by the Equality Act 2010. Asda tried to argue that it should not apply any more but both the ET and EAT rejected this argument.
It is also worth noting that permission has already been granted for this case to be appealed to the Court of Appeal although no date has yet been set for the case to be heard.
What do you need to be doing now?
Until further clarity is received from the courts, it is difficult to advise on the correct course of action for employers, but it would be wise to assess employees who perform similar duties to ensure male and female employees are paid equally. There is already a requirement for employers with over 250 employees to report on their own gender pay gaps annually under the Gender Pay Gap Regulations.
This commentary has been prepared for the purpose of an article only. It should not be regarded as a substitute for taking legal advice.