What happens to ongoing equal pay claims when employees transfer to a new company after their previous employer has become insolvent? That was the question considered by the Employment Appeal Tribunal (EAT) in the case of Graysons Restaurants Ltd v Jones and others.

In this case, a number of female employees whose employment had been transferred to a new employer had equal pay claims that were ongoing. Overturning the previous ruling by an employment judge, the EAT ruled that such equal pay arrears can be considered arrears of pay, and can be claimed from the National Insurance Fund (NIF).

The EAT held that, as the employees’ work had been rated as equivalent to their male colleagues, they had a legal right to be paid according to the equality clauses in their contracts for work carried out before their previous employer’s insolvency. The equal pay for equal work clause is implicit in all employment contracts by the Equal Pay Act 1970.

According to the ruling, the claimants are entitled to up to eight weeks’ equal pay arrears from the NIF (subject to the Employment Rights Act statutory limit on a gross week’s pay). Where liability for arrears of equal pay exceeds the amount that can be claimed from the NIF, liability for the excess transfers to the new employer.

The case raises interesting considerations for businesses purchasing an insolvent company with ongoing equal pay claims, and may have wider implications for TUPE.