Equal pay lawsuits threaten to cost retailers millions as legal pressure mounts
Some of Britain’s biggest retailers face the prospect of paying millions in damages as a result of a wave of equal pay lawsuits, many of which are backed by controversial funding schemes.
Last month saw the latest development in the long-running legal case against Asda, with tens of thousands of workers suing the supermarket. The lawsuit alleges that shop floor workers, mostly women, are paid less than warehouse workers, mostly men, in violation of the Equal Pay Act.
Asda’s hearing comes after a legal victory for Next workers, in which an employment tribunal found the retailer had failed to justify pay inequality between its staff, mainly men, and shop floor workers, mostly women. The following plans to appeal the decision, which could see compensation of up to £30 million for the claimants. The case was represented by law firm Leigh Day and funded by Harbor Litigation Funding.
Similar legal challenges have been launched against other retail giants, including Morrisons, Tesco, Sainsbury’s, and the Co-op. Leigh Day has confirmed that all of its supermarket equal pay cases are being pursued under a damages-based settlement, which covers more than 100,000 UK retail workers across the UK. Harbor Litigation Funding is also supporting claims against Sainsbury’s, Morrisons, and Tesco.
David Williams, a chartered partner at City law firm Fox Williams, noted that the retail industry is under a lot of pressure. “There is some concern [in the retail industry] and I think it comes from different sources. The debts can be huge because there are many people in this sector and there is a history of businesses not taking equal wages seriously,” he said. “This is a wake-up call for more companies to examine their practices and address wage inequality.”
Therium Capital Management, another litigation funder, is backing the lawsuit against Tesco. Founded in 2008, Therium manages 12 separate litigation funds, which collectively support claims worth $36 billion. The firm has a history of supporting high-profile cases, including legal action against the Post Office and supporting Noel Edmonds in his legal battle with Lloyds Bank over matters relating to its HBOS subsidiary.
Venture capitalists work by raising money from sources such as hedge funds and sovereign wealth funds. This money is pooled to fund various claims, with profits from successful cases enabling further investment in legal actions. Although this funding model may facilitate access to justice, it has caused controversy. Critics argue that it violates the common law principles of champerty and retention, which have historically prevented third parties from financing legal disputes for profit.
The rapid increase in class action lawsuits and third party funding has led to concern among the business community. A recent report by the Adam Smith Institute warned that these legal approaches are exposing many companies to multi-billion dollar claims. Meanwhile, the US Chamber of Commerce has been seeking to combat the spread of class-action lawsuits and related funding models in the UK and Europe, arguing that they reflect controversial trends seen in the United States.
In England and Wales, two types of no-win, no-charge agreements are prevalent. The traditional model, conditional fee, allows lawyers to raise up to 100% of their standard fees for winning cases. However, the new damage-based agreements are highly controversial. Similar to contingency fees in the US, these agreements allow lawyers and their third-party supporters to seek damages of up to 50%, leading to unease among defendant companies facing litigation.
