Graysons Restaurants Ltd v Jones & Ors

An equal pay claim founded on a statutory equality clause can constitute arrears of pay under Part XII of the Employment Rights Act 1996, even where the claim has not been determined or quantified when the employer becomes insolvent.

The equality clause operates contractually and the entitlement accrues payday by payday. The resulting claim can therefore be a debt payable by the Secretary of State, subject to the statutory eight-week and weekly-payment limits. Employment Tribunal pleadings need not require a technical election between arrears and damages where the claim is in substance for arrears. Administrative difficulties cannot override the clear statutory meaning.

Eighty-six catering assistants brought equal pay claims arising from work of equal value with predominantly male comparators. Their employment transferred to Duchy Catering Ltd, which entered administration in January 2009; Graysons Restaurants Ltd acquired the assets and employment contracts.

The Employment Tribunal held that unquantified equal pay arrears were not debts payable on insolvency. The Employment Appeal Tribunal reversed that decision, holding that such claims could fall within Part XII of the Employment Rights Act 1996: [2018] ICR 670. The Secretary of State appealed on the meaning of arrears of pay and debt under sections 182 and 184. Although the underlying litigation settled, the Court of Appeal allowed the appeal to proceed because the issue was important and unresolved.

1. Appeal dismissed. Lord Justice Bean gave the leading judgment, with Lord Justice Haddon-Cave and Lord Justice Longmore agreeing. The appeal continued after settlement because it raised an important point not previously decided by the Court of Appeal.
2. Part XII of the Employment Rights Act 1996 requires the Secretary of State to pay qualifying debts where the employer is insolvent, the employment has ended and the employee was entitled to the debt on the appropriate date. For arrears of pay, the appropriate date is the date of insolvency. Payment remains subject to the limits in section 186, including the maximum eight-week period and weekly cap.
3. The statutory equality clause under the Equal Pay Act 1970 operated automatically to modify the employment contract. The entitlement to equal pay accrued payday by payday, as part consideration for work performed, whether or not the employer recognised or paid it at the time. This contractual analysis was supported by Abdulla v Birmingham City Council [2013] 1 All ER 649, Sorbie and Others v Trust Houses Forte Hotels Limited [1977] 1 QB 931 and Reading Borough Council v James and others [2018] ICR 1839.
4. An equal pay claim that remained undetermined and unquantified when the employer became insolvent could therefore be arrears of pay under section 184(1)(a) and a debt within section 182. Benson v Secretary of State for Trade and Industry [2003] ICR 1082 and Connor v Secretary of State for Trade and Industry UKEAT/0589/05/SM correctly addressed the separate categories of protected debts, but did not determine the present issue.
5. The claimants’ pleaded claims were, in substance, claims for arrears rather than damages. Employment Tribunal pleading rules were not so technical as to require an election. Practical difficulties in investigating equal pay claims, including under section 190, could not prevail against the statute’s clear meaning. No order as to costs was made between the parties by agreement.

Procedural history

1. Court of Appeal (Civil Division) — The Secretary of State’s appeal was dismissed. The court held that unresolved equal pay claims could constitute arrears of pay and debts under Part XII of the Employment Rights Act 1996.
2. Employment Appeal Tribunal — On appeal from the Employment Tribunal, the EAT held that equal pay arrears could fall within sections 182 and 184 and that the claims were debts, subject to the statutory limits: [2018] ICR 670. The appeal was heard under case number UKEAT/0277/16.
3. Employment Tribunal — The tribunal held on 25 May 2016 that unquantified equal pay arrears were not debts payable at the relevant date. It also held, in the alternative, that any liability beyond the guaranteed eight-week sum would transfer to the transferee.