Some of Britain’s biggest retailers face the prospect of paying millions in damages due to a wave of equal pay lawsuits, many of which are underpinned by controversial litigation funding arrangements.
Last month saw the latest development in a long-running legal case against Asda, with tens of thousands of employees suing the supermarket. The prosecution argues that store workers, most of whom are women, are paid less than warehouse workers, who are mostly men, in violation of equal pay legislation.
The Asda hearing comes on the heels of a legal victory for workers at Next, with an employment tribunal finding that the retailer failed to justify the pay disparity between warehouse staff, most of whom are men, and store workers, who are mostly women. Next plans to appeal the ruling, which could result in compensation of up to £30 million for 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 Co-op. Leigh Day has confirmed that all equal pay issues in its supermarkets are being pursued under a compensation-based agreement, which involves more than 100,000 retail employees across the UK. Harbor Litigation Funding is also supporting claims against Sainsbury’s, Morrisons and Tesco.
David Williams, recruitment partner at Fox Williams law firm in the City, said the retail sector was under significant pressure. “There is a significant degree of concern (in the retail industry) and I think it comes from a variety of sources,” he said. “The liabilities are likely to be enormous because there are a lot of people in this sector, and there is a history of companies not taking equal pay on.” Seriously.” “This is a wake-up call for many companies to review their practices and address salary disparity.”
Therium Capital Management, another litigation funder, is backing the case against Tesco. Founded in 2008, Therium manages 12 separate litigation funds, collectively supporting $36 billion in claims. The firm has a track record of supporting high-profile cases, including legal action against the Post Office and supporting Noel Edmonds in his legal battle with Lloyds Bank over issues relating to its HBOS branch.
Litigation funders work by raising capital 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 proceedings. While this funding model can facilitate access to justice, it has sparked controversy. Critics argue that it violates the common law principles of immunity and maintenance, which have historically prevented third parties from financing legal disputes for profit.
The rapid rise in class action lawsuits and third-party financing has led to concerns within the business community. A recent report from the Adam Smith Institute warned that these legal mechanisms expose many companies to claims worth billions. Meanwhile, the US Chamber of Commerce is lobbying against the proliferation of class action lawsuits and associated financing models in the UK and Europe, arguing that they mirror controversial practices seen in the US.
In England and Wales, two types of no-win or no-payment agreements now prevail. The traditional model, contingent fees, allows attorneys to receive up to a 100% increase over standard fees for winning cases. However, more recent compensation-based agreements are more controversial. These deals, which are similar to contingency fees in the United States, allow lawyers and their third-party backers to claim up to 50% of the damages awarded, creating unease among corporate defendants facing potential lawsuits.