Certain debts including up to eight weeks' arrears of pay are guaranteed by the government in an insolvency situation, payable from the National Insurance Fund (NIF).
This case raised the question as to whether an equal pay claim which was not quantified at the time the employer became insolvent was "arrears of pay" and payable to the claimants.
Employees brought equal pay claims against their original employer.
Following their employment being transferred to Duchy Catering Limited (Duchy) by way of a transfer of an undertaking (TUPE), which went into administration, administrators were appointed who sold its assets to Graysons Restaurants (Graysons). Graysons took over the contracts of the Claimants as a TUPE transferee.
Unpaid sums due to employees from an insolvent transferor do not transfer to the transferee if they can be reimbursed by the NIF. The employees successfully argued in the Employment Appeal Tribunal that equal pay arrears can be "arrears of pay" and so can be reimbursed by the NIF.
The Court of Appeal agreed with that decision. The equal pay claims were claims for debt even if the equal pay claim remained to be determined at the time of the insolvency.
The sums which could be claimed from the NIF only included arrears up to eight weeks pay. The EAT held that liability for sums in excess of this amount would transfer to the transferee and that element of the claim was settled between the employer and employees.