Background

The time limit for bringing an equal pay claim is six months from the termination of the employment to which the claim relates, and in standard cases six years of arrears going back from the day before the claim is lodged can be awarded. Under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (‘TUPE’), the employment contracts of employees employed in the business that transfers transfer to the new employer on their existing terms and conditions. In addition, the acts or omissions of the seller before the transfer are treated as having been done by the transferee (with an exception for old age, invalidity or survivors benefits under occupational pension schemes). In this case, the EAT had to determine whether claimants who had been transferred under TUPE could bring claims for equal pay against both the transferor and the transferee and whether the claims were brought in time.

Facts

On 1 July 2001 the claimants transferred from a health trust to a private contractor pursuant to TUPE. In December 2006 they made claims for equal pay and sought to recover pay going back six years using comparators who worked for the trust but did not transfer to the contractor. Their claims were in respect of employment prior to 1 July 2006 with the trust and with respect to employment with the contractor after 1 July 2006.

The trust argued that the principles in the House of Lords case of Powerhouse Retail Limited v Burroughs 2006 should apply to claims for equal pay. In the Powerhouse case the employees had claimed equal pay in relation to their pension entitlements, and it was held that since the claims related to a period of employment prior to a TUPE transfer the time limit ran from the date of the transfer. The claimants argued that the facts could be distinguished as in Powerhouse there was no ongoing breach by the transferee. In addition, occupational pension rights do not transfer pursuant to TUPE in any event.

The EAT disagreed, and considered that the relevant wording in equal pay legislation refers to the ‘employment’ and not the employment contract. Therefore the relevant question was which employment the claim relates to. Following this approach, the 6 month time limit for claims against the transferor runs from the date of the transfer for all equal pay claims which derive from the equality clause against the transferor, at least with regard to the alleged breaches by the transferor. However, the EAT held that the equality clause ‘bites’ from the moment the conditions of its application are met, even where there has been no finding that there has in fact been unequal pay. What transfers is the contractual right derived from the equality clause. Therefore the claimant can enforce rights against the transferee that were previously enforceable against the transferor. In order to enforce rights in relation to the period of employment with the transferor, claims must be brought within 6 months from the transfer date. In relation to periods of employment with the transferee, claims must be brought within 6 months of the termination of employment with the transferee.

The EAT rejected the contractor’s argument that the claimant could not rely on a comparator who had not transferred from the transferor.

Effect on employers

This does not affect the principle that the transferee steps into the shoes of the transferor in relation to its acts or omissions. However, in order to secure those rights in relation to the equal pay for the period of employment with the transferor, claims must be brought within 6 months of transfer. This does not give any comfort to transferee employers who may subsequently be faced with claims of unequal pay deriving from a disparity which arose during the period of employment with the transferor. It seems clear from the EAT’s decision that a claimant may base a claim on an ongoing disparity with a comparator who has not transferred from the transferor. A transferee may be faced with real problems in defending any such claim, particularly if it has no contractual relationship with the transferor which would require the transferor to co-operate in litigation, although the Tribunal has the power to order disclosure from third parties to a claim in certain circumstances. Transferee employees should ensure that the indemnities received from transferors give them adequate cover to protect them against such claims, which could be brought substantially after a TUPE transfer has taken place.