Who would bother to create jobs in modern Britain? Clothing retailer Next has done plenty of job-creation over the past few years – only to be whacked by an equal pay claim brought by 3,500 shop assistants. An employment tribunal has ruled that the company was wrong to pay them less than it paid staff at its warehouses. With back pay it could cost the company £30 million.
The cost of this kind of case goes far beyond the potential legal liability itself
Equal pay is one thing where it concerns men and women working alongside each other in the same jobs. It is quite another when it is extended to the concept of ‘work of equal value’, as it was in this case. The tribunal ruled that Next failed to show that paying its shop workers, who are overwhelmingly women, lower pay rates than its warehouse workers, who are mostly men, was not sex discrimination. There is no suggestion, by the way, that the company is discriminating against women by refusing to employ them in its warehouses – any female shop assistants who feel underpaid are quite free to apply for a job there, where they will be paid the same as male warehouse workers.
It doesn’t take too much imagination to see how destructive this area of employment law could turn out to be. The Next case is similar to the equal pay claim which brought Birmingham City Council to its knees, leading to bankruptcy and council tax bills being jacked up by 21 per cent over the next couple of years. There, the issue was with cleaners, whose work was deemed to be of ‘equal value’ to that of refuse collectors. Henceforth, all employers – whether in the public or private sector – are going to have to second-guess what an employment tribunal would make of the various occupations on its pay roll. It is an entirely subjective judgement, for example, as to whether someone who sells clothes is engaged in work of equal value as someone who designs them – but setting their remuneration has become a minefield which could cost employers many millions of pounds.
The cost of this kind of case goes far beyond the potential legal liability itself. It is going to undermine the labour market. A retailer might, for example, find itself with a shortage of warehouse staff but with a surfeit of shop assistants – which wouldn’t be altogether surprising given that working in distribution centres is pretty unpleasant work and tends to involve anti-social hours where shop assistants are needed mainly between 9am and 5pm. But how does it now tackle that situation? It can’t now seek extra recruits by raising pay for warehouse staff without also raising shop assistants’ pay. But if it does that then potential warehouse recruits might well decide they would rather work in the shops – so you are back where you started, with a shortage.
Judgements like this will inevitably lead to pay being bid up all round. What is there now to stop warehouse staff arguing that their work is of equal value to administrative staff, who in turn might claim to be if equal value as shop managers, who in turn might claim they should be paid the same as distribution managers? And so it goes on until everyone has to be paid the same as the Chief Executive.
On a political point, the government stands accused of surrendering to the unions, awarding fat pay rises without demanding changes to working practices. It has lumbered billions of pounds of extra costs on an already-unproductive public sector – in spite of Keir Starmer’s laughable assertion this morning that his government has done more in seven weeks to boost economic growth than the previous government managed in seven years. Yet the Next claim, like the Birmingham one, long pre-dates the current government. It shows just how far the law had already leaned over towards the side of the worker – even before we elected the most union-friendly government in nearly half a century.