EAT TRANSFER OF UNDERTAKINGS – Insolvency
RIGHTS ON INSOLVENCY
Two short questions of construction arise in an employer insolvency context concerning rights of employees to arrears of pay under Part XII ERA 1996. The first is whether a claim for equal pay arrears is a claim for ‘arrears of pay’, and in circumstances where the claim has not yet been determined, whether it gives rise to a debt to which the employee is entitled on the ‘appropriate date’. The second is whether liability for only that debt does not transfer from the insolvent employer (or transferor) to the transferee under Regulation 8 TUPE Regulations 2006, or whether the whole liability for past equal pay arrears is extinguished so far as the transferee is concerned.
The Employment Judge concluded that:
(i) equal pay arrears are not a debt payable at the time of transfer (or on the appropriate date) where the equal pay claims have not been determined and quantified. The debt will only be due if the equal pay claims succeed and not before.
(ii) If wrong about that, any liability in excess of the eight week sum guaranteed by the statutory scheme in Part XII, transfers to the transferee and is not extinguished.
The appeal succeeded in part:
(i) equal pay arrears can be ‘arrears of pay’ within s.184(1) ERA, and therefore a debt within s.182 ERA.
(ii) The Employment Judge was in error in concluding that arrears of pay arising from an equal pay claim that is as yet undetermined cannot be a claim for ‘arrears of pay’ within s.184(1) ERA.
(iii) There is a presumption that equality clauses operated in the Claimants’ contracts since their work has been rated as equivalent to their comparators. If that presumption is not rebutted by genuine material factor defences the Claimants had a legal entitlement to be paid in accordance with the equality clauses for work they performed before the appropriate date. To the extent that they were not so paid, they were entitled to arrears of pay on the appropriate date. They are in no different position to suppliers of goods who were unpaid on the appropriate date, or employees who did not receive pay due under implied or disputed oral agreements for work done before the appropriate date.
(iv) The wider point relied on by the Respondent failed. Only liabilities for up to eight weeks of arrears of equal pay do not transfer to the transferee if they constitute sums payable under Part XII ERA by the Secretary of State because the necessary conditions in ss.182 and 184 ERA are established. To the extent that the liabilities exceed the statutory limits in Part XII ERA, liability transfers to the transferee.
Citations:
[2017] UKEAT 0277 – 16 – 2811
Links:
Jurisdiction:
England and Wales
Employment, Insolvency
Updated: 02 April 2022; Ref: scu.601917