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Tesco shares rally despite record £4bn equal pay lawsuit

Lawyers accuse Tesco of paying its male-dominated warehouse staff more than its predominantly female store workers, even though the value of the work is comparable
tesco store
The claim could cost Tesco up to £4bn - around a quarter of the grocer's market value

Tesco PLC (LON:TSCO) shares ralllied on Wednesday afternoon despite reports that the supermarket giant is facing a £4bn bill from an equal pay lawsuit.

The claim – which would be by far the largest ever seen in the UK – accuses Tesco of paying its male warehouse staff more than their female counterparts even though the value of the work is comparable.

Up to 200,000 workers could be involved

Law firm Leigh Day is taking the initial legal steps for 100 women this week, but it has been estimated that the case could involve as many as 200,000 female supermarket workers.

If they all receive the £20,000 in back pay lawyers are asking for, the UK’s biggest grocer could be forced to fork out around £4bn. Even if only a small proportion is successful, the bill for Tesco would still be significant.

Tesco has played down the lawsuit, saying it works hard to ensure all staff are paid “equally and fairly”.

Lawyers argue that employees working male-dominated distribution centres are paid considerably more than largely female-staffed Tesco stores.

' Distribution workers earn up to £5,000 a year more'

The average wage in the distribution centres is around £11 an hour, while store workers earn closer to £8.

Over the course of a year, a full-time distribution worker on the same hours would earn around £5,000 more than store staff, Leigh Day said.

The claims have been submitted to conciliation body ACAS and the move follows similar cases against Asda and Sainsbury’s which are currently being dealt with by the employment tribunal process.

“We believe an inherent bias has allowed store workers to be underpaid for many years,” said Paula Lee from Leigh Day, who is representing the women.

“In terms of equal worth to the company, there really should be no argument that workers in stores, compared to those working in distribution centres, contribute at least equal value to the vast profits made by Tesco, which last year had group sales of £49.9bn.”

'Serious claim poses a problem for Tesco shareholders'

“Investors may take some time to really assess this as it has come out of the blue, but it appears to be a serious claim and one that clearly poses downside risks to the stock,” said ETX Capital analyst Neil Wilson.

“Tesco’s market cap is around £16bn with underlying profits last year of £1.2bn, so a £4bn bill would be significant.

“Net debt has been coming down so this would smart particularly as it comes just as the Booker tie-up is supposed to produce margin accretive revenue growth and cost synergies.

“Tesco shares fell about 1% in early trading as investors reacted to the news, although it’s possible this could go further once we get a clearer picture of the risks involved.”

Having been down for most of the day, Tesco shares were up 1.1% to 202.1p shortly before market close.

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