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High street giant Next today warned it could be forced to close stores after losing a £30m legal battle over equal pay.
The fashion retailer issued the warning after an employment tribunal ruled last month that Next must pay its store staff, who are mainly women, the same hourly rates as its warehouse workers , mainly male.
Bosses told investors on Thursday that the ruling would affect Next’s ability to make stores “individually profitable” and could lead to store closures.
It could later have to pay more than £30 million to settle the claim, which was first filed in 2018 and includes more than 3,500 current and former workers.
The retailer has approximately 500 stores in the UK and Ireland, as well as a further 206 franchised stores in 33 other countries.
High street giant Next said it could be forced to close stores after losing a £30m legal battle over equal pay.
Bosses told investors on Thursday that the decision would affect Next’s ability to make stores “individually profitable” and could lead to store closures.
Lawyers from law firm Leigh Day believe more than £30m could be owed in back-pay, but Next has confirmed it will appeal against the decision.
They said the difference between the hourly rates of shop and warehouse staff ranged from 40p to £3 and an average wage loss of more than £6,000 per person.
It later explained the potential impact of the decision on its half-year results on Thursday, saying: “Inevitably, some of our stores will no longer be viable if this decision is upheld on appeal.
“The material increase in store operating costs will result in more stores being closed when their leases expire, and will materially impede our ability to open new stores going forward,” he said. The Telegraph.
The company also warned that the case could have ripple effects in its stores, where it will not be possible to raise wages without doing so in the stores.
The comments came as the company released figures showing its revenue in the first six months of the year rose 13.6 per cent to £2.9bn while profits rose by 3.9 per cent to £432 million.
Strong financials led to Next shares rising by 6 percent in early trading today.
Last month, the court rejected Next’s defense that warehouse pay rates were higher than on the shop floor because of wage levels in the wider labor market.
However, the court ruled that there was no evidence of “direct discrimination” against women.
Instead, the ruling says that the payment discrepancy was down to Next wanting to “reduce costs and enhance profits”.
It said that “the business need was not great enough to overcome the discriminatory effect of the lower basic pay.”
Between 2012 and 2023, approximately 77.5 percent of sales workers at Next were women while 52.75 percent of store operators were men.
It could later have to pay more than £30 million to settle the claim, which was first filed in 2018 and includes more than 3,500 current and former workers.
Later, which is run by Tory peer Lord Wolfson (pictured), says it will appeal the decision
Former and current staff now hope they will be paid thousands of pounds in compensation.
Helen Scarsbrook, 68, was one of three claimants in the case and worked for Next for more than 20 years.
Celebrating the victory last month, he said: “We did it! It’s been six long years fighting for the equal pay we all feel we deserve, but today we can say we won.
Elizabeth George, partner at Leigh Day and lawyer representing the successful claimants, added: “When you have female-dominated jobs that are paid less than male-dominated jobs and the work is equal, employers can’t pay women less just pointing to the market and saying: “It’s the rate for the works”.
“It is worth reminding people that the financial compensation they will now be entitled to is not a setback.
“It’s a wage they would still be entitled to if Next had complied with its equal pay obligations.”
A spokesman for Next said: “This is the first private sector equal pay group action to reach a decision at court level and raises a number of important points of legal principle.”
Five supermarket giants – Asda, Tesco, Morrisons, Sainsbury’s and the Co-op – are also facing equal pay cases.
Tesco is also facing a similar equal pay case – with 50,000 warehouse workers claiming they are being paid unfairly compared to their warehouse colleagues.
And in these cases, the sellers also argue that the payment is established based on market rates.
The largest British grocer Tesco is the subject of legal action involving almost 50,000 workers.
Shop workers, who are mostly women, say they have been unfairly paid as they were paid up to £3 less an hour than distribution center workers, who are mostly men.
His lawyers claim that the potential payout could exceed a staggering £4 billion.
A Tesco spokesman said: “The jobs in our stores and distribution centers are different.
“These roles require different skills and requirements which lead to variations in pay – but this has absolutely nothing to do with gender.
“We continue to vigorously defend these claims.”