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England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Lawrence & Ors v Regent Office Care Ltd & Ors [2000] EWCA Civ 196 (21 June 2000)
URL: http://www.bailii.org/ew/cases/EWCA/Civ/2000/196.html
Cite as: [2000] IRLR 608, [2000] EWCA Civ 196
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Case No: EATRF/1999/0206/AI
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM
THE EMPLOYMENT APPEAL TRIBUNAL
Royal Courts of Justice
Strand, London, WC2A 2LL
Date: 21st June, 2000
LORD JUSTICE PILL
LORD JUSTICE BROOKE
and
LORD JUSTICE MUMMERY
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MR A LAWRENCE & ORS |
Appellant | |
- and - |
||
(1)
REGENT OFFICE CARE LIMITED |
Respondent |
-
(Transcript of the Handed Down Judgment of
Smith Bernal Reporting Limited, 180 Fleet Street
London EC4A 2HD
Tel No: 0171 421 4040, Fax No: 0171 831 8838
Official Shorthand Writers to the Court)
- - - - - - - - - - - - - - - - - - - - -
Mr B Langstaff QC & Ms D Rose (instructed by Adam Creme, Head of Employment Rights, Unison for the Appellant)
Mr B Napier (instructed by Messrs Mackay Simon for the Respondent)
Judgment
As Approved by the Court
Crown Copyright ©
Lord Justice Mummery:
This is the judgment of the court.
Introduction
This appeal from the decision of the Employment Appeal Tribunal on 5 November 1998 raises a significant question on the interpretation of the directly effective provisions in Article 141 (formerly Article 119) of the EC Treaty under which each Member State shall ensure that, without discrimination based on sex,
" the principle of equal pay for male and female workers for equal work or work of equal value is applied."
The point arises in the context of claims under the Equal Pay Act 1970 (the 1970 Act) and Article 141 by 447 applicants for whom Mr Brian Langstaff QC and Ms Dinah Rose appear.
The applicants are female workers currently employed or formerly employed in the provision of cleaning and catering services in school premises in North Yorkshire by the three respondent companies. Mr Brian Napier appears for two of those companies, Commercial Catering Group Limited, against whom 85 claims are made, and Mitie Secure Services Limited (formerly Securicor Cleaning), against whom 300 claims are made. The third company, Regent Office Care Limited, against whom 62 claims are made, does not appear and is not represented.
Background
The issue is whether the applicants are entitled, for the purposes of establishing their equal pay claims against the respondent companies, to use as comparators the terms and conditions of employment of male workers employed by the North Yorkshire County Council (the Council). The proposed male comparators are not employed by any of the respondent companies. This issue goes to the right of the applicants to bring their claims and to the jurisdiction of the Employment Tribunal to hear and determine the claims. At this preliminary stage the court is not directly concerned with the issue of justification for the difference in pay.
Most of the applicants were originally employed by the Council in the provision of the same cleaning and catering services in the same schools. As a result of the process of compulsory competitive tendering pursuant to the Local Government Act 1988 there have been transferred to the respondent companies the undertakings of providing those services in the Council's schools.
During the period of compulsory competitive tendering an equal pay claim under the 1970 Act by female employees against the employer Council was proceeding in the Employment Tribunal, in the Employment Appeal Tribunal and finally in the House of Lords. The claim was ultimately successful for the reasons given in the speech of Lord Slynn on 6 July 1995 in North Yorkshire Council -v- Ratcliffe [1995] ICR 833.
The comparators used in that case were men in the employment of the Council. The Council had accepted the results of a job evaluation study which rated the work of the applicant women as being of equal value with various jobs performed by the men. The women's wages were lower than those of the men with whom the comparisons were made. The Council attempted to argue that the reason for paying the women less was to enable it to compete with a commercial company in the competitive tendering process in the open market. This argument was rejected by the House of Lords who held that it was impossible to say that the difference in pay was genuinely due to a material factor other than the difference in sex.
When the Council contracted out catering and cleaning services in certain geographical areas to the respondent companies those companies re-employed some former female staff on fresh terms and paid them at lower rates than those paid by the Council prior to the transfer. They also paid new female employees, who had not been employed by the Council, lower rates than those paid by the Council to its female employees prior to the transfer.
