Asda, equal pay and the meaning of “establishments”

Daphne Romney QC

Daphne Romney QC considers the long awaited decision of the ET in Brierley v ASDA Stores.

The ET sitting in Manchester has handed down judgment in the latest instalment of Brierley v ASDA Stores[1] the equal pay litigation between some 7,000 claimants, predominantly female, working in the Retail division of ASDA. They assert that they do work of equal value with workers in ASDA’s Distribution division, who are predominantly male.

ASDA first began to trade in 1965 and was acquired by Walmart in 1999. It has some 630 stores employing 133,000 employees. ASDA also owns and operates Distribution centres across the UK, employing some 11,600 employees. The ET heard that there was a complex history with the Distribution centres. Some had always been operated by ASDA, and some by third parties and that there had been different terms and conditions between them, often set locally. However, since 2003, ASDA had itself operated and run all its Distribution centres and currently had 24 such centres.

The Retail stores did not recognise any union for the purposes of collective bargaining – pay was determined by Retail management. The Distribution centres did recognise the GMB for collective bargaining (since 2010-2011). There were differences in the amounts paid to Retail staff and Distribution staff. For example, pay was higher for Distribution staff; Distribution staff received overtime after 40 hours, whereas no overtime was paid to Retail staff; Distribution staff received late shift premium which Retail staff did not; Distribution staff got a paid 30 minute lunch break and a paid 10 minute break which Retail staff did not (though some did get paid lunch breaks).

The issue before the ET was whether the claimants could rely on distribution workers as comparators. The Retail stores and the Distribution centres were on different sites. The claimants therefore had to show either that their claims fell within Art. 157 TFEU (formerly Art. 119) and that there was a Single Source regulating the employment of both sets of employees or that under s. 1(6) EPA/s. 79 EA, they either enjoyed common terms and conditions with their comparators or that, if on the hypothetical basis (however unlikely) that the comparator would transfer to do his present job at a claimant’s place of work, he would largely retain his present terms and conditions.

The ET heard extensive argument over six days on the applicability of European and domestic law. Given that occupational gender segregation often means that men and women work in different establishments, making comparisons difficult, the cases have sought to give a purposive interpretation to the law to allow such comparisons to be made.

In the judgment handed down on 14 October 2016, Employment Judge Ryan held that the claimants were entitled to compare themselves to Distribution staff for the following reasons.

Direct applicability of Art. 157

Article 157 TFEU (formerly 119 of the Treaty) provides that “Each MemberState 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 119/157 had direct effect (Defrenne v Sabena[2]; McCarthy’s v Smith[3]). However, ASDA contended that it did not have direct effect in cases of equal value unless there had been a prior concession or where there was a job evaluation scheme holding that work was rated as equivalent. Although Worringham v Lloyds Bank[4] suggests 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 where the Tribunal could not make a determination without expert evidence. The ET rejected that argument, holding that it did determine facts and further pointed out that an ET was not obliged to accept expert evidence.

Single Source

A Single Source exists where the claimant can show that there is a body responsible for setting the terms of both claimants and comparators - as the ECJ put it in Lawrence[5], “a body responsible for the inequality and which could restore equal treatment”. It is not necessary to show that the body originally set the terms or that the body maintains day to day control. Many large companies devolve day to day management but this is not the test. The test is who has the ultimate say – see Fox Cross Claimants v Glasgow City Council[6], (upheld on appeal by the Court of Session[7]).

ASDA relied on Robertson v DEFRA[8]. In that case, the Government had expressly devolved its powers to determine salary to individual Departments, and so a woman in one Government Department could not compare herself to a man in another Government Department. ASDA contended that Retail and Distribution were wholly separate with each determining its employees’ salary and terms. It was not enough to show there was the same employer, there had to be shown that there was a Single Source, Just as in Robertson, ASDA argued that there was evidence of devolved responsibility through different structures. The ET rejected this. Ultimately, both Retail and Distribution operated under the authority of the Executive Board. Robertson was distinguishable both in fact and degree. Government Departments were not the same as a Board of Directors, even in a business as large as this one, this was a commercial enterprise and both were subject to “a degree of oversight so that there was control in practice as well as in theory”.

Common Terms

The ET turned to consider domestic law and the application of s 1(6) EPA, now s. 79 EA. This provides that a comparator (B) must either work in the same establishment as the claimant (A), in which case it does not matter whether they have the same terms and conditions or work in another establishment of the employer or an associated employer “at which common terms and conditions are observed generally or for employees of the relevant classes”. s. 79 is in slightly different language - s. 79(4)(c) provides that common terms and conditions apply “either generally or as between A and B”.

ASDA argued that there were essentially different employment regimes for Retail and Distribution staff. In considering whether the terms were broadly similar, the ET had to consider geographical locations as well as historical reasons for any differences. The ET held that the common terms were broadly similar and that a broad comparison meant that there should not be a too narrow a focus on the contractual terms. It expressly rejected the argument that locations were relevant and further rejected the contention that common terms could not be common where they had been negotiated separately – to accede to that submission would mean that the legislation could be subverted, in particular if an employer chose to indulge in separate negotiations in order to defeat the operation of the Act.

“The North hypothetical”

This refers to the hypothesis, upheld in North v Dumfries & Galloway Council[9] that should a male comparator be transferred to do his work at the claimant’s place of work, however unlikely that hypothesis, whether he would continue to work on the terms and conditions enjoyed by him presently. ASDA contended that the ET had to ask this question both of a man from Distribution staff working in Retail and vice versa and that the evidence showed that in Distribution, terms changed from location to location, whereas in Retail, terms were standardised. The ET was unpersuaded that a hypothetical man moving to do his job but working in/near a Retail store would be subjected to the less favourable terms enjoyed by Retail staff and thought it unlikely that a man from Distribution staff would be willing to accept less favourable terms. The ET was also unpersuaded that the test and considering the position and the comparator was indeed correct, but decided the case on that basis as it had been argued by both claimants and ASDA.

Change of words from s. 1(6) to s. 79

ASDA argued that this meant that the North hypothetical had been abolished. As such, the claimants were not entitled to argue that the section should be read so as give effect to European law and the words underlined should be read in common terms and conditions applyor would apply either generally or as between A and B if each was employed at the other establishment”. The ET disagreed. It pointed out that there had been no suggestion, including in the Explanatory Notes, that there was any change intended and any changes were to bring about consistency of language in the new Act. He also held that EU jurisprudence permitted comparisons where claimant and comparator worked in different establishments – Leverton v Clwyd CC[10] had specifically rejected the contention that a woman had to establish ”an undefined substratum of similarity between her terms and those of the comparator as a precondition”. The language of the new section permitted of the claimant’s interpretation – if not, it should be disapplied to give effect to EU law.

As a result, the claimants can now continue their claims, having satisfied the essential comparison. They still have to prove that their work is of equal value to the comparators’. ASDA will also seek to show that there is a material factor defence for any pay differential, and may well rely upon the historical complexities of the Distribution Centres to argue that there is an explanation for the differentials unrelated to sex or that there is objective justification for any such differential. However, ASDA is certain to appeal this decision, given the enormous ramifications.

Daphne Romney QC is an expert in equal pay. If you would like further information about the work which Daphne does or her colleagues in chambers, then please contact the clerks on 0207 827 4000.

[1] Case No: 2406372/2008

[2] [1976] ICR 567

[3] [1980] ICR 672

[4] [1981] ICR 592

[5] [2003] ICR 1092

[6] [2013] ICR 954

[7] [2014[ CSIH 27

[8] [2005] ICR 750

[9] [2013] ICR 993

[10] [1989] AC 706