Asda in the Supreme Court - a missed opportunity?

The long awaited decision of the Supreme Court in the Asda equal pay saga is to some extent disappointing. Two difficult points of law had been considered by the ET, the EAT and the Court of Appeal. Had the Equality Act 2010 changed the law on equal pay in a significant and retrograde way? Is EU law (article 157) directly effective in an equal value claim? The Supreme Court had very little to say about either of these points of law.

The common terms issue

Some 35,000 hourly paid employees in Asda’s retail stores are claiming equal pay. They have nominated higher paid comparators, all of whom are hourly paid employees in Asda’s distribution depots. All the claimants and comparators have the same employer - Asda. However each store and each depot are separate establishments. Cross-establishment comparisons are permitted by our domestic law, if the claimants and comparators have the same employer (or associated employers), but there is an additional test to be passed, the ‘common terms’ test. If that test is failed, cases don’t get to the starting line.

The Equal Pay Act 1970 (EPA 1970) and the Equality Act 2010 (EA 2010) use different wording for the ‘common terms’ test. Both statutes had to be considered in the Asda litigation, because the earliest cases were started in 2014. If these cases succeed, back pay can be awarded with effect from six years earlier than that starting date (or commencement of the claimant’s employment if earlier). So, in some of the Asda cases, there is a first period of comparison, starting in 2008, under the EPA 1970 ; and a second period, starting on 1 October 2010, under the EA 2010.

The test under the EPA 1970 is whether ‘common terms and conditions of employment are observed’ at the two establishments ‘either generally or for employees of the relevant classes’. The meaning of these words had already been considered three times by the highest court in the land, most recently in 2013 by the Supreme Court in Dumfries and Galloway Council v North [2013] UKSC 45, [2013] ICR 993. Claimants employed by the council in schools, for example as classroom assistants, wished to rely on comparators employed by the council at different establishments in jobs such as refuse collector or leisure attendant. Lady Hale, giving the judgment of the Court, said that a comparison was permitted if the comparator’s terms would have been broadly similar to his current terms if he had been employed at the same establishment as the claimant. It didn’t matter that a refuse collector, for example, would never have done his work in a school. It didn’t even matter that it wouldn’t have been feasible for him to do so. The question had to be answered on a hypothetical basis. Hence the expression ‘the North hypothetical’ was born.

Unfortunately, Parliament chose to use very different wording in the EA 2010. The test is stated in section 79 to be whether ‘common terms apply at the establishments (either generally or as between A and B)’. In this context A is used as shorthand for the claimant and B for the comparator. So, at first sight, Parliament was saying ‘compare the terms of the claimant and the comparator’. Tom Ryan, the employment judge who heard the Asda case in Manchester, found that Parliament could not seriously have meant to change the law to make life more difficult for claimants. However, in case he was wrong, he carried out a detailed comparison of retail and distribution terms as well as applying the ‘North hypothetical’. In doing so he was deciding specific issues identified by the parties and on which they had based their submissions. He was plainly right to do so. He would have looked very foolish if he had applied only the traditional test and if the Employment Appeal Tribunal had then taken Parliament at face value and sent the case back for rehearing.

In the event he concluded that the claimants succeeded on the common terms issue whichever of the two tests applied. The claimants also succeeded in both the Employment Appeal Tribunal and the Court of Appeal. The latter declared that the wording in the EA 2010 had not changed the law. The wording was inept, but it could and must be given the same meaning as the traditional test. The true question was whether the comparators would have had the same terms wherever they worked. The ‘North hypothetical’ was a method of answering that question. The question had been answered decisively and the claims could proceed. The detailed comparison of retail and distribution terms had been unnecessary and comparisons of that kind should not be undertaken in future cases.

That statement of the law by the Court of Appeal remains the most recent word on the question whether section 79 has changed the law. Asda did not seek to argue the point in the Supreme Court. Lady Arden gave the judgment of the Court in Asda Stores Limited v Brierley [2021] UKSC 10. She expressed herself cautiously. She said that she inclined ‘to the view that the concession was correctly made, for the reasons explained by the Court of Appeal’, but did not ‘express a concluded view’ because the Court had not heard argument on the point. She also said that she inclined to the view that the common terms ‘requirement is the same whether the case is brought under the EPA 1970 or the EA 2010, but I express no final view on the latter’. In theory, therefore, it remains open for a respondent in another case to argue the point in the Supreme Court. In practice, it must be unlikely that leave to revisit the Supreme Court on that point alone would ever be given.

The EU issue

The EU issue, on the other hand, cannot be regarded as settled. Part of the claimants’ case was that they could succeed under EU law even if they failed on the common terms issue. Their case involved three propositions. The EU doctrine of single source provides a free standing gateway to comparability; it is satisfied on the facts of this case; article 157 of the Treaty on the Functioning of the European Union (TFEU) is directly enforceable in an equal value case, just as it is in a like work or work rated as equivalent case. Employment Judge Ryan found for the claimants on each of these propositions.

Kerr J in the EAT agreed. However he found that the third question, that of direct effect, was not acte clair. He considered whether to make a reference to the CJEU, but decided not to do so, because the Court of Appeal would be in a better position to consider whether a reference was necessary. He carefully reviewed the authorities and decided that the better view was that article 157 was directly enforceable. Accordingly the claimants would have succeeded under EU law even if they had failed on the common terms issue.

