The EAT decide that upon a TUPE transfer, the new employer (transferee) can acquire liability for equal pay claims based on any unequal pay structures it inherits from the original employer (transferor).
Under TUPE (the Transfer of Undertakings (Protection of Employment) Regulations 2006), when a transferee company acquires employees as part of a transfer, they also acquire liability in respect of those employees for any outstanding claims against the transferor e.g equal pay claim.
This case makes it clear that even if no such equal pay claim had been made at the time of the transfer, the transferee can acquire liability for equal pay claims which arise from any unequal pay structures in place at the time of the transfer.
The full implications of this decision are not yet entirely clear (see below) but employers who are acquiring employees under a TUPE transfer would be well advised to seek warranties and indemnities from the transferor in respect of potential claims which may arise from existing pay disparities.
The case of Sodexho Limited v Ms Gutridge was heard by the Employment Appeal Tribunal. Ms Gutridge was a cleaner employed by North Tees and Hartlepool NHS Trust until 1st July 2001 when her employment transferred to Sodexho Limited. In December 2006 Ms Gutridge brought an Equal Pay Act claim against Sodexho Limited based on a comparison with the pay of maintenance workers employed at the NHS Trust at the same time as her, but who had not transferred to Sodexho.
Under the Equal Pay Act, an "equality" clause is implied into every employment contract to ensure that the pay between the sexes is equal. Accordingly, in this case the EAT decided that where an employer does not pay men and women equally, the "contractual rights" of the women were infringed i.e., there had been a breach of contract. Liability for that breach (failure to pay the women the same as their male comparators), then transferred from the original employer (NHS) to the new employer (Sodexho Limited) under TUPE.
The EAT's decision only establishes that the women in this case could claim against Sodexho Limited. It will be for a separate Tribunal to determine whether their claims are successful.
Also, what is not clear from this case is the precise legal basis upon which such cases will be heard and this will remain a difficult issue for the tribunal.
It is also worth noting that in this case the EAT confirmed that Equal Pay Act claims against the transferor must be brought within 6 months of the transfer date.