All roads lead North: Asda Stores Ltd v Brierley

Daphne Romney QC

Daphne Romney QC considers an important new decision in the Court of Appeal concerning what a claimant needs to establish in order to show that she has a valid comparator in equal pay claims.

We return to the long running saga of ASDA Stores Ltd v Brierley,[1] an everyday story of supermarket folk. This week’s episode concerns the Court of Appeal judgment on the vexed question of comparability – if a claimant works in one establishment, and her intended comparator works elsewhere, what does she have to show other than that they have the same employer or an associated employer?

To remind ourselves of the story so far, thousands of claimants are bringing equal pay claims against the retail giant ASDA. They work in a variety of roles in the stores. The comparators work in distribution depots. These are entirely different establishments. This is a common theme to all the various supermarket claims, because in a classic case of occupational gender segregation, retail workers are predominantly female and distribution workers are overwhelmingly male. So far, the ASDA cases remain stuck in the foothills, held up by the question of whether the claimants are entitled to compare themselves to the comparators at all, given that they work in separate establishments, under s 1(6) Equal Pay Act 1970 (“EPA 1970”) and s. 79 Equality Act 2010 (“EqA 2010”).

At a PH, Employment Judge Ryan found that the retail and distribution divisions were run separately, with different terms and negotiating mechanisms and had a different history. However, he held that the ultimate control lay with the ASDA Board of Directors so that there was a single source; that the claimants and the comparators shared common terms of employment; and that the Northhypothetical (of which much more below) survived the change of wording from s. 1(6) EPA to s. 79(4)(c) EqA. The EAT (Kerr J) dismissed the appeal.

Where a claimant and her comparator work in the same establishment, it does not matter what employment terms each has – a comparison can be made between them. However, it becomes more complicated where the comparator works at a different establishment. S. 1(6) EPA 1970 held that they would be treated as working in the same establishment as the claimant

‘…if they are men employed by her employer or any associated employer at the same establishment or at establishments in Great Britain which include that one and at which common terms of employment are observed either generally or for employees of the relevant classes.’

How common do those terms have to be and in common with whom? In Leverton v Clwyd CC, [2] the claimant and her comparators worked under the same collective agreement but had varying terms. Lord Bridge, applying a purposive construction, held at 745, ‘The concept of common terms of employment observed generally at different establishments necessarily contemplates terms applicable to a wide range of employees whose individual terms will vary greatly inter se’. Were it otherwise, the whole purpose of the Act could be circumvented by simply placing groups of employees in different establishments on slightly different terms. The paradigm example, as Lord Bridge put it, was where there was a single collective agreement, applicable to both establishments. At paragraph 34, Underhill LJ distilled the Leverton test into the submission advanced to the House of Lords by counsel for the appellant in that case - “in other words, are the terms applicable to the relevant jobs irrespective of the establishment at which the employees work?” The comparison is not between the claimant’s terms and the comparator’s terms. It is between the terms applicable to each job, whether claimant or comparator, at the various establishments where people doing that job work. Underhill LJ observed tartly, the comparison between employees approach should have been dead since Leverton but, ‘as the history of the present case shows, it refuses to lie down’. [3]

In British Coal Corporation v Smith, [4] the claimants across multiple collieries enjoyed the same terms but their comparators, surface workers, did not; concessionary coal and bonuses varied from pit to pit. The employer therefore argued that a claimant in establishment A could not claim common terms with a comparator in establishment B. This argument was rejected. In the House of Lords, Lord Slynn held that the appropriate test was whether the surface miners’ terms were ‘broadly similar’ between the various establishments. Underhill LJ held that this was the ratio of the case, but observed that Lord Slynn had indicated that a man doing the same job as a comparator did not actually have to work at the claimant’s establishment – it was enough that had such a man worked there, he ‘would have’ enjoyed common terms with a comparator who worked at the comparator’s establishment. In other words, it was permissible to create a hypothetical comparator for the purpose only of answering the question posed by s. 1(6) EPA. (It is of course quintessential to establishing equal work, whether it be like work, work rated as equivalent or work of equal value, that the claimant must have an actual comparator and not a hypothetical one, save in the very limited circumstances of s. 71 EqA). As Underhill LJ explained in paragraph 43,Smith follows naturally from Leverton - the comparison is between establishments, not claimants and comparators.

Which brings us to North v Dumfries & Galloway Council, [5]  where the EAT and Court of Session worked themselves into a tizzy because they focused on the wrong issue. School staff wished to compare themselves with manual workers at other establishments. Much time was spent in the ET, EAT and Court of Appeal debating the degree of likelihood required for a hypothetical manual worker to work at a school. In the Supreme Court, Baroness Hale held that Lord Slynn’s test in Smith had said nothing about any degree of likelihood. The purpose of the legislation was to compare different jobs done by people who worked in different establishments. ‘The hypothesis is that the comparators are transferred to do their present jobs in a different location. The question is whether in that event, however unlikely, they would remain employed on the same or broadly similar terms to those applicable in their current place of work’. [6] This has become known as the ‘North hypothetical’ although, as Underhill LJ points out, its origins are in fact to be found in Leverton andSmith.

