In Summary...

In a judgment (Birmingham City Council v Abdulla & ors [2012] UKSC 47) released this morning, the Supreme Court has concluded that it is open to claimants in Equal Pay cases to present their claims in the High Court up to 6 years after leaving employment, even when they are time-barred from bringing claims in the Employment Tribunal, where the time limit is 6 months from termination.

The Story…

In July 2010, 174 former employees of Birmingham City Council began litigation in the High Court against the Council, seeking redress for unequal pay. Usually, Equal Pay claims are brought in the Employment Tribunal. These employees chose the High Court because they had left the Council's employment between 2004 and 2008, and therefore none of them would have been able to bring a claim in the Employment Tribunal where there is a strict 6 month time limit within which Equal Pay claims must be brought. By contrast, in the High Court, a claim for breach of contract (which is what an Equal Pay claim really is) can be presented up to 6 years after the breach – in this case, the last day on which the employees were paid at the unequal rate, ie their termination dates.

How could the employees bring a statutory employment claim in the High Court? Because Equal Pay claims are contractual in nature: the Equality Act 2010 (and previously the Equal Pay Act 1970) effectively reads a "sex equality" clause into an employee's contract of employment to equalise the claimant's pay where a comparator carries out equal work (meaning, broadly (i) like work, (ii) work rated as equivalent or (iii) work of equal value).

What does this mean?

The practical effect of this case is that cautious employers should consider themselves potentially exposed to Equal Pay claims for 6 years post termination of employment, rather than 6 months. In large scale outsourcing or where there is a corporate sale (whether or not TUPE applies – which has its own effect on time limits) purchasers and others who ultimately inherit liability for employee claims will need to take increased care in due diligence on employees' potential equal pay claims which may now present a real financial risk for much longer than was previously supposed. Where there is the possibility of negotiating the extent of liability, it may be possible to apportion liability for any "dormant" High Court claims through indemnities.

Today's Supreme Court decision is by a majority (3 to 2), and includes some controversial assumptions. It may well be that the decision is open to challenge in the future, particularly given the cogently argued decision of the dissenting minority.

It is, however, in line with the Zeitgeist. Coupled with increasing pressure from some political quarters for legislation to require employers to publish their payscales and diversity statistics, the decision forms part of the current wave of opinion which would seek to hold employers (especially those in the allegedly "secretive" private sector) to account for inequality of pay, even where those inequalities may be historic or inherited – or the result of long ago negotiated collective agreements.