In Next Retail Ltd and another v Thandi and others [2026] EAT 130, the Employment Appeal Tribunal (EAT), in a judgment handed down by Mr Justice Bourne on 7 September 2026, accepted Next’s material factor defence to basic-pay differences under section 69 of the Equality Act 2010.
Some 3,540 predominantly female retail sales consultants sought equal pay with warehouse operatives whose work an employment tribunal (ET) had found to be of equal value. Next did not challenge that finding. Instead it relied on section 69, under which a sex equality clause has no effect in relation to the disputed pay difference if the employer shows that the pay difference is because of a material factor which does not involve direct sex discrimination and, where the factor puts one sex at a particular disadvantage, is a proportionate means of achieving a legitimate aim.
For basic pay, the ET identified three relevant material factors: market rates, the recruitment and retention of warehouse staff, and business viability and performance. Next argued that it needed to pay warehouse operatives the going rate to recruit and retain sufficient workers, pressures that did not apply in its stores. The ET accepted that these pressures were genuine and that women were put at a particular disadvantage by the pay difference, but characterised the aim behind the differential as saving money, which was not legitimate on its own. It referred to Next’s “financial headroom” to pay store employees more and required a “more compelling business reason”.
The EAT upheld the finding of particular disadvantage but held that the ET had framed the justification question incorrectly. The issue was why warehouse staff were paid more, not why retail staff were not paid the same, and affordability did not decide whether the difference was justified. On the ET’s own findings, Next’s aim was to recruit and retain sufficient warehouse staff, which was legitimate, and paying the market rate was a proportionate means of achieving it. Rather than remitting the issue, the EAT held that the basic-pay differential was justified.
Next also overturned the findings on unconsolidated awards and long service awards, both of which arose from its negotiations with USDAW over warehouse remuneration. However, its challenges concerning the night-time premium, overtime premiums and paid rest breaks were unsuccessful. For night-time payments and rest breaks, the EAT accepted that the ET could attribute the unequal treatment to decisions to reduce expenditure, rather than to the different needs of stores and warehouses. On overtime premiums, the EAT held that its reasoning on basic pay, which rested on recruitment and retention, did not carry across. It nevertheless acknowledged that the outcome had no practical consequence, as retail staff had not been required to work overtime for many years.
The EAT also allowed Next’s challenge concerning Sunday premiums, finding that the ET had wrongly dismissed the significance of collective bargaining in explaining why warehouse employees retained their existing Sunday pay entitlements. However, it did not determine whether the pay difference was proportionate. The EAT indicated that it would seek further submissions from the parties before settling the form of its order and any consequential matters.
The employees’ cross-appeal argued that reliance on market forces amounted to direct sex discrimination unless the employer proved those forces did not disadvantage either sex. The EAT rejected that proposition as a matter of law. Separately, it held that there was sufficient evidence for the ET to conclude that sex had “no conscious or subconscious influence” on the setting of basic pay, notwithstanding the absence of evidence from Next’s Board members. The claimants have indicated their intention to appeal the basic-pay ruling, while Next has said it will seek permission to appeal findings concerning other disputed terms, including paid rest breaks.