Lady Hale gave five reasons for her conclusion, set out in paragraphs 33-41 of her judgment. In particular, reason 3 had regard to the purposes of the equal pay provisions; reason 4 distinguished between the comparison necessary to bring a case at all i.e. a comparison of terms observed at different establishments, and the comparison required to establish equal value; and reason 5 was that such a construction was in accordance with EU law and the concept of the single source, namely a person or body who can rectify the inequality between claimant and comparator. She noted that there was not a single EU case which held that no single source existed between employees working for the same employer.

These three mighty cases laid down the principles of comparison – it was now for the Court of Appeal to apply them to the ASDA appeal.

Is same employer enough?

On the issue of common terms, counsel for ASDA submitted that Lady Hale in North had only understood comparability to be possible where an employer agrees to collective agreements applying across its workforce and “is not operating separate businesses in separate locations”.  In paragraph 53, that submission was roundly rejected. Underhill LJ said, ‘I do not believe that Lady Hale meant any such thing. She was doing no more than acknowledging the role of the “same employment” test as a filter, while emphasising its limited purpose. The passage is not directed at defining the circumstances in which common terms apply across establishments.  It is in fact clear from the passages quoted at paras. 49 and 57 above that she envisaged cross-establishment comparisons being possible between very different kinds of operation of the same employer’. In paragraph 59, he added, ‘In short, North is in my view binding authority that the fact that claimant and comparator have the same employer will in the ordinary case mean that the terms have a single source and thus that EU law permits comparison between them for equal pay purposes’. Although the passages in Lady Hale’s judgment are very short, Underhill LJ said that they are binding so ‘thereis nothing more to be said’ (paragraph 61). If ASDA does appeal, it had better hope that the Supreme Court will hear the case after Lady Hale has retired.

Common terms

The next point was whether common terms applied. Underhill LJ summarised the authorities above, and emphasised that the comparison is that between establishment and establishment not between claimant and comparator (paragraph 67). Indeed, any similarity between the claimants’ terms and the comparators’ terms is irrelevant (paragraph 73). ‘The question is whether the terms for cleaners are (or would be) the same (or broadly so) whether they are employed at (establishment) X or at (establishment) Y and likewise as regards the terms for manual workers.’

Would it be different under s. 79(4) (c) EqA 2010?

The phrase in section 1(6) EPA 1970 – ‘establishments … at which common terms of employment are observed either generally or for employees of the relevant classes’ – was replaced in section 79(4)(c) EqA 2010 by the phrase ‘common terms apply at the establishments (either generally or as between A and B)’. 

As a result, ASDA argued that the North hypothetical no longer applied – the section, as redrafted, clearly called for a comparison between the terms of the establishments generally or between claimant and comparator, and the removal of the phrase ‘relevant classes’ negated the function of the hypothetical man working at the claimant’s establishment. This argument failed. Underhill LJ said that there was nothing to indicate that the Government had intended to reduce the breadth of comparison available to claimants and it was in line with the case law under s. 1(6) EPA 1970. Nevertheless, Underhill LJ acknowledged that the wording in s. 79(4) could suggest that the comparison was to be made, but it was not the only possible meaning and he did not think that it had been the draftsman’s intention to change the law; ASDA’s interpretation was contrary to Leverton,SmithandNorth. ‘In my view it is quite clear that the draftsman has unthinkingly deployed the technique, used throughout the 2010 Act, of referring to claimants and other parties by letters of the alphabet and has failed to appreciate that it could be read as effecting a substantive change’. He did not mince his words. ‘The new drafting may perhaps be inept but in context its meaning is clear.  There have, regrettably, been several other instances of re-drafting effected by the 2010 Act unintentionally unsettling the previous law’, a reference to Jessemey v Rowstock Ltd [2014] ICR 550; and Blackwood v Birmingham & Solihull Mental Health NHS Foundation Trust [2016] ICR 903. [7]

As a result, the North hypothetical survives to be wielded by claimants in other cases.

Comparison of terms.

The ET had painstakingly analysed the differences and similarities between the terms applicable to retail and distribution. However, in paragraph 88, Underhill LJ pointed out that this was entirely the wrong exercise, based upon a misapplication of the test in Smith.

