Graysons Restaurants Ltd v Jones

Equal pay arrears may constitute arrears of pay and a qualifying debt under Part XII of the Employment Rights Act 1996, even where the equal pay claim has not yet been determined or quantified.

Where the statutory conditions for an equality clause are met, entitlement to the corresponding pay arises automatically and accrues as work is performed. In insolvency proceedings falling within regulation 8(1)–(6) of the Transfer of Undertakings (Protection of Employment) Regulations 2006, only sums payable by the Secretary of State under the statutory guarantee scheme avoid transfer. Liability exceeding the eight-week statutory limit transfers to the transferee.

Women employed as cooks and kitchen assistants brought longstanding equal pay claims against Liverpool City Council. Their employments subsequently transferred through two catering companies to Duchy Catering Ltd, which entered administration. Graysons Restaurants Ltd purchased Duchy’s assets and became the transferee.

The Employment Tribunal held that undetermined equal pay arrears were not debts payable at the transfer date, but alternatively held that any liability exceeding the statutory guarantee transferred to Graysons. The appeal concerned whether equal pay arrears fell within Part XII of the Employment Rights Act 1996, whether an undetermined claim created an accrued debt, and whether regulation 8 of the Transfer of Undertakings (Protection of Employment) Regulations 2006 extinguished liability beyond the statutory guarantee.

1. The appeal succeeded in part. Equal pay arrears can be arrears of pay under section 184(1)(a) of the Employment Rights Act 1996, and therefore a debt within section 182.

2. The five categories of debt in section 184(1) are exhaustive, but section 184(2) does not exhaustively define arrears of pay. Equal pay arrears concern remuneration for work actually performed and are not conceptually different from arrears due under express, implied or disputed contractual terms.

3. The statutory equality clause operates automatically when the conditions in section 1(2) of the Equal Pay Act 1970 are satisfied. Where work is rated equivalent and the employee receives less pay, there is a presumption that the equality clause operates, subject to a genuine material factor defence. The entitlement accrues pay-day by pay-day and does not depend upon a prior tribunal declaration or award.

4. The reasoning in Pressure Coolers v Molloy that claims not made by the date of insolvency do not give rise to a protected debt was general description rather than part of that decision’s ratio. If intended as a legal rule applicable to all arrears of pay, it was not accepted. Secretary of State for Business, Innovation & Skills v Dobrucki did not require a different conclusion.

5. Regulation 8(5) of the Transfer of Undertakings (Protection of Employment) Regulations 2006 disapplies transfer only for sums payable under the statutory schemes. It does not extinguish the underlying debt. Liability for up to eight weeks of qualifying arrears, subject to the statutory weekly ceiling, may fall on the Secretary of State; liability exceeding those limits transfers to the transferee.

• Employment Appeal Tribunal: allowed the appeal in part. It held that undetermined equal pay arrears could qualify as arrears of pay under Part XII of the Employment Rights Act 1996, while affirming the Employment Tribunal’s alternative conclusion that liability exceeding the statutory guarantee transferred to the transferee.
• Employment Tribunal: concluded that undetermined equal pay arrears were not debts payable at the transfer date, but held alternatively that liabilities exceeding the statutory guarantee transferred.