TUPE: Red-circling terms not a breach of Equal Pay

Under TUPE, transferring employees have the right retain their existing terms of employment.  This can lead to problems under the Equal Pay legislation as it can result in a pay disparity between men and women.  

The EAT in Skills Development Scotland v Buchanan (2011) has now held that “red-circling” an individual’s pay, to comply with TUPE, can amount to a genuine material factor defence to an equal pay claim, where this results in a disparity in pay between a man and a woman. 

Moreover, the employer is under no duty to narrow the pay gap after the transfer (e.g. by freezing the transferred employees’ pay) provided that any decision to award subsequent pay rises to all staff (thus continuing the pay gap) is not tainted by sex.  In other words, it will be a defence to an equal pay claim where the TUPE transfer was and remains the main cause of the pay disparity and it had nothing to do with sex.