Misapplication of the Northhypothetical test

ASDA placed emphasis on the evidence of the comparators’ manager, who said that if men transferred from depots to stores, they would not have remained on the same terms as the comparators remaining at the depots. Again, however, this was not the relevant question; and the relevant question could ‘only be answered by inference based on how terms for actual workers in the relevant class(es) are applied, and what a lay witness says about that is of limited, if any, value: it is a matter on which the tribunal has to reach its own conclusion.’ [8]

Single source

The case could therefore be resolved on domestic law and without any recourse to EU law. Nevertheless, Underhill LJ agreed with Employment Judge Ryan and Kerr J that there was clearly a single source here. A company with a Board of Directors was wholly distinguishable from the situation in Robertson v DEFRA,[9] where the Government devolved power by (revocable) statutory instrument to set salaries for each department. Whether or not Robertson was correctly decided, a matter of much debate, it turned on its own particular facts. Here, the Board could set the terms as it chose. [10] It remains to be seen whether the doctrine of single source will survive Brexit, and if so, for how long.

Direct applicability

Art. 157 TFEU provides that: “Each Member State shall ensure that the principle of equal pay for male and female workers for equal work or work of equal value is applied”. It was common ground that in claims of like work, Art. 157 (and its predecessors) had direct effect – see Defrenne v Sabena[11] and Macarthys v Smith. [12]  However, ASDA contended that the same was not true of claims for equal value unless there had been a prior concession to that effect or a job evaluation scheme had rated the work as equivalent. Although Worringham v Lloyds Bank[13] suggested that the principle applied to equal value claims, ASDA argued that the language in the judgment, namely “discrimination that can be judicially identified” precluded equal value claims because the ET could not make a determination without expert evidence, so that there was no clear identification of equality. ASDA further argued that several senior judges had (albeit obiter) cast judicial doubt on the principle of direct effectiveness in such cases, namely Lord Oliver in Pickstone v Freeman[14] Balcombe LJ in Leverton v Clwyd[15] and Lord Eason in City of Edinburgh v Wilkinson. [16]  It further relied on Van Gend en Loos[17] where the ECJ said that in order to be directly effective, the measure in question had to be unconditional and sufficiently precise.

The ET held that it determined equal value, and further pointed out that it was not obliged to accept expert evidence and could make its own decision. Kerr J found the decision to be a difficult one and that it was not acte clair. The question was whether the language in Art. 157 was sufficiently precise as posed in Van Gend.[18] On balance, Kerr J held that were the CJEU to hear the case today, it would hold that there was direct effectiveness. [19] Whilst he would have “enthusiastically” referred the matter to the CJEU, he left it to the Court of Appeal to decide whether a reference was necessary. [20] The Court of Appeal declined to do so as it was unnecessary for the disposal of the case; Underhill LJ was inclined to agree with Kerr J, Sales LJ was less sure about it and Peter Jackson LJ declined to express a view. [21]

Discussion

The clarity of Underhill’s judgment is to be welcomed. Ever since Leverton, there has been confusion about whether and with whom comparisons should be made for the purposes of getting over the hurdle of s. 1(6) EPA / s. 79(4) EqA. As a result, a lot of time has been wasted drawing intricate comparisons of the respective terms of claimant and comparator, which is a red herring. Matters were made even more complicated by the rewording found in s. 79(4)(c) EqA 2010, which, however unintentionally, appeared to close the door on the North hypothetical by expelling the hypothetical man working at the claimant’s establishment and substituting a straight comparison of the respective terms of claimant and comparator. Some might think that Underhill’s explanation is a little too neat, but it is certainly right that it would be extraordinary if, as ASDA argued, the law had suddenly changed with no prior warning, explanation, consultation or debate. As Kerr J pointed out in the EAT, there is no example of a court narrowing the effect of domestic discrimination law.

It is worth emphasising that a purposive reading of the EPA and EqA is necessary to allow equal pay claims to take place. Otherwise, an employer or associated employer would be able to shift men and women into separate establishments, and have a small difference in their employment terms, in order to prevent equal pay claims from getting off the ground. In large employers, like local authorities, health trusts, and supermarkets, where men and women tend to work in gender-segregated jobs, the woman and her comparator may well not work in the same establishment and never will. This means that it would be too easy for the larger employer to minimise its equal pay liabilities. It also goes without saying that if the terms of claimant and comparator were or had to be the same, there would be no need to bring an equal pay claim at all.

Of course, ASDA may appeal. If it does not, the case brought by the retail workers can finally reach the equal value process. Either way, there is still a very long way to go. Stand by for the next instalment.

[1] [2019] EWCA Civ 44

[2] [1989] AC 706

[3] Paragraph 35

[4] [1996] ICR 515

[5] [2013] ICR 993

[6] Para. 30

[7] Paras 78-79

[8] Para. 106

[9] [2005] ICR 750

[10] Para. 111

[11] [1976] ICR 567

[12] [1980] ICR 672

[13] [1981] ICR 592

[14] [1989] AC 66 at 124B-F

[15] [1989] AC 706 at 723H – 724D

[16] [1981] IRLR 202 @ paras. 40-42

[17] [1973] CMLR 105

[18] Paras. 17/18

[19] Para. 31

[20] Para. 37

[21] Paras 116, 118, 119