On the contracting out some of the Council's female employees were transferred to the respondent companies; some of them left employment on the transfer or more than 6 months before submitting a tribunal claim; and some female staff were employed for the first time by the respondent companies.
In December 1995 the applicants started proceedings in the Industrial Tribunal, as it was then called, under the 1970 Act. The nature of the complaint made by Mrs Marion Askew against Securicor Cleaning (now Mitie Secure Services) is typical of the claims
"I worked for North Yorkshire County Council who cut my pay and conditions in 1991. This was challenged on the basis of Equal Pay legislation and went through various stages of appeal in the UK courts where a final decision was given in the House of Lords in Ratcliffe and Others -v- North Yorkshire County Council on 6th July 1995.
In the interim my employer transferred the undertakings, or part of it I work in, to Securicor Cleaning Ltd.
I consider that I should have Equal Pay in line with the decision in Ratcliffe and Others -v- North Yorkshire County Council, and that my present employer is liable for any back pay and other monies which may be due to me."
The Agreed Facts
The case before the Employment Tribunal was argued on the basis of the following agreed Statement of Facts.
" (1) North Yorkshire County Council provide a service to the Council Tax Payers in North Yorkshire. Part of that service has traditionally involved the provision of education, catering for schools and educational institutions, and cleaning them.
(2) The cleaning of buildings, catering for the purposes of schools and welfare, and ground maintenance are all "defined activities" within the meaning of the Local Government Act 1988, Section 2. That Act provides for the compulsory competitive tendering of such defined activities if they are to be provided by the Local Authority concerned.
(3) Accordingly, in North Yorkshire a catering Direct Service Organisation ("DSO") was set up in 1990 with a view to bidding internally for the work.
(4) For the purposes of compulsory competitive tendering, catering in North Yorkshire was let in six separate contract areas. In July 1990, contract area 1 (Craven and Harrowgate) was won by the DSO. Contract area 2 was lost to Commercial Catering Group (now Castleview) ("CCG"). Contract areas 3,4,5 and 6 were retained by the DSO, on the basis of a bid which was designed to be competitive financially against those anticipated from CCG and other competitors. Accordingly, the employees in the School Meal Service (who, with the exception of two men, were entirely female) suffered pay cuts, which formed the basis for their application to the Leeds Industrial Tribunal in the case which ultimately reached the House of Lords as North Yorkshire County Council -v- Ratcliffe [1995] ICR 833.
(5) In short, the effect of the ruling in the House of Lords was that the women were entitled to compare themselves for equal pay purposes with men in the employment of North Yorkshire County Council, in other parts of the Local Government service, whose work was rated as equivalent upon a national job evaluation study of August 1987, and who continued to be paid on the NJC scales for local authority service.
(6) The claim of Ratcliffe and Others had been upheld by the Leeds Industrial Tribunal on the 15th June 1992. The Council's appeal against that decision was allowed by the Employment Appeal Tribunal on 17th March 1993, and the appeal of the employees against that decision of the EAT was dismissed by the Court of Appeal on 28th April 1994. On July 6th 1995 the House of Lords unanimously allowed the employees' appeal from the decision of the Court of Appeal, and restored the decision of the Industrial Tribunal.
(7) The cases of Ratcliffe, Crosby and Collinson were test cases for several applicants who had claimed equal pay on the same basis.
(8) Before the hearing before the House of Lords, the catering contracts in each area had to be re-tendered under the provisions of the 1988 Act. Contract area 1 was lost to CCG, contract area 2, won back by the DSO, and of the remaining four areas two were retained by the DSO and two awarded to CCG. CCG secured an indemnity from North Yorkshire County Council in respect of any liabilities which might arise out of the Ratcliffe case.
CLEANING
(9) For the purposes of compulsory competitive tendering, North Yorkshire was divided into thirteen contract areas. North Yorkshire Contract Services (Cleaning and Caretaking Division), the DSO, tendered successfully in 1990 when the first contracts were put out for tender.
(10) During 1993/94, the cleaning contracts were re-tendered. The DSO tendered upon the basis that they would reduce terms and conditions of employment, in the same way as had been done in the case of catering.
