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Preston and others v. Wolverhampton Healthcare NHS Trust and others (No 3) (formerly Powerhouse Retail Limited and others (Respondents) v. Burroughs and others (Appellants))
LORD HOPE OF CRAIGHEAD
1. The issue in this appeal is confined to a single point of statutory construction. It arises out of a series of claims brought by about 60,000 part-time workers under the Equal Pay Act 1970. They had been denied access to their employers' occupational pension schemes. This was because the schemes laid down as a condition of membership thresholds as to minimum weekly working hours with which, as part-time workers, they could not comply. Their claims were the subject of a series of test cases under what has been described as the Preston litigation: see Preston and others v Wolverhampton Healthcare N H S Trust and others  ICR 227 (HL), Preston and others v Wolverhampton Healthcare N H S Trust and others (Case C-78/98)  ICR 961 (ECJ) and Preston and others v Wolverhampton Healthcare N H S Trust and others (No 2)  UKHL 5,  ICR 217. The first round of cases dealt with a range of preliminary issues of general application. The current round which has given rise to this appeal deals with issues which, while not of universal application, affect all or at least the majority of cases within a particular group or sector. Mrs Preston, after whom the litigation takes its name, is no longer involved in these proceedings. Her claim was successful before the employment tribunal on the preliminary issue which was relevant to her, and there has been no appeal against that decision.
2. The appellants' cases were selected to deal with a particular issue that affects claimants who were transferred from the employment of one employer to another by the operation of the Transfer of Undertakings (Protection of Employment) Regulations 1981 (SI 1981/1794) ("TUPE"). The question that has arisen in their cases relates to the meaning and effect of the statutory time limit on the bringing of claims under the 1970 Act where there has been a TUPE transfer and the claim relates to the operation of an equality clause on an occupational pension scheme. The appellants were all employed in the electricity industry, but the issue is not confined to claimants who were employed in that sector. It applies also to the claims of other persons employed in the private sector, including the banking and local government sectors. It is an issue of general public importance as it affects so many claims. In view of the importance of the case the First Secretary of State was given leave to intervene in the appeal, and brief submissions to the effect that it should be dismissed were made on his behalf by counsel.
3. Section 2(4) of the 1970 Act was amended by the Sex Discrimination Act 1975, section 8(6) and Part I, para 6(1) of Schedule 1, and it has been amended again since the events with which this case is concerned. At the relevant time it provided as follows:
4. For reasons that I shall explain more fully later, claims in respect of the operation of an equality clause relating to an occupational pension scheme where there has been a TUPE transfer must be brought against the transferor, not the transferee. The time limit affects every claim which depends on facts that occurred prior to the date of the TUPE transfer, and the appellants' claims are all in that category. The question with which this case is concerned, put simply, is whether time begins to run in a claim against the transferor for equality of treatment under its occupational pension scheme from the date of the transfer, or whether it runs from the end of the employee's employment with the transferee.
5. As a result of the decisions mentioned above, it is common ground that section 2(4) of the 1970 Act applies to the appellants' claims. So, if they are to be entertained by an employment tribunal, they must be brought within the statutory time limit. It is also common ground that, where a claim is brought in time, the employment tribunal is empowered to declare that a successful applicant has the right of retrospective access to the scheme, subject to the payment of appropriate contributions, in respect of periods of employment not earlier than 8 April 1976. That was the date as from which direct effect was given to the judgment of the European Court of Justice in Defrenne v Sabena (Case C-262/88)  ICR 547, in which the court ruled that article 119 of the EC Treaty (now article 141 EC) could be relied on to claim equal treatment in the right to join an occupational pension scheme. The question as to the meaning and effect of the time limit affects all those claimants in whose cases the facts giving rise to the claim occurred prior to the date of the TUPE transfer.
6. The appellants were originally employed by an employer within the nationalised electricity industry. They all worked part-time in an electricity showroom. Prior to 1 April 1988 their working hours were insufficient to qualify them for membership of the occupational pension scheme to which their employers were affiliated. This was the industry's Electricity Supply Pension Scheme (the "Scheme"). On 1 April 1988 the working hours threshold was removed. The appellants then joined the Scheme and began to accrue benefits under it. In 1990 the electricity industry was privatised. The Scheme was then split into 17 separate Groups, each of which was aligned with the respective privatised businesses and the companies that had been formed to run these businesses. As a result each Group within the Scheme became, in effect, a discrete pension scheme. In 1992 a TUPE transfer took place (in fact there were two successive transfers on successive days, but nothing turns on this) as a result of which the appellants' employment was transferred to a new employer, Powerhouse Retail Ltd.
