Graysons Restaurants Ltd v Jones & Ors

The Court of Appeal held that claims for equal pay which have accrued but have not yet been determined can constitute "arrears of pay" within the meaning of Part XII of the Employment Rights Act 1996 (in particular s 184(1)(a)) and therefore can be debts for which the Secretary of State may be liable under s 182, subject to the statutory limits in s 186. The court relied on the contractual mechanism of the Equal Pay Act 1970 (now reflected in s 66 Equality Act 2010) which treats an equality clause as implied into contracts so that any shortfall in pay accrues payday by payday as consideration for work done.

The court rejected the Secretary of State's submission that the phrase "arrears of pay" should be confined to items calculated by reference to ss 220–224 and 234 ERA or to the limited list in s 184(2) and that equal pay claims were conceptually distinct and excluded. The court distinguished earlier authority relied upon by the Secretary of State and held that practical difficulties in administration did not override the statutory meaning.

Background and parties. The claim began in 2007 as a multiple equal pay claim by 86 catering assistants who had been employed by Liverpool City Council and whose employment transferred to private contractors and ultimately to Duchy Catering Ltd and then to Graysons Restaurants Ltd following administration. The Claimants alleged unequal pay compared with male-dominated comparator roles and sought arrears of pay. Duchy entered administration and Graysons acquired the contracts. The employment tribunal (EJ Robinson) held that equal pay arrears not yet determined were not "arrears of pay" under Part XII ERA, but alternatively held that any liability in excess of the statutory guarantee transferred to the transferee.

Procedural history. Graysons appealed to the Employment Appeal Tribunal. Simler P (EAT) held that equal pay arrears can be "arrears of pay" within s 184(1)(a) and thus debts for which the Secretary of State can be liable under s 182 (subject to the limits in s 186); and that transferee liability under TUPE was not extinguished. The Secretary of State obtained permission to appeal to the Court of Appeal. The appellate hearing proceeded despite a settlement between the Claimants and Graysons because the point was of wider importance; the Attorney General appointed an advocate to the Court to assist.

Nature of the claim and issues before the Court of Appeal. (i) The Claimants sought arrears of equal pay and payment from the National Insurance Fund under Part XII ERA. (ii) The principal issues were whether an equal pay claim that has not been determined can constitute "arrears of pay" under s 184(1)(a) and thereby be a debt within s 182, and whether the particular equal pay claims in this case were debts within s 182. Secondary issues concerned the proper role of the statutory definitions of "week's pay" (ss 220–229 and related provisions) and the effect of previous authorities relied upon by the Secretary of State.

Court's reasoning. The court emphasised the contractual operation of the Equal Pay Act 1970 (and s 66 Equality Act 2010) which implies an equality clause into contracts so that equal pay entitlements accrue "payday by payday" as consideration for work performed, even if the employer has not recognised or paid them. That contractual character means such arrears can fall within s 184(1)(a). The court considered the decisions relied upon by the Secretary of State (including Benson and Connor) but found they did not determine the present point. Practical concerns about administration and information-gathering did not outweigh the statutory meaning. The court also rejected the argument that the Claimants retained an unmade election to claim damages rather than arrears in a way that would exclude Part XII cover; the pleadings and the nature of equal pay claims made it clear they were claims for arrears of pay.

Result. The Court of Appeal dismissed the Secretary of State's appeal and upheld the EAT's decision that the equal pay claims in this case could and did amount to debts covered by Part XII ERA, subject to statutory limits.

Appeal dismissed. The Court of Appeal agreed with the Employment Appeal Tribunal that equal pay claims that have accrued but remain undetermined can constitute "arrears of pay" within s 184(1)(a) of the Employment Rights Act 1996 and therefore can be debts payable by the Secretary of State under s 182, subject to the statutory limits in s 186. The court applied the contractual operation of the Equal Pay Act 1970 (now reflected in s 66 Equality Act 2010) which treats the equality clause as implied into contracts so that entitlement accrues payday by payday; it rejected the Secretary of State's narrower construction and distinguished earlier authority relied upon by the Secretary of State.

Heard in the employment tribunal (Employment Judge Robinson), Liverpool, 25 May 2016 (ET held equal pay arrears not "arrears of pay" unless determined). Appeal to the Employment Appeal Tribunal (Simler P) UKEAT/0277/16; reserved judgment 28 November 2017, reported at [2018] ICR 670 (EAT held equal pay arrears can be "arrears of pay" and transferable liability not extinguished by TUPE for sums beyond statutory guarantee). Permission to appeal to the Court of Appeal was granted on paper by Underhill LJ 30 July 2018. Court of Appeal judgment delivered 17 April 2019 ([2019] EWCA Civ 725).