Transferee employer responsible for equal pay claims

Sodexho Ltd (1) Gutridge & Others (2) North Tees and Hartlepool NHS Foundation Trust


Facts


The claimants were employed as cleaners by North Tees and Hartlepool NHS Trust Foundation. In 2001, the claimants’ employment transferred to Sodexho under the Transfer of Undertakings (Protection of Employment) Regulations (TUPE). More than five years later, the claimants issued equal pay proceedings in the employment tribunal. Their comparators were maintenance assistants who were employed by the trust, and whose employment had not transferred to Sodexho.


The tribunal had to decide whether the claimants had the right to bring an equal pay claim where their comparators had not transferred. It also had to determine the appropriate time limit for bringing such a claim.


Decision


The employment tribunal found that, prior to the transfer, the Equal Pay Act 1970 had created an equality clause in the claimants’ contracts of employment. This substituted more favourable terms and conditions into the contracts to bring them in line with the contracts of their comparators. On the transfer, the effect of TUPE was to automatically transfer the more favourable terms and conditions to Sodexho. The claimants’ claim could therefore be said to relate to the employment with Sodexho. This meant that the six-month time limit for bringing an equal pay claim did not start until the claimants’ employment with Sodexho terminated. They could therefore make a claim in respect of their employment both with the trust and with Sodexho.


The Employment Appeal Tribunal, which heard Sodexho’s appeal, agreed with the tribunal in part. It found that the effect of an earlier House of Lords’ judgment in Powerhouse Retail Limited v Burroughs was that where there were alleged breaches by the trust, the six-month time limit to bring a claim in respect of employment with the trust would run from the date of transfer. The claimants were therefore out of time to bring a complaint in respect of their employment with the trust. However, where there was a continuing breach on the part of Sodexho, the six-month time limit would run from the date that employment with Sodexho terminated.


Here, Sodexho had been involved in a continuing breach through its failure to honour the equality clause in place at the point of transfer. Therefore, the claimants’ complaints against it were in time. It did not matter that their comparators were employed by the trust, and not Sodexho, as common employment was only necessary to establish the enhanced contractual terms, but not to maintain them.


Implications


This case raises a number of issues of practical importance. Employers engaged in TUPE transfers will be relieved that equal pay claims relating to pre-transfer employment will have to be brought within six months of the transfer. Employees will therefore have to act quickly, or else they will lose the right to claim in respect of this period altogether.


However, a transferee’s continuing liability under an equality clause presents very real problems. It means that transferee employers will have to deal with equal pay claims for which the transferer was, in fact, responsible. These claims may not come to light until many years after the transfer has taken place and where, as here, the comparator is employed by the transferer, the transferee will face difficulties in obtaining the evidence necessary to defend the claim.


The key protection for transferee employers is to obtain suitable indemnities and warranties from the transferer where possible in any TUPE transfer, which are adequate to cover such claims.


Alan Chalmers, partner, DLA Piper

Comments are closed.