In the Court of Appeal, Underhill LJ said that in his view North is ‘binding authority that the fact that claimant and comparator have the same employer will in the ordinary case mean that the terms have a single source and thus that EU law permits comparison between them for equal pay pay purposes’. However he agreed with Kerr J that EU law on the issue of direct effect was not acte clair. It would not, he said, be right to make a reference to the CJEU when the point was not determinative (the claimants having succeeded under domestic law). He said that it would ‘achieve little of value for us to embark on a further elaborate analysis with a view to deciding the point at this level where only a reference will achieve certainty’. His own, provisional, view, on direct effect was that Kerr J’s view was right. Lord Sales, however, said that he was more doubtful. Peter Jackson LJ did not express a view either way.

Unfortunately the Supreme Court have not taken matters any further. Lady Arden said that, since the claimants were entitled to succeed on the ‘North hypothetical’, it was unnecessary to consider whether they could succeed ‘on the basis of EU law, which imposes a test of “single source” where the common terms requirement is not met’. By the time that the Supreme Court judgment was given, it was too late for a reference to the CJEU (section 6(1)(b) of the European Union (Withdrawal) Act 2018 as amended). It is understood that a timely reference was made by the Watford employment tribunal in the Tesco cases (the precise terms of the reference do not appear to be in the public domain). However any decision on the reference will not be binding, although it may be treated as persuasive (sections 6(1)(a) and 6(2) of the 2018 Act as amended). The issue of direct effect is likely to return to the Supreme Court if in a future case claimants argue both common terms and single source and fail on the former. In the meantime, Kerr J’s judgment is a binding authority, but only up to EAT level.

Of course it is theoretically possible that there will be no future case in which claimants rely unsuccessfully on common terms. Lady Arden’s judgment contains some powerful rhetoric to the effect that it is time to apply the provisions of the EA 2010 ‘with confidence and unswervingly’ with Parliament’s purpose clearly in mind. The common terms test should not be used ‘as a proxy or as a way or as a way of avoiding difficult and complex issues’. Employment tribunals ‘should not countenance a prolonged enquiry into this threshold test’. Also, ‘appeals are to be discouraged.’

Lady Arden’s judgment also contains useful guidance on the practical application of the ‘North hypothetical’ in similar cases to the Asda cases. It should be assumed that the comparators would continue to perform their existing role. It would be wrong to assume any change in the way they do their work. If necessary it should be assumed that they work in separate premises, for example a depot adjacent to a retail store. This guidance should help tribunals to avoid lengthy hearings and reduce the number of cases in which the ‘wrong comparator’ defence succeeds.

Nevertheless, it would be hugely optimistic to imagine that there will never be cases in which the ‘wrong comparator’ defence succeeds and in which it therefore becomes necessary to consider whether article 157 has direct effect for the purpose of the single source doctrine. Lady Arden said that ‘it is hard to find any reported case where the common terms requirement has not been met in one way or another’. In fact, the case of Armstrong v The Newcastle upon Tyne NHS Hospital Trust [2006] IRLR 124, in which Lady Justice Arden (as she then was) gave one of the two leading judgments in the Court of Appeal, was such a case.

The relevant facts (in abbreviated form) were that the Royal Victoria Hospital (RVI) and the Freeman Hospital were in separate trusts until April 1998. Hospitals were able to negotiate their own bonus schemes for workers including domestics and porters. The porters at the RVI had a bonus scheme but the domestics there had lost their bonus scheme in the 1980s when the work was put out to tender. The porters and domestics at the Freeman had never had a bonus scheme because they were thought to be working efficiently without one. The two hospitals were brought together in the respondent trust from 1 April 1998. Domestics at the Freeman as well as the RVI brought equal pay claims naming porters at the RVI as comparators. The Freeman claimants relied on the EPA 1970 and also on what was then article 141 of the Treaty. It was only the article 141 single source claim which went to the Court of Appeal (and which the Court rejected for reasons explained by Lady Justice Arden). The common terms claim failed in the tribunal and the EAT and was not pursued further.

It is easy to see how any similar claim in the future could fail the common terms test. If a porter at the RVI who had been named as a comparator had instead worked as a porter at the Freeman, he would not have had a bonus. He would have worked at the Freeman on Freeman terms, with no bonus, not RVI terms. It is possible to imagine many other same employer cases in which a comparator at a different establishment from the claimant’s would be able to do his job working side by side with the claimant at the claimant’s establishment, but on the terms applicable at that establishment, not his current terms. It would be unsurprising to find parties knocking at the door of the Supreme Court to ask again for answers to the single source questions.

There is a practical point here. It is notorious that in multiple equal pay cases it can take several years and huge expenditure to determine whether the jobs of all the lead claimants are of equal value to their comparators’ jobs. Any wrong comparator defence should be dealt with expeditiously, since if it succeeds any time and money spent on the equal value exercise will have been wasted. The same comment applies to material factor defences, which can usually be identified at an early stage and which should not generally be held over until equal value has been determined. This is particularly important in cases where there is a potential overlap between a wrong comparator issue and a material factor defence, for example where there are market forces issues linked to geographical differences between establishments.

Michael Discrimination Law LooseleafMalone is a contributor to the Discrimination Law Looseleaf. 

Written by Michael Malone

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