Employers advised not to take risks after equal pay and TUPE ruling

Employers have been advised not to take risks after a Court of Appeal ruling on equal pay and TUPE.

Emma Burrows, partner at Trowers & Hamlins, said the judgment in Gutridge v Sodexo [2009] EWCA Civ 729 was a 'complete nightmare' for companies involved in outsourcing.

'Individuals may have equal pay claims going back six years, not just to their previous employer but to the one before that,' she said.

'Any transfers to companies like Sodexo in recent years may bring with them potentially latent claims they have no concept of. How can they make financial provision for this?'

Burrows said that companies could protect themselves contractually at the time of the transfer but some were still taking risks.

In its ruling the Court of Appeal, by a two to one majority, backed the approach taken by Mr Justice Elias, former president of the EAT, in his judgment at first instance.

The case involved female cleaners employed by a hospital trust who were 'contracted out' to Sodexo. The main question was whether their claim for equal pay, which dated back to their days of working for the hospital trust but was made five years after they were transferred, met the limitation provisions of the Equal Pay Act 1970.

At the EAT Mr Justice Elias rejected Sodexo's argument that the whole claim should have been brought within six months, while agreeing that the cleaners could only claim after that time for the period following the transfer (see Solicitors Journal 13 August 2008).

Delivering judgment in Gutridge v Sodexo, Lord Justice Wall said: 'All of the claims related to periods prior to the TUPE transfer. The question, accordingly, was 'what was the period within which such claims had to be brought?'

'Was it within six months of the TUPE transfer, or was it within six months of the termination of the employees' contracts with the transferee?'

Lord Justice Wall said a key issue was whether the judgment of the House of Lords in Powerhouse Retail v Burroughs and others [2006] UKHL 13 applied beyond the scope of occupational pensions cases. He agreed with Elias J that it did.

He dismissed the appeal by Gutridge. He also dismissed a cross-appeal by Sodexo, in which the company argued that the equality clause operated only during the period in which the claimant and her chosen comparator were in the same employment, working directly for the hospital.

Lord Justice Pill agreed. He said, of the appeal by the cleaners: 'The right which has accrued is that under the 1970 Act. TUPE does not enlarge that right.

'The right created in relation to the transferor was limited in time. It was a right, now to be enforced against the transferee under TUPE, which, if it is to be enforced, has to be enforced within six months of the termination of her employment with the transferor.'

In a dissenting judgment Lady Justice Smith argued that Powerhouse should be interpreted differently.

'As a matter of logic, I think that either the transferee must be protected altogether from liability unless the claim is brought within six months of transfer or else he is not to be protected by reference to the transfer at all but is to be protected only by reference to the period in which he continues to employ the claimant.

'For those reasons, I would reject Elias J's solution and am left to choose between the all or nothing contentions of the two parties.'

She allowed the appeal and dismissed the cross-appeal.