This case raises two short questions in the TUPE insolvency context. The second is relevant to TUPE generally.
First, is whether a claim for equal pay arrears is a claim for “arrears of pay”, and in circumstances where the claim has not yet been determined, whether it gives rise to a “debt” to which the employee is entitled on the “appropriate date” (here the employers insolvency).
If so, the second question is whether the whole of the arrears of pay accrued prior to the appropriate date is effectively extinguished or whether only that liability excluded under the statutory scheme in Part XII of the ERA is extinguished leaving the transferee to pay the balance.
In 2007 equal pay claims were brought against Liverpool City Council by a group of women, the Claimants, who were employed as cooks and kitchen assistants at various schools throughout Liverpool (those claims had not been determined at this stage). Their employment transferred twice in 2007 and in 2009. The second employer become insolvent before being bought G. The Claimants’ contract of employment transferred to G. The Secretary of State would be liable to pay certain sums to employees out of the National Insurance Fund as their former employer had became insolvent.
The question was whether any of the sums, that may become due if the equal pay claims were successful, were payable by the Secretary of State (up to the 8 week limit) and whether or not the transferee would then be liable for the balance.
The ET Judgment
The ET referred to the Acquired Rights Directive and the Insolvency Directive and observed that their paramount concern is to safeguard and protect the rights of the employees either where there is a transfer or an insolvency of the employer.
The ET held:
- That equal pay arrears are not a debt payable at the time of transfer (or on the appropriate date) where the equal pay claims have not been determined and quantified. The debt will only be due if the equal pay claims succeed and not before.
- If wrong in relation to the above, any liability in excess of the eight week sum guaranteed by the statutory scheme in Part XII of the ERA, transfers to the transferee and is not extinguished.
The EAT Judgment
The EAT (Mrs Justice Simler) held:
- The list found in s.184(1) ERA is exhaustive. However, equal pay arrears can be ‘arrears of pay’ within the meaning of s.184(1) ERA, and therefore a debt within s.182 ERA.
- The ET erred in concluding that arrears of pay arising from an equal pay claim that is undetermined cannot be a claim for ‘arrears of pay’ within s.184(1) ERA. The sums relate to work performed prior to the insolvency and though not yet quantified, the Claimant’s will be in a position to identify the precise shortfall at some stage.
- There is a presumption that equality clauses operated in the Claimants’ contracts since their work has been rated as equivalent to their comparators. If that presumption is not rebutted by the genuine material factor defences the Claimants had a legal entitlement to be paid in accordance with the equality clauses for work they performed before the appropriate date, provided they were not time-barred. To the extent that they were not so paid, they were entitled to arrears of pay. They are in no different position to suppliers of goods who were unpaid on the appropriate date, or employees who did not receive pay due under implied or disputed oral agreements for work done before the appropriate date.
- The wider point relied on by G failed. Only liabilities for up to eight weeks of arrears of equal pay do not transfer to the transferee, pursuant to Reg 8(5), if they constitute sums payable under Part XII ERA by the Secretary of State because the necessary conditions in s.182 and 184 ERA are established. To the extent that the liabilities exceed the statutory limits in Part XII ERA, liability transfers to the transferee and are unaffected by Reg 8(2)-(6)
The Court of Appeal Judgment
Graysons settled the claims brought by the claimants and the appeal therefore only concerned the sums payable by the Secretary of State.
The Court of Appeal upheld the EAT judgment for the reasons given by Simler J. An interesting observation was made in relation to the argument that the claim brought by the claimants was a damages claim and not a debt claim. Bean LJ held “This seems to me rather far-fetched. It is not suggested that the present claims are for anything other than arrears of pay. The rules of pleading in ETs are not so technical as to require a claimant to be put to her election as between a claim for arrears of pay or a claim for damages. The vast majority of claims of this kind are for arrears of pay“.