Buchanan and another v Skills Development Scotland Co Ltd ETS/113105/08

Two female employees working for SDS compared their pay with that of a male comparator and found he was paid over £12,000 more than they were. They and their comparator had transferred under TUPE from different employers to a predecessor company in 2002 and then to SDS in 2008. SDS continued to make pay increases and bonuses to the comparator.

In answer to the employees’ equal pay claims SDS contended that the comparator’s terms and conditions were protected under TUPE by the 2002 transfer and this was therefore a genuine material factor defence to their claim. This was not accepted by the tribunal. It found that no evidence of SDS’ obligations under TUPE to make the post-April 2002 awards and it did not accept that from April 2004 the TUPE protection requirements amounted to a significant or relevant reason for the difference in pay. An employer can rely on historical reasons for pay differentials but the tribunal did not believe that the TUPE transfer in this case was the genuine reason for this disparity.

Key point: This is a first instance decision but a transferee may not be able to continue to rely on TUPE as a genuine material factor as its relevance will diminish over time. It may have to freeze an employee’s pay until others catch up without triggering any claim from the employee. Proper due diligence prior to an acquisition is essential to highlight any potential equal pay issues.