Background

The case first began with equal pay claims issued in 2008 and, over time, we understand that approximately 7,000 Asda employees have been added as claimants. Mainly female employees working in Asda retail stores have sought to compare themselves to mainly male employees working in Asda's distribution centres for the purposes of their equal pay claims. The claimants allege that the work they perform is of equal value to their comparators, but that the comparators are paid substantially more than they are. The claimants allege that the differential in pay arises from a historical belief that the work done in the distribution centres is a man's role and so is worth more. Without exception, Asda's stores are on separate sites from its distribution centres.

Despite the first claims having been issued as long ago as 2008, this case has not gone beyond dealing with the preliminary issue of whether the claimants are, in fact, entitled to compare themselves to their chosen comparators. 

Relevant legislation

As many of the claims here were brought prior to the enactment of the Equality Act 2010 (EA), the issues to be determined fall to be considered under both the EA and the Equal Pay Act 1970 (EPA). In order to bring a claim under the EA, a claimant must identify a comparator of the opposite sex:

• performing equal work (in this case, work of equal value);
• for the same or an associated employer;
• at the same establishment or at a different establishment to which common terms and conditions apply.

Case law has established that "common terms" need not be identical. It has also established that if, hypothetically, a comparator would have been employed on their existing terms if they moved to the same establishment as the claimant (whether or not this might actually happen), then "common terms" can be found to exist. The provisions relating to "common terms" under the EA are worded slightly differently from those under the EPA and it has been unclear whether:

• it was enough that employees in the claimants' group were on "common terms" with employees in their comparators' group (as under the EPA); or
• whether, under the EPA, the claimants and their chosen comparators had to have any similarity in their terms.

Both the relevant provisions of the EA and the EPA are referable to Article 157 of the Treaty on the Functioning of the EU under which the key question is whether there was a "single source" responsible for the inequality of terms. The claimants argued that, if they were not entitled to compare themselves to their chosen comparators under the EA and the EPA, Article 157 had direct effect so as to allow their claims to continue in any event.

Employment Tribunal and Employment Appeal Tribunal decisions

Both the ET and the EAT agreed with the claimants that they were entitled to compare themselves to their chosen comparators on the grounds that:

• Article 157 did have direct effect in the UK;
• where terms came from a "single source" an employee was automatically able to bring their claim under Article 157;
• Asda's executive was a "single source" of terms and conditions; and
• there were common terms between the claimants and their chosen comparators which would apply if the location of the distribution centres happened to be the same as the retail stores, so that they formed one establishment.

Asda appealed to the Court of Appeal.

Court of Appeal decision

Following an in-depth analysis, the Court of Appeal agreed with the ET and the EAT that the claimants are entitled to compare themselves to their chosen comparators, even though those comparators work in separate establishments. The Court of Appeal came to its decision based on domestic law and did not believe it necessary to consider the applicability of European Union (EU) law in any detail (although it did pass some relevant comment).

The Court held that the relevant provisions of the EA did not change the law set out previously in the EPA in relation to the existence of "common terms". The Court confirmed that the relevant test, under both the EA and the EPA, is that, where the claimant and her comparator work at separate establishments, "common terms" must apply for employees of the claimants' group and employees of the group at each of the separate establishments. It is irrelevant whether the claimant and her comparator have, themselves, any similarity in their terms.

However, the Court disagreed with the approach taken by the ET and the EAT in determining whether the terms between retail store employees at one establishment were broadly similar to those of the distribution centre employees at another. It held that the correct test is whether the terms of the two groups of employees are broadly similar across their respective sites as a whole, so that a distribution centre employee would be employed on the same terms regardless of which site they actually worked at.

The Court of Appeal did agree with the ET and EAT's finding that, in this case, Asda applied "common terms" for retail store employees and distribution store employees wherever they worked. The Court also held that this would apply even where, in practice, the two groups of employees would never actually work at the same establishment. Accordingly, the claimants were entitled to compare themselves to their chosen comparators, and the ET had not erred in declining to strike out their claims on this basis.

On the EU law element, the Court of Appeal commented that, as both the retail store employees and the distribution centre employees were employed on terms set by the same employer, they were derived from a "single source". However, on the question of the direct effect of Article 157, the Court commented that, had this been determinative, it would have been necessary to refer this issue to the European Court of Justice. As it happened, the claimants were able to continue with their claims under domestic law, so no such reference needed to be made.

Asda applied for permission to appeal to the Supreme Court but this was denied.

Comment

Whilst the Court of Appeal's decision does not change the law as such, it does highlight how broad an equal pay claim based on work of equal value might be. It is not automatically obvious that supermarket employees working within retail stores can compare themselves to employees working in distribution centres where their job descriptions and the locations at which they work are quite different. However, it is clear that the equal pay legislation may go so far as to require equality of pay for all employees working for the same, or associated, employers where their work provides equal value for the employer. This applies regardless of how the business is structured, or where (in the UK) the employees are located.

By no means does this mean the end for Asda's defence of the claim. The comparator point is preliminary issue and the ET is yet to hear the merits of the claim or to consider whether, in actual fact, the work performed by the retail and the distribution staff is work of equal value. That will be the real turning point of the claim.

Given the financial and reputational consequences if the claim against Asda is successful, it remains a possibility that Asda could seek permission directly from the Supreme Court to appeal the Court of Appeal's decision on whether the claimants are entitled to rely upon their chosen comparators.