The Court of Appeal has upheld the decision of the EAT, in Gutridge v Sodexo, that following a TUPE transfer a transferee can be liable for the transferor's equal pay breaches.

The employees had been transferred from their NHS Trust employer to Sodexo and, around five years after the transfer they raised equal pay claims against Sodexo in relation to pre-transfer equal pay liabilities. Their comparators were male maintenance assistants who also worked at the hospital, but who had not transferred to Sodexo.

The Court of Appeal upheld the EAT's ruling that liability for equal pay claims relating to the period prior to the transfer does pass under TUPE to the transferee employer. However, the time limit for bringing such a claim is six months from the date of the transfer and in this case the employee's claims were out of time. They could not therefore recover back-pay relating to the period prior to the transfer on this occasion.

The Court of Appeal also upheld the EAT's ruling that the equality clause implied into every contract of employment by the Equal Pay Act "bites" as soon as there is a case of an unequal pay - there is no need for a legal ruling. As a result, at the time of the TUPE transfer the claimants had a contractual right to be paid at the same rate as their male comparators. This contractual right transfers under TUPE, putting the transferee under a continuing obligation to honour its terms. The claimants could therefore enforce the right to higher pay against Sodexo. The time limit for claims of this nature is six months from the end of the employee's employment with the transferee.

Impact on employers

  • Contractors who inherit employees under TUPE, particularly employees who have in the past been in the public sector, may find themselves liable for substantial claims relating to pay inequalities.
  • Claims based on historic inequalities will come to light quickly, as employees only have 6 months from the date of the transfer to bring their claim.
  • However, claims based on the ongoing contractual right to equal pay that transferred with the employee may not come to light for some time.
  • Due diligence on pay structures may not be enough as it is unlikely that sufficient detail will be available to identify potential equal pay claims.
  • Ideally, transferees should seek warranties regading equal pay compliance and indemnities against claims.