Sodexo Ltd v Gutridge and Others – Employment Appeal Tribunal

The Equal Pay Act 1970 (the "Act") implies an equality clause into all contracts of employment to provide that men and women should receive equal pay for equal work.

The Employment Appeal Tribunal has delivered an important Judgment relating to the effect of the Transfer of Undertakings (Protection of Employment) Regulations ("TUPE") on equal pay claims.

The case involves claims brought by numerous female employees under the Act some 5 years after they had transferred to Sodexo under TUPE. To support their claim, they relied upon comparators from their previous (pre-transfer) employment, who had not transferred to Sodexo.

The EAT considered two material questions, firstly whether Sodexo could be liable to compensate the employees for any breach of the Act committed by the transferor before the transfer; and secondly, whether the employees could claim an ongoing entitlement to equal pay after the transfer, using male comparators who had not transferred to the transferee.

Decision

In relation to the first issue, the EAT held that claims brought under the Act, relating to a potential breach of the same by the transferor, should be brought within six months of the date of transfer. As 5 years had passed in the current case, the Claimants' claims in this respect were out of time and the Tribunal had no jurisdiction to hear them.

In relation to the second issue, the EAT decided however that the employees could rely upon comparators from their previous, pre-transfer, employment in respect of their claims against Sodexo (the transferee), irrespective of the fact that these comparators did not transfer. It held that the right for claimants to benefit from the equality clause "bites" immediately the conditions for its application apply. This has the effect that claims can be brought by employees against the transferee based on an unlawful pay differential that was in place whilst they were employed by the transferor, but which continued during their employment with the transferee. The relevant time limit for bringing such claims is 6 months from the date of termination of employment with the transferee, which could be many years from the date of transfer.

Comment

Whilst employers will welcome the EAT's Judgment in relation to the first aspect of this case, its decision in respect of the second issue is likely to create significant difficulty for transferee employers, who may struggle to gather appropriate evidence of comparators, in order to properly defend the claim, who were never within their employment.

We recommend that where possible, transferee employers should seek protection by way of obtaining appropriate warranties and indemnities from the transferor when negotiating the terms of the transfer deal, to manage the risk of inherent equal pay claims arising post-transfer.