7. The appellants' claims relate entirely to periods prior to 1 April 1988, except in the case of Mrs Burroughs whose claim relates to the period prior to October 1986 when she became eligible for membership of the Scheme because her working hours had increased. They all relate to periods when the appellants were employed by the transferor. The pension benefits which they accrued between 1 April 1988 and the date of the transfer remained with their original employer's Group for a short period after the transfer. They were then transferred to the Powerhouse Retail Group of the Scheme. The effect of the transfer was to align the Group with the appellants' new employment with the transferee. The appellants accept however that the effect of regulation 7 of TUPE is that their claims for retrospective access to the Scheme in respect of periods of employment prior to 1 April 1988 must be made against the transferor.
8. The appellants' originating applications were presented to the employment tribunal in November and December 1994. They had been prompted by the decisions of the European Court of Justice in Vroege v NCIV Instituut voor Volkshuisvesting B V (Case C-57/93) and Fisscher v Voorhuis Hengelo BV (Case C-128/93)  ICR 635, in which the court ruled (1) that the right to membership of an occupational pension scheme, as well as benefits payable under the scheme, fell within the scope of article 119 of the EC Treaty, (2) that the exclusion of married women from membership of such a scheme entailed discrimination based on sex, (3) that the exclusion of part-time workers from membership could amount to a contravention of that article if it affected a much greater number of women than men unless the employer showed that the exclusion was explained by objectively justified factors unrelated to discrimination on the ground of sex and (4) that the article could be relied on to claim equal treatment in the right to join an occupational pension scheme as from 8 April 1976.
9. The dates when these applications were presented were more than six months after the date of the relevant TUPE transfers. The appellants contend that time runs against their claims from the end of their employment with the transferee. On this approach, as they were still in the employment of the ultimate transferee employer when their claims were presented, their claims were all in time. The respondents, on the other hand, contend that the appellants' "employment" within the meaning of section 2(4) of the 1970 Act for the purposes of their claims for equal treatment under the occupational pension schemes was their employment with the transferor. If this is right, the claims were all out of time, as the appellants' employment with the transferor ended with the date of the TUPE transfer.
The Equal Pay Act 1970
10. The 1970 Act had, as has already been mentioned, been amended by the Sex Discrimination Act 1975 in order to establish the demarcation line between discriminations which were subject to the Equal Pay Act and those which were subject to the Sex Discrimination Act by the date when the European Court of Justice issued its decision in the Defrene v Sabena case on 8 April 1976. The words "equal pay clause" in the 1970 Act as originally enacted were replaced by "equality clause" to make it clear that discriminations which were subject to the Equal Pay Act related not just to pay but to other terms and conditions of the woman's contract. The 1970 Act as amended is set out in Part II of the Schedule to the 1975 Act.
11. In order to set section 2(4) into its context, the following provisions in section 1 of the 1970 Act, as amended, should be noted:
12. Section 2 of the Act, as amended, provides:
The TUPE Regulations
13. The Transfer of Undertakings (Protection of Employment) Regulations 1981 were made under section 2(2) of the European Communities Act 1972. They gave effect to Council Directive 77/187/EEC of 14 February 1977 on the approximation of the laws of the Member States relating to the safeguarding of employees' rights in the event of transfers of undertakings, businesses or parts of businesses ("the Acquired Rights Directive"). The first indent of article 3(1) of the Directive provides:
Article 3(2) provides that after the transfer the transferee shall continue to observe the terms and conditions agreed in any collective agreement until the date of termination or expiry of the agreement or the entry into force or application of another collective agreement. The first indent of article 3(3) provides:
14. Regulation 5(1) of TUPE provides:
Regulation 5(2) provides that, on the completion of a relevant transfer:
15. Regulation 7(1) provides that regulation 5 shall not apply:
16. The effect of these provisions is to replace the common law rule that a change in the identity of an employer terminates a contract of employment: Nokes v Doncaster Amalgamated Collieries  AC 1014. But the rule which they create that a relevant transfer does not terminate the contract, with the result that all the rights and obligations of the transferor are transferred to the transferee, is subject to the exception set out in regulation 7. The transferee does not inherit the pension obligations of the transferor.
The decisions below
17. In the employment tribunal, Mr J K Macmillan held that time began to run under section 2(4) of the 1970 Act from the date of the TUPE transfer, so proceedings had to be brought against the transferor within six months of that date. In the employment appeal tribunal, Judge J McMullen QC held that the employment tribunal chairman erred in holding that time began to run from the date of the TUPE transfer:  ICR 993. In his opinion it did not begin to run until the end of the employee's employment with the transferee. In para 146 of his judgment he said:
18. The Court of Appeal (Pill, Jonathan Parker LJJ and Laddie J)  EWCA Civ 1281 allowed the respondents' appeal against the decision of the employment appeal tribunal:  ICR 222. In para 25 of his judgment, with which the other members of the court agreed, Pill LJ said that, while the effect of TUPE was that the continuing contract of employment was deemed always to have been with the transferee, it must be acknowledged that the pension rights had been removed from it and that it could not be treated as if they had not. He then explained how, as he saw it, this reasoning fits with the wording of section 2(4) of the 1970 Act: