In the recent case of Graysons Restaurants Ltd v Jones, the Employment Appeal Tribunal (EAT) considered what would happen to ongoing equal pay claims when an employer becomes insolvent.
Equal pay claims were brought against Liverpool City Council in 2007 by a number of women who worked (and remain working) at various schools throughout Liverpool as cooks and kitchen assistants.
The Claimants’ contracts were transferred through TUPE from the Council, a public sector organisation, to a private sector company, and later another private sector company. That company entered insolvency proceedings in 2009. The assets and employment contracts were purchased by Graysons as part of the insolvency proceedings.
It had been common ground that the Claimants had been doing equivalent work to their male counterparts but that they had been paid less for doing so. As a result there was a presumption of equal pay, but the company was insolvent.
The EAT held that the Claimants’ equal pay claims were capable of being claims for arrears of pay within Section 184(1) Employment Rights Act 1996, and as such are debts in the insolvent company. Because the insolvent company couldn’t pay, the Claimants were entitled to up to eight weeks’ equal pay arrears from the National Insurance Fund, and any further arrears transferred to Graysons.
In order to avoid potentially hefty liabilities, prospective purchasers of the assets of insolvent companies should ensure that they conduct sufficient due diligence and ask questions relating to any ongoing or potential claims.
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