As if there weren't enough issues to worry about when you're buying a business, a recently decided case has given business purchasers another headache.
The case was Sodexho Ltd v Gutridge and others.
The decision in this case was that where an employer fails to give equal pay then a contractual liability exists in respect of those employees to whom the failure relates, even before any action has been taken to determine the existence of the pay inequality.
The ramifications for anyone buying a business are that where a discriminated-against employee becomes an employee of the purchaser on the sale of the business, his or her pay level protected by TUPE (the Regulations that give all employees the right to be employed by the purchaser on the transfer of a business) is not that which they were actually paid before the business was sold, but that which they should have been paid were it not for the pay inequality.
If a purchaser innocently carries on paying the employee at the same rate then they are committing an ongoing breach of contract.
This is another due diligence headache and the only effective way to protect yourself (other than having relevant warranties in the sale contract) is to conduct an audit of the employees salaries to attempt to establish whether there is any evidence of pay inequality. If there is then these potential issues should be settled before taking over the business.
For more advice on these issues contact commercial property lawyer, Steve Petty, on 01926 629005.
Steve Petty, Commercial Property Lawyer
This blog is not intended to constitute legal advice, nor is it intended to be a complete and authoritative statement of the law, and what we say might be out of date by the time you read it. You should always seek legal advice to confirm whether or how any information in this blog applies to your particular situation. We offer a free 30-minute telephone advice session to discuss your particular circumstances.