(11) The DSO retained three contract areas (1,2 and 10). Mitie won contract areas 3,4,5,6,7,12 and 13. Regent Office Care Limited won contract areas 8,9 and 11. Subsequently, in 1994, Commercial succeeded in obtaining area 1.
(12) The exact date of the commencement of each cleaning contract is shown on Appendix 1.
(13) John Cafferty, Senior Regional Officer in the Yorkshire and Humberside office of UNISON, wrote to each of the Respondents, in the Autumn of 1993, to advise them of the potential liability which the present claims assert. A sample letter is annexed hereto.
(14) North Yorkshire County Council, and the Respondents, at the time of the transfers, acted on the assumption that TUPE was inapplicable to the lettings. Accordingly, North Yorkshire County Council made redundancy [and] payments in lieu of notice to their staff. Those staff who were then re-employed by the Respondents were offered fresh terms and conditions of employment, and pay rates constituting a reduction in pay over that paid by the DSO (which had itself been reduced from NJC terms and conditions prior to the letting). Originating Applications were lodged against each of the Respondents, claiming declarations as to terms and conditions of employment and claims in respect of unlawful deductions from wages. The substance of the claim sample applications and terms of settlement in respect of Securicor Cleaning and Regent Office Care, are annexed hereto. The terms of settlement in respect of each employee who brought the claim is in identical terms, employer by employer.
(15) Following the decision of the House of Lords in Ratcliffe, North Yorkshire County Council accepted that it was bound to pay:
(i) catering staff, and
(ii) cleaning staff, whose wages had been cut in anticipation of compulsory competitive tendering.
The successful Claimants in Ratcliffe were catering staff. North Yorkshire County Council accepted that the logic of the position applied to cleaning staff also. If those employees had lodged Originating Applications at the time of Ratcliffe and Others, four years back pay was paid. For other employees two years back pay was paid. NJC rates were restored for all employees.
(16) The present Applicants fall into [these] categories:-
(I) Those Applicants employed by North Yorkshire County Council, as either catering staff or cleaners, who transferred to the employment of a Respondent after the compulsory competitive tendering process described above, and who either remain in employment or left employment less than six months before presenting their Originating Applications.
(Ii) Those Applicants employed by North Yorkshire County Council as above, who left employment at the date of the transfer of the contract from the DSO to a Respondent, or who were employed by a Respondent and who left more than six months prior to presenting their Originating Applications.
(Iii) Those Applicants who have never been in the employment of North Yorkshire County Council, but who have been employed by a Respondent after the transfer.
(iv) Those Applicants who were in the employment of North Yorkshire County Council, who did not transfer at the point of transfer, but who subsequently became employees of a Respondent.
(17) For the purposes of the issues that arise in the preliminary hearing, it is to be assumed that there was a transfer of undertaking from North Yorkshire County Council to each Respondent. (It is agreed between the parties that the Respondents may, notwithstanding their Appearances, argue that there is no transfer in law, but agreed that that issue should be stayed pending the resolution of the Suzen case before the ECJ.)
(18) Those employees in category (i) whose employment was transferred, continued to work in the same location, using the same equipment, and (in general) working the same hours. Where, as is the majority of cases, an employee works at a school, she continues to work in the same school, under the same supervisory officers and the same head teacher, serving immediately the same children or their immediate successors and counterparts. In many cases, the uniform that each Applicant wore remained the same after the transfer as it had done before, at least for a while before change.
(19) The organisation of the contracts in the service of the Council is under a contract officer whether the service is contracted out to such as the Respondents, or whether it is performed by the DSO. Save for any necessary alteration relating to the geographical area, the specifications are the same for the DSO where it continues to perform the "defined activity" as for the contractor under its contract with North Yorkshire County Council. In each case, the provision of the defined activity is subject to review, and further compulsory competitive tendering exercises will periodically be conducted at which those presently performing the activity, whether DSO or contractor, will need to bid competitively if they are to retain the right to continue to perform the "defined activity."
(20) Budgetary provision is made in the same manner by the North Yorkshire County Council for cleaning and catering whether it is performed in- house, or by a contractor.
COMPARISONS
(21) For the purposes of the preliminary hearing, it is by agreement between the parties to be assumed that there is a difference, to the disadvantage of the Applicants, between their terms and conditions of employment and those of their comparators."
In addition, as recorded in paragraph 6ii of the extended reasons of the Employment Tribunal sent to the parties on 16 April 1997, the parties have proceeded on the following assumptions for the purposes only of the preliminary hearing :-
" a. That there was a transfer of an undertaking when the relevant catering and cleaning contracts were contracted out to the respondent;
b. The jobs of the applicants were of equal value to the jobs of their chosen comparators at the dates of the respective transfer;
c. The jobs of the applicants were still of equal value to the jobs of their chosen comparators at the respective dates when their Originating Applications were submitted.
d. The comparators were, at all material times, employed by NorthYorkshire County Council."
The Relevant Law
A. The 1970 Act.
Section 1 enacts a requirement of equal treatment for men and women in the same employment in Great Britain. The effect of section 1 (2) is that a woman employed on like work with a man or on work rated as equivalent with that of a man "in the same employment" is entitled to the modification of any term in her contract of employment which is or becomes less favourable than a comparable term in the contract under which her male comparator is employed.
Under section 1(3) the employer has a defence to a claim if he proves that the variation between the woman's contract and the man's contract is genuinely due to a material factor which is not the difference in sex.
Section 1 (6) (c) provides that
" two employers are to be treated as associated if one is a company of which the other (directly or indirectly) has control or if both are companies of which a third person (directly or indirectly) has control,
and men shall be treated as in the same employment with a woman if they are men employed by her employer or any associated employer at the same establishment or at establishments in Great Britain which include that one and at which common terms and conditions of employment are observed either generally or for employees of the relevant classes."
Mr Napier contends, on behalf of the respondent companies, that the applicants' claims cannot succeed under the 1970 Act because the applicants are not "in the same employment" as the proposed male comparators. They have different employers which are not "associated" and they are employed at different establishments.
Mr Napier accepts that, if the restriction to "the same employment " in the 1970 Act is incompatible with Article 141, as interpreted by the Court of Justice, the restriction must be disapplied to the extent that it is incompatible. He also accepts that, in certain exceptional circumstances, reliance can be placed on Article 141 to broaden the scope of the 1970 Act by allowing a valid comparison to be made between employees not employed by the same employer or by an associated employer and that the concept of "the same establishment or service " found in some decisions of the Court of Justice may go wider than the definition of "associated employer " in section 1 (6) of the 1970 Act.
B. The Decisions of the Court of Justice on Article 119 (now Article 141).
It is common ground that Article 141 confers directly enforceable rights on citizens of member states and that its effect, read with the European Communities Act 1972, is to require the disapplication of incompatible provisions of the 1970 Act.
Counsel cited the following decisions of the Court of Justice on the issue of the alleged incompatibility of the "same employment" requirement in section 1 of the 1970 Act with the provisions of Article 141. Extensive citations are set out in the report of the judgment of the Employment Appeal Tribunal.
In Defrenne -v- Sabena (No 2) [1976] ECR 455 it was held that Article 119 was one of the foundations of the Community and was directly effective in that case without the need for more detailed implementing measures on the part of the Community or of member states. It applies to all forms of direct and overt discrimination which may be identified solely with the aid of the criteria based on equal work and equal pay referred to in the article. The Court also said at paragraph 19
" It is impossible not to recognise that the complete implementation of the aim pursued by article 119, by means of the elimination of all discrimination, direct or indirect, between men and women workers, not only as regards individual undertakings but also entire branches of industry and even of the economic system as a whole, may in certain cases involve the elaboration of criteria whose implementation necessitates the taking of appropriate measures at Community and national level."
The judgment at paragraph 22 referred to the cases where men and women receive unequal pay for equal work
"....carried out in the same establishment or service, whether public or private."
In Macarthys Limited -v- Smith [1980] ICR 672 the Court of Justice held that the scope of the concept of equal pay may not be restricted by the introduction of the requirement of contemporaneity. Differences in treatment in the same post at different periods of time may be explained by the operation of factors which are unconnected with any discrimination on grounds of sex. That is a question of fact for the court of tribunal to decide.
