Next wins £30 million appeal to overturn equal pay ruling

The retailer Next has secured a major victory in its long running equal pay battle with a growing group of unhappy employees.

The Employment Appeal Tribunal (EAT) has overturned a 2024 ruling which said Next must pay its retail staff, mostly women, the same higher rate of pay as its warehouse workers, mostly men.

Next successfully argued that the reason it paid its warehouse workers a higher market rate was because they were more difficult to recruit and retain. It called the win ‘not only correct in law but also a victory for common sense’.

It added: “Employers must be able to pay what is necessary to recruit the people they need; and that doing so does not oblige them to raise the pay of other employees where there is no reason to do so.”

Since the original tribunal, which found Next had failed to justify the pay disparity, several thousand more staff members joined the equal pay legal action taking the total from 3,540 claimants to more than 6,400.

What happened in this equal pay legal battle?

Between 2012 and 2023, it came to light that some warehouse staff, 58% of whom were men, could earn between 38p and £3.13 more an hour than retail sales staff, 78% of whom were women.

The retail staff took their case to be paid the same to an employment tribunal and won but Next appealed, successfully arguing that it “should not have to pay shop assistants and warehouse operatives the same amount of basic pay, in circumstances where the market and working conditions are very different”.

It claimed that the equal pay ruling had put the future of some of its stores at risk because it would make it unable to compete with the higher rates its competitors paid warehouse staff and it would therefore lose out.

However, although the EAT overturned the most significant aspect of the original ruling, it found that night shift premiums, overtime premiums and paid breaks must remain in place and was unable to resolve the issue of Sunday premium pay which will return to the employment tribunal sometime in the future.

What are the implications of this equal pay EAT ruling?

The ruling does not change the fundamental principle that men and women should receive equal pay for equal work.

Both the original employment tribunal and the EAT found there was no direct sex discrimination in Next's pay rates.

What it does mean is that in certain circumstances, employers can use market forces as a genuine business reason for justifiably and lawfully paying one group of workers more than another.

However, employers should remember they must be able to clearly explain why they pay different groups differently and support this with robust evidence and ongoing review.

Currently, some of the UK’s biggest supermarkets – Asda, Tesco, Morrisons and Sainsbury’s – are also fighting equal pay claims against 112,000 workers.

These major employers are all using the same argument as Next around market pay rates to counter these claims and will be looking closely at this latest decision.

• Both Next and the claimants are expected to pursue further appeals.

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Posted by: David Baynton, Head of Employment