Equal Pay Claims and Employer Insolvency

In an important decision, the Employment Appeal Tribunal (EAT) has ruled that equal pay claims being pursued by catering workers did amount to claims for ‘arrears of pay’ and ‘debts’ that transferred from one employer to another when there was a relevant transfer under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) after the company they worked for went into administration (Graysons Restaurants Limited v Jones and Others).

The case concerned a number of school cooks and catering assistants who had originally worked for Liverpool City Council, against which equal pay claims were commenced in 2007. The women’s employment had twice transferred by virtue of TUPE to private sector companies, the latter of which became insolvent in 2009. At that point, another catering company purchased the insolvent company’s assets and took over the women’s employment contracts.

It was common ground that the women had been doing work rated equivalent to, but had been paid less than, their male comparators. There was therefore a presumption of equal pay, but material factor defences were being pursued in all cases and liability had not been finally determined or quantified.

Firstly, the EAT held that the women’s equal pay claims were capable of being claims for arrears of pay within Section 184(1) of the Employment Rights Act 1996 (ERA) and therefore debts within the meaning of Section 182 ERA. In the EAT’s view, on the date that their former employer became insolvent the women were legally entitled to receive pay for work already done, at the same rate of pay as male comparators doing equivalent work. They were in exactly the same position as any suppliers of goods who were unpaid at the date of insolvency.

Secondly, the EAT held that any liability in excess of the eight weeks of arrears of equal pay payable under Part XII ERA by the Secretary of State had not been extinguished and had transferred to the catering company.

If you are seeking to acquire a business in administration, contact us for advice.

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