On the question of comparison with a "hypothetical male worker" in the context of indirect and disguised discrimination the Court said in paragraph 15 that that implied
"....comparative studies of entire branches of industry and therefore requires, as a prerequisite, the elaboration by the Community and national legislative bodies of criteria of assessment. From which it follows that, in cases of actual discrimination falling within the scope of the direct application of article 119, comparisons are confined to parallels which may be drawn on the basis of concrete appraisals of the work actually performed by employees of different sex within the same establishment or service."
Re: Equal Pay Concepts: EC Commission -v- Denmark ( C-143/83) [1985] ECR 427 was concerned with the legislation of a member state which restricted the principle of equal pay to "the same place of work." That was held to be an additional restriction in breach of the Treaty. Advocate General VerLoren van Themaat said at p.428 that
"As appears from the second sentence of Article 1 of the Directive, however,a comparison of duties within the same fixed establishment of an undertaking or even within a single undertaking will not always be sufficient. In certain circumstances comparison with work of equal value in other undertakings covered by the collective agreement in question will be necessary.....in sectors with a traditionally female workforce comparison with other sectors may even be necessary."
C. Domestic Decisions.
Reference was also made to Hasley -v- Fair Employment Agency [1989] IRLR 106 at paragraph 22 in which Lord Lowry in the Court of Appeal of Northern Ireland observed that the decisions of the Court of Justice in Defrenne and Macarthys did not confine comparisons to work carried out in "the same establishment or service."
The decisions of the House of Lords in Strathclyde Regional Council -v- Wallace [1998] ICR 205 and of the Employment Appeal Tribunal in Scullard -v- Knowles [1996] ICR 399 were also cited on the issue of the selection of comparators "in the same establishment or service."
The Applicants' Submissions
On behalf of the applicants Mr Langstaff QC contends that, in the special circumstances of this case, Article 141 gives them a directly effective right, while employed by the respondent companies, to claim equal pay with the male comparators employed by the Council, regardless of whether the applicants were originally employed by the Council and whether they are now employed by the Council.
The "special circumstances" relied on to distinguish this case from the normal case in which female workers of one employer receive lower pay than male workers employed by a different and unconnected employer, focus on the combined effects of compulsory competitive tendering, the Transfer of Undertakings Regulations and the job evaluation study. Mr Langstaff itemised the following special circumstances:-
(1) The work which is done by the applicants was evaluated under a job evaluation study while the majority of the applicants were in the employment of the Council. Their work was rated as equivalent to that of the proposed male comparators in the employment of the Council. For the purposes of the preliminary issue it is to be assumed that the applicants are performing work of equal value to that done by the male comparators.
(2) The majority of the applicants suffered a pay cut while in their original employment with the Council relative to the pay of the proposed male comparators in the employment of the Council.
(3) The House of Lords held that the pay cut was for a reason tainted by sex discrimination, namely the fact that private sector employers, including the respondent companies, employed all female workforces and paid them low rates because of the vulnerability of women in the market. The applicants were paid less because they were women.
(4) The pay of the applicants was either further reduced from that discriminatory level by the new employer, or that employer simply adopted the discriminatory pay rate, so that at the point of transfer the women were paid as little as they were because they were women.
(5) The nature of the work performed by the applicants since the job evaluation study has not significantly changed nor has that performed by the proposed male comparators. The identity of the undertaking in which the applicants are employed remains unchanged. All that has changed is the identity of the applicants' employer.
(6) The competitive tendering system involves the periodic review and re-tendering for work by local authorities and contractors. The workforce is, for practical reasons, likely to retain its identity despite any change of contractor to another contractor or to the direct employment of the local authority.
(7) The employers are closely linked, as the work done both by the applicants and the proposed male comparators is funded by community charge payers in North Yorkshire as part of the service provided by the local authority.
(8) The terms under which such work is to be performed are regulated at least in part pursuant to the legislation on compulsory competitive tendering.
Mr Langstaff also submits that the Council and the respondent companies are "associated employers" for the purposes of section 1 (6) of the 1970 Act. This is disputed by the Council. It is unnecessary to deal with the point as this appeal is concerned with the interpretation of Article 141 and not with the interpretation or application of section 1(6).
The Respondent Companies' Submissions
Mr Napier makes the following principal submissions on behalf of the respondent companies.
(1) The effect of the decisions of the Court of Justice is that Article 141 only gives directly effective rights to individuals where the applicant and the comparator are in "the same establishment or service."
