Next Has Won. Now Repeal the Law That Put It in Court

Is this the pivot back to sanity that the British equal-pay laws need? The Employment Appeal Tribunal this week overturned a finding that Next had underpaid thousands of predominantly female shop workers by paying warehouse staff more, eradicating much of a potential £30 million back-pay bill. Large supermarkets facing similar challenges will be breathing a little easier.

Two years ago a tribunal decided that Next store workers and warehouse operatives performed work of “equal value”. This was not based on any market test. No, experts marked roles across 11 equally weighted factors, from knowledge and customer service to physical demands and working conditions, before adding the scores together. And voilà: the ostensibly objective exercise found large differences across factors, but with retail roles scoring higher totals than warehouse jobs, implying, if anything, that retail work was more demanding. The roles were thus chalked up as of “equal value”.

Having made that determination, the tribunal concluded that Next hadn’t justified paying its warehouse workers (53 per cent male) more than its store workers (78 per cent female). There was no direct sex discrimination, the tribunal found, nor evidence of gender consciously or subconsciously influencing decisions. It also acknowledged Next was paying market rates and couldn’t pay warehouse workers less “without a risk of jeopardising the required service”.

Yet it ruled against Next anyway, because the company was profitable, providing the supposed financial headroom to pay shop workers more. Next’s offence therefore was not about paying women less because they were women. It was refusing to raise wages for a female-dominated group it had no trouble recruiting, because it could “afford” to.

As economics, this was bonkers. Next’s shops attracted between 28 and 30 applicants for each vacancy, while filling its warehouses required recruitment platforms, agency workers and financial incentives.

Market pay rates reflected important supply and demand factors that job evaluations missed. Things such as how many people wanted a job, how appealing the working conditions were and how urgently Next needed staff, given trends in shopping habits. Next even offered shop workers the chance to transfer to warehouses. Few did and one claimant admitted warehouse work did not appeal unless it paid considerably more. Despite all this clear evidence, Next was found in breach.

The appeal judge saw through much of the muddled thinking. The real question, he said, was why warehouse staff received more, not why shop workers got less. Warehouses needed a pay premium to attract and retain labour. Shops didn’t.

That Next, in hindsight, could have paid shop workers more without making losses is irrelevant. Every pound spent raising wages above those needed to staff shops is unavailable for investment, dividends, price cuts or protecting stores against closure.

Yet, welcome as this specific judgment is, the bad law remains. Next succeeded only after eight years of expensive litigation, being forced to justify why two completely different jobs paid differently merely because their workforces had different sex mixes. And that’s only the seen cost. How many firms already compress wages, outsource warehouse functions or hire cautiously to reduce the risk of such disputes?

Leigh Day, representing the claimants, now complains that allowing market rates to justify pay differences risks making “the very market conditions that give rise to the discrimination” a “legal justification”. This remarkable statement says more about the law than the verdict. Once tribunal-appointed experts label two unlike jobs “equal value”, pay differentials reflecting scarcity, worker preferences and recruitment difficulties become presumptively suspect rather than evidence against the premise.

The Hon Mr Justice Bourne (no relation) said that, in this case, Next had proved that recruitment and retention necessitated higher pay. But setting that bar is the problem. A pay gap between different jobs does not itself prove sexism. It does, however, provide strong evidence that workers and employers do not treat the jobs as interchangeable. It’s long past time to repeal this ludicrous “equal value” framework.