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Birmingham City Council declares bankruptcy over equal pay claims

Makbool Javaid, Partner - Simons Muirhead Burton

Birmingham City Council has issued a s.114 Notice as part of the plans to meet the Council’s financial liabilities relating to Equal Pay claims and an in-year financial gap within its budget which currently stands in the region of £87m.

In June the Council announced that it had a potential liability relating to Equal Pay claims in the region of £650m to £760m, with an ongoing liability accruing at a rate of £5m to £14m per month.

The Council is still in a position where it must fund the equal pay liability that has accrued to date (in the region of £650m to £760m), but it does not have the resources to do so.

In 2012 a group of 170 women – including teaching assistants, cleaners, and catering staff – won the right to proceed with equal pay claims against the council at the Supreme Court, alleging that they were denied bonuses and other payments made to men who were doing work of equal value. They argued that this breached the equality clauses of their employment contracts under the Equal Pay Act of 1970 — and the court agreed. Hundreds more workers have since made similar claims.

The Claimants brought claims for equal pay against Birmingham City Council, for breach of the equality clauses of their contracts of employment under the Equal Pay Act 1970.  Their claims, however, were brought after the limitation period of six months had expired and would have been struck out had they been brought in an Employment Tribunal.  To get around this restriction, the Claimants instead issued their claims in the High Court, attempting to take advantage of its more generous six-year limitation period.

The Council asked the Court to exercise its discretion under section 2(3) of the Act to strike the claims out, on the basis that the claim ‘could more conveniently be disposed of separately by an employment tribunal’.

Birmingham’s application failed for the simple reason that it could never be more convenient for a case to be heard in a forum ‘where the… tribunal could not determine the claim on its merits but would be bound to refuse jurisdiction to deal with the claim because it was time barred.’

This decision is likely to have significant ramifications for employers, as section 2(3) was replicated in section 128(1) of the Equality Act 2010.  The Supreme Court has opened the door to equal pay claims from as far back as six years ago, and businesses will need to take measures to ensure that they retain sufficient evidence to be able to respond to such historic claims.

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