Equal Pay Hearings Could Cost Supermarkets Billions

What is being decided this week

Both Tesco (LSE: TSCO) and Morrisons began crucial procedural stages this week in their respective equal pay claims, as first reported by Personnel Today. The hearings will examine whether work performed by predominantly female store-floor employees is of "equal value" to that carried out by predominantly male warehouse and distribution-centre staff.

The legal foundation was laid in 2021, when the Supreme Court ruled in Asda Stores Ltd v Brierley that supermarket store workers could use distribution-centre colleagues as valid comparators for equal pay purposes under the Equality Act 2010. That decision did not resolve whether the roles were of equal value; it simply confirmed the comparison was permissible. The hearings now under way at Tesco and Morrisons move to that substantive question.

If employment tribunals find the work is of equal value, the burden shifts to the employer to demonstrate a material factor, other than sex, that justifies the pay differential. Failing that defence, the retailers would be liable for back pay and future pay adjustments.

The cases are being watched closely across the grocery sector and beyond. A finding of equal value at one retailer would not automatically bind another, but it would create a persuasive precedent that claimants at other chains could cite.

Financial exposure for Tesco and Morrisons

The potential liabilities are substantial. Tesco alone faces claims from roughly 60,000 current and former employees, according to figures cited by law firms acting for the claimants. Morrisons confronts a similarly large cohort. Across the supermarket sector as a whole, estimates of total exposure run as high as £8 billion, a figure reported by employment law specialists and widely referenced in industry commentary.

Neither Tesco nor Morrisons has disclosed a specific provision for equal pay claims in its most recent annual report. Under accounting standards, companies are not required to recognise a provision unless a liability is both probable and reliably estimable; the ongoing nature of the litigation means both retailers have, to date, treated the claims as contingent liabilities rather than booked charges.

For Tesco, which reported group revenue of £68.2 billion for the year ending February 2025 according to its annual results, even a fraction of the sector-wide estimate would represent a material hit to earnings. Morrisons, taken private by Clayton, Dubilier & Rice in 2021 for approximately £7 billion, faces the additional complication that any large settlement or award would sit on a balance sheet already carrying significant acquisition-related debt.

Back-pay claims can stretch over six years in England and Wales, and up to five years in Scotland, meaning the cumulative sums per claimant can be considerable even where hourly differentials appear modest.

Other retailers in the queue

Asda, Sainsbury's, and the Co-op all face parallel equal pay proceedings at various stages. The Asda case, which produced the 2021 Supreme Court ruling, has itself not yet concluded on the equal value question. Any determination in the Tesco or Morrisons hearings could accelerate or reshape settlement dynamics across these other claims.

Read-across for multi-site employers

The significance of these cases extends well beyond grocery. Any organisation that operates distinct site types, such as retail outlets, warehouses, factories, call centres, or offices, and pays them under separate structures, faces analogous risk if one site type is disproportionately staffed by one sex.

The legal test is not limited to retail. Under the Equality Act 2010, employees can compare themselves with colleagues at a different establishment of the same employer, provided common terms and conditions apply or could be applied. The Supreme Court's reasoning in Brierley reinforced a broad reading of that comparability test.

For mid-market and scaling businesses, the practical lesson is that pay fragmentation across locations or functions can create latent equal pay exposure that only crystallises years later. A distribution hub paying a premium to attract staff in a tight local labour market, while a chain of high-street outlets pays less, may look like rational market pricing. But if the workforce split correlates with gender, it becomes legally vulnerable.

The Employment Rights Bill factor

The UK's Employment Rights Bill, currently progressing through Parliament, proposes strengthened pay-transparency and equal-pay reporting obligations. If enacted in its current form, the Bill would require larger employers to publish action plans alongside gender pay gap data and could extend equal pay protections to outsourced workers.

These provisions would compound the regulatory burden regardless of how the Tesco and Morrisons hearings conclude. Employers who have not yet conducted a rigorous equal pay audit would face both litigation risk from historic differentials and compliance risk from new statutory duties.

How operators should prepare

The hearings this week will not produce immediate judgments; equal value assessments typically involve independent experts and can take months. But the direction of travel is clear enough to warrant action now.

Job evaluation frameworks are the first line of defence. Employers with separate grading or banding structures across sites should assess whether those structures can withstand scrutiny under an equal value lens. The question is not whether roles are identical, but whether they make comparable demands in terms of effort, skill, and decision-making.

Pay audits should map differentials by gender across every site and function. Where gaps exist, employers need to document the material factors, such as market supplements, shift patterns, or geographic weighting, that justify them. Vague references to "market rates" are unlikely to satisfy a tribunal without supporting evidence.

Contingency planning is prudent for any business where the audit reveals unexplained gaps. Remediation could involve adjusting current pay bands, setting aside reserves for potential back-pay claims, or both. Finance directors should model scenarios ranging from voluntary equalisation to a contested tribunal outcome.

Legal privilege matters. Pay audits conducted under legal professional privilege, typically commissioned through external solicitors, are protected from disclosure in litigation. Audits conducted purely as an internal HR exercise may not be.

Finally, operators should monitor the Employment Rights Bill's passage through Parliament. The Bill's pay-transparency provisions, if enacted, will impose new reporting obligations that interact directly with equal pay risk. Businesses that have already completed a thorough audit will be better positioned to comply; those that have not may find themselves exposed on two fronts simultaneously.

The supermarket cases are the most visible front in a broader shift in how UK employment law treats pay equity across fragmented workforces. The grocery giants are in the dock, but the precedent will reach far further.