British supermarket chain Asda may face an £1.2 billion equal pay claim

Just days after a recent victory for Next Plc employees, a hearing at Manchester’s employment tribunal on Monday will decide whether the jobs of more than 60,000 Asda retail workers, who are mostly women and paid lower hourly rates, were of equal value to the disproportionately male warehouse staff. 

That decision, which will likely come in the first half of next year, could leave the UK retailer liable for over £1.2 billion in back pay to claimants, though the supermarket chain will still have one further set of hearings to convince the court it had a fair reason for the pay discrepancy. 

The case will give an indication of how Asda’s competitors will fare against similar claims. J Sainsbury Plc, Tesco Plc and WM Morrison Supermarkets Ltd. and Co-operative Group Ltd. are all embroiled in equal pay claims from tens of thousands of retail workers, with the total compensation estimated to be as much as £8 billion by lawyers for the claimants, Leigh Day.

“This will inevitably put retailers and other large businesses a little bit on edge, given that the results of equal value comparisons can often be surprising,” said Anne Pritam, a lawyer for Stephenson Harwood, who wasn’t involved in the case. 

Asda’s court appearance comes after employees of clothing retailer Next scored a first-of-its-kind victory for equal pay battles in the private sector. A judge found workers’ pay based on so-called market forces was not a valid reason for the pay discrepancy. The retailer will appeal the result. 

Under UK law, work of equal value must be paid equally unless an employer can show that the difference in pay is explained by a reason that is not sex discrimination. 

If Asda’s workers are successful, it’s not clear how much of the liability will rest with former owner Walmart Inc. The US retail giant indemnified buyers Zuber and Mohsin Issa and current majority shareholder TDR Capital for an undisclosed portion of any financial damages arising from the equal pay claims when it sold the business in 2020. Walmart maintains a 10% stake in the supermarket, and continues to oversee the legal defense against the claimants. 

During the hearing, the court will examine a scoring sheet developed by independent experts to help decide whether the work done by a select number of claimants was of equal value to comparators working in distribution centers. A draft plan released in legal documents covered 14 different factors, including knowledge required and stress in the job.

The results of a scoring exercise, leaked in an email to ITV News last year, showed the shop floor roles scored slightly higher on average with 453 points, compared to 447 for warehouse workers. Neither side has commented on the report.

“We continue to defend these claims because retail and distribution are very different sectors, with their own distinct skill sets and rates of pay,” the company said in a statement. 

Asda workers argued that the difference in pay was a result of stereotypical assumptions about women’s work being less valuable. In earlier court filings, they highlighted Asda’s vice president of labor relations saying in 2011 that store workers were mostly part-time females working at Asda for a secondary income.

Equal pay claims have already been successfully won against local authorities in the UK. Last year Birmingham city council effectively declared bankruptcy due to an estimated £760 million bill from an equal pay claim, while Glasgow had to mortgage public buildings in order to pay its former employees.