Case law: equal pay compensation payable in respect of successive contracts

By: Fanny Marshall

Date: 19 June 2009

Employers need to take account of a landmark ruling that entitles employees to bring an equal pay claim in respect of periods of employment under an earlier contract.

This case involved two employees working for a local authority who reduced the number of hours that they worked, for which they signed new contracts of employment. When they brought equal pay claims against their employer two years later, an employment tribunal ruled that they were entitled to claim compensation for the period before their current arrangements took effect. The Employment Appeal Tribunal (EAT), however, ruled in favour of the employer, stating that signing the new contracts indicated that the previous arrangements had come to an end, and any claim in respect of that period needed to be made within six months of the end of the contract. So, the claims for the earlier period were presented out of time.

In the Court of Appeal, the employees argued successfully that a ‘stable employment relationship’ existed during the period covered by both the earlier and the later contracts, and therefore they were entitled to claim compensation in respect of the whole period. This approach had previously been applied by the House of Lords in a case where there had been a break between contracts; this case now removes the anomaly that had arisen, so that an employee with no break between contracts has equivalent rights to an employee who has a break between contracts.

Employers must take care to avoid equal pay claims arising in the first place, or face potentially high claims for compensation.

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