When staff TUPE transfer - think equal pay

Published: 1st August 2008

When considering a TUPE transfer of staff, it is very important to consider the risk of equal pay claims, particularly as they may not immediately be clear. The decision of the Employment Appeal Tribunal in Sodexo v Gutridge should cause everyone involved in staff transfers to consider carefully the issues it raises. It is also very important to those organisations currently handling equal pay claims.

Consider your response. A female employee comes to see you and asks for more pay. She transferred to you five years ago. She says that a man who worked for the company she was employed by pre-transfer, did a job of equivalent value to hers and got paid more than her. She wants her salary increased to his pay level. You explain that you have never employed the person she is comparing herself with. You have no idea if their pay was different, whether their jobs were comparable, or whether there was a good reason for him to be paid more (if indeed he was).

Following this EAT decision, this female employee can bring a claim for equal pay based upon the pre-transfer comparison. She can claim even if the comparator did not transfer to you and even if the transfer was many years ago. She can gain an increase in current pay, as well as back pay (for the difference between her pay and his) back to the date she transferred to you or for six years from the date of her claim, whichever is the shorter.

Importantly, the Judgment determines that the individual cannot recover "back pay" from you for the period prior to the transfer date. Her claim for that period must be brought against the pre-transfer employer and must be entered within six months of the transfer date.

Whether this is good for those currently handling equal pay claims, depends upon the facts in the claims you face. If the claimants transferred out of your employment more than six months before they claimed - you are probably off the hook. For those who have claims from people who transferred to them, you are now faced with the tough task of providing evidence about the pay of people you have never employed.

For anyone whose business might involve transactions, tenders or outsourcing (which might involve a TUPE transfer of staff), this decision highlights the importance of carefully considering and exploring the possibility of equal pay claims. A profitable contract may easily become loss making if a number of the employees are able to increase their pay and recover the difference for (up to) six years before their claim. The importance of the contract terms and the precise wording of warranties and indemnities will be key to your ability to pass the cost to others. Being able to spot potential equal pay claims is hard but the right questions should be asked and the issue considered in any potential transfer.

If you are transferring staff out you need to consider that after this decision they may still be able to recover up to six years back pay from you, even though you thought that all liabilities connected to those employees had been transferred away.

If this complex decision raises any issues for your organisation please speak to your usual contact within the Mace & Jones Employment and HR team.