Some of Britain’s biggest retailers are facing the prospect of having to pay millions in damages following a wave of equal pay lawsuits, many of which are backed by controversial litigation funding schemes.
Last month saw the latest development in a long-running lawsuit against Asda, with tens of thousands of employees suing the supermarket. The claim alleges that shop floor workers, who are mainly women, are paid less than warehouse workers, who are mainly men, in breach of equal pay legislation.
The Asda hearing follows a legal victory for workers at Next, where an employment tribunal ruled that the retailer failed to justify pay gaps between its warehouse staff, mainly men, and its shop floor employees, who are mainly women. Next plans to appeal the ruling, which could see damages awarded to the plaintiffs up to £30 million. 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 her supermarket equal pay cases are being prosecuted under a damages-based agreement, involving more than 100,000 store workers across the UK. Harbor Litigation Funding also supports claims against Sainsbury’s, Morrisons and Tesco.
David Williams, an employment partner at City law firm Fox Williams, noted that the retail sector is under significant pressure. “There is quite a bit of concern [in the retail industry] and I think it comes from different sources. The liabilities are potentially huge because there are a lot of people working in the sector and there is a history of companies not taking equal pay seriously,” he said. “This is a wake-up call for many companies to audit their practices and address pay disparities.”
Therium Capital Management, another litigation funder, is backing the case against Tesco. Founded in 2008, Therium manages twelve separate litigation funds, which collectively support claims worth $36 billion. The company 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 subsidiary.
Litigation financiers operate 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 allowing further investment in legal actions. While this financing model can facilitate access to justice, it has generated controversy. Critics argue that it violates the common law principles of champerty and maintenance, which have historically prevented third parties from funding legal disputes for profit.
The rapid rise of class action lawsuits and third-party financing has raised 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 spread of class action lawsuits and associated financing models in Britain and Europe, arguing that they mirror controversial practices from the United States.
Two types of no-win, no-fee agreements are now common in England and Wales. The traditional model, conditional fees, allows lawyers to increase up to 100% of their standard fees for winning cases. However, the newer indemnity-based agreements are more controversial. These deals, which resemble contingency fees in the U.S., give attorneys and their third parties the ability to claim up to 50% of the damages awarded, creating unrest among defendant companies that could face lawsuits.