Dear Trustee - Equal pay claims

Dear Trustee

I would be grateful if you could bring the contents of this letter to the attention of all staff who are involved in administering bankruptcy cases and Protected Trust Deeds.

Trustees will be aware that Glasgow City Council (“GCC”) have offered settlements in relation to equal pay claims made on the basis that women were unlawfully paid at a lower rate than men for comparable work. In some cases, people who have been offered a settlement payment will have entered an insolvency product. This letter sets out how we would expect Trustees to approach settlement payments in these cases, which will also be the approach adopted in cases where the Accountant is the Trustee. This would also apply to other settlements of equal pay claims with other bodies.

The settlement offers being made by GCC treat the settlement payments as arrears of wages. The Accountant’s view is that this is the correct treatment and that settlement payments of this kind represent arrears of wages. Other councils or bodies may categorise the payments in a different way, such as describing them as compensation rather than arrears of wages. This should not necessarily result in a practical difference to the guidance offered in this letter but the terms of any settlement offer should be examined carefully and legal advice sought if necessary.

It is likely that settlements will cover arrears of wages due both before and after the appointment of the Trustee, and that they may therefore need to be considered in two parts, most likely on a pro rata basis.

Any payment made in respect of wages due for a period prior to an award sequestration or the granting of a trust deed will vest in the trustee. This is because the arrears of wages are a contingent obligation in existence at the date of sequestration or granting of a trust deed, see Gordon Smith vs. AiB, [2021] SC GLW 013.

Any payment made in respect of wages due for a period after an award of sequestration or the granting of a trust deed vests in the debtor as income. The trustee may seek a contribution from income by variation of a debtor contribution order calculated over the period of an existing order, even if that is currently set at nil, if the trustee considers that there would be a benefit to the creditors from so doing.

Trustees should note that the settlement offers being made  by GCC provide for a deduction to be made for any debt owed to the Council, such as arrears of council tax. The basis for this adjustment is not statutory, and the recipient has the option to decline the settlement and pursue litigation. Trustees may have to take account of the recovery of the debt to the Council in the settlement if they have also made a claim for the same debt in a sequestration or trust deed.

Yours faithfully

Simon Roberts

Head of Operation Policy and Compliance