Kerry Underwood

INSOLVENCY, EQUAL PAY AND TUPE TRANSFER

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In Graysons Restaurants Ltd v Jones & Ors and the Secretary Of State for Business, Energy and Industrial Strategy (Interested Party) [UKEAT/0277/16/JOJ]

the Employment Appeal Tribunal held that where a company becomes insolvent, employees could present a claim to the Secretary of State for payment of equal pay arrears up to the statutory maximum of eight weeks, as these were “arrears of pay” within sections 184 and 182 of the Employment Rights Act 1996.

In the case of employees transferred under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) any balance over the eight weeks’ pay recoverable from the Secretary of State, is payable by the transferee.

Here, there was an ongoing equal pay claim by cooks and kitchen assistants against Liverpool City Council.

Their employment was transferred to a private company and then to another private company which went into administration.

Graysons then took over their contract as transferees under TUPE.

The Employment Appeal Tribunal held that an equal pay claim is a claim for arrears of pay, even if the equal pay claim has yet to be determined or quantified.

The EAT pointed out that the employees relied upon their contracts of employment as modified by the equality clause deemed by the Equal Pay Act 1970 to be incorporated into those contracts, and held that such a claim is just as much a claim in contract as a claim based on an express term said to have been breached resulting in arrears of pay being claimed.

Here it had been accepted that the claimants were employed on work rated as equivalent to that of their comparators, creating a presumption that the equality clauses operated, subject to a material factor defence.

This leaves open the position where an equal pay claim is outstanding without that presumption having been established.

In relation to the eight weeks’ arrears of pay payable by the Secretary of State, this liability did not transfer to the transferee as where a transferor is in “relevant insolvency proceedings”, Regulation 8(2) – (6) of TUPE provides that liability for sums payable to employees under the relevant statutory schemes shall not transfer.

Where the insolvency proceedings are analogous to bankruptcy proceedings and have been instituted with a view to liquidation of the assets, then there is no transfer of staff to the transferee and no claim for unfair dismissal, although other provisions of TUPE, such as the information and consultation regulations, continue to operate.

Here, it was accepted that there was a TUPE transfer.

The right to equal pay, previously contained in section 1 of the Equal Pay Act 1970, is now governed by section 66 of the Equality Act 2010 and although it was the earlier Act in force for the purposes of this case, the principles apply to the current legislation.

The finding that equal pay arrears, potentially going back many years as here, transfer on insolvency to the transferee has, as the EAT here recognised, “ significant ramifications”.

Although TUPE derives from the European Union’s Acquired Rights Directive, Member States are free to provide, subject to certain minimum protection for employees, that such liabilities do not transfer but the United Kingdom opted for provisions that mean that they do transfer, subject to the eight weeks payment by the Secretary of State.

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Written by kerryunderwood

September 12, 2018 at 10:08 am

Posted in Uncategorized

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