Equal Pay Arrears from Insolvent Companies

14 December 2017

Will equal pay arrears claimed against an insolvent employer be payable by the Secretary of State out of the National Insurance Fund?

Yes, held the EAT in Graysons Restaurants Ltd v Jones.

Equal pay claims were brought against Liverpool City Council in 2007. The Claimants’ contracts of employment transferred twice to private sector catering companies before being transferred again to the Respondent In 2009.

The appeal raised issues of construction in an employer insolvency context. Simler P. held:

Equal pay arrears can be ‘arrears of pay’ within s 184(1) Employment Rights Act, and therefore a debt within s 182 ERA.

To the extent that the liabilities exceed the statutory limits in Part XII ERA, liability transfers to the transferee. 

Where there are outstanding equal pay claims against the insolvent employer, employees may seek payment from the Secretary of State of up to 8 weeks’ pay on the basis that they were entitled to be paid the greater amount under their contract. The Secretary of State would have to consider any application for payment of the arrears in the normal way, and any dispute as to entitlement could be referred to the employment tribunal.


With thanks to Daniel Barnett’s employment law bulletin for providing this update.