(2) There is no direct and overt discrimination in this case. The applicants and the comparators work for different employers independent of each other. This case is outside the scope of the direct application of Article 141.
(3) There is no basis in the case law or in policy for extending direct effect beyond the limits of " the same establishment or service." There were reasons against an extension of the kind proposed by the applicants which would have substantial economic effects best brought about by legislation.
(4) There is no suggestion in the "special circumstances" relied on by the applicants that the contracting out by the Council was done with a view to evading the application of the principle of equal pay enshrined in Article 141.
(5) The extension proposed by the applicants would create real difficulties for the respondent companies in establishing the defence of objective justification of the differences in pay between the applicants and the comparators who are employed not by them but by the Council. This was a reason for holding that the present case is outside the scope of the direct application of Article 141. It would not suffice for the respondent companies to justify their own pay rates. It would be necessary to explain the rates of pay of the Council and, in the light of the explanations, to demonstrate why the amount of the difference between them is as it is. Unless the respondent companies can show how both pay rates came about in the first place they cannot begin to justify the difference between them. It follows that the respondent to a claim under Article 141 must be able to provide explanations of the applicants' pay rate and that of the comparator.
(6) In this case the respondent companies can only explain the rates of pay they observe. They cannot explain the rates of pay paid by the Council any more than the Council can explain the rates of pay paid by the respondent companies. So the respondent companies will only be able to argue justification if the Council chooses to provide them with the necessary information. The Council is not under an obligation to provide that information to them. This is not a case where the terms and conditions of those engaged in a particular industry are centrally determined by a statutory scheme or by collective bargaining.
Response of Applicants
Mr Langstaff's response on behalf of the applicants is that the ability of the respondent companies to make out a defence of justification is not part of the cause of action invoked by the applicants. The question on a complaint of sex discrimination against the respondents is why the respondents pay female employees less than the male comparators are paid. That could be explained by the respondent companies without the need for them to know why the male comparator is paid what he is paid.
The Decision of the Employment Tribunal
The Employment Tribunal sitting at Leeds dealt, as a preliminary issue, with the point whether the applicants could compare themselves with a comparator employed by a different employer, namely the Council. In its extended reasons sent to the parties on 16 April 1997 it held (at p. 24) that no comparison could be made between the applicants and the wages of the male comparators remaining in the employment of the Council because the respondent companies do not control the pay of both groups of employees. There was no discriminator (in what is essentially a form of sex discrimination) in control of both the wages of the applicants and of the comparators.
The fact that the Council was in a position to award the contracts and to supervise them did not mean that it was in a position to control the wages paid by the respondent companies to their individual employees. The Council only controls the working of the contract itself and the monitoring of the respondents' performance under the terms of the contract.
Decision of the Employment Appeal Tribunal
The Employment Appeal Tribunal agreed with the conclusion of the Employment Tribunal and dismissed the applicants' appeal on 5 November 1998. On 7 December 1998 permission to appeal was refused by the Appeal Tribunal, but permission to appeal was granted by this court on 15 February 1999.
The Employment Appeal Tribunal concluded that there was nothing in this case to distinguish it from any other case where an applicant claimed equal pay with a comparator employed by another company, not necessarily even engaged in the same industry (see p. 672 H). It did not consider that it was a case which should be referred to the Court of Justice.
After a full review of the authorities the Appeal Tribunal identified two general principles at p. 671 F-672A:-
" 1. The purpose of Article 119 of the EC Treaty, like section 1 of the Equal Pay Act 1970, is not to achieve fair wages but to eliminate discrimination on grounds of sex. In other words, the target of the legislation and of the Treaty is not to eliminate inequality in pay but to eliminate inequality in so far as it is caused by discrimination on grounds of sex.
2.Whilst it is the policy of Article 119 eventually to eliminate all such discrimination across industries(for example, catering and cleaning have traditionally been regarded as " women's work" and probably thereby been poorly paid), a radical assault across industries will require further agreement between member states, and detailed implementation in domestic laws (see paragraph 19 of the judgment in Defrenne [1976] ICR 547,566). The precise ambit of the article, as it stands and without further agreement or direction, is not precisely defined. Case law of the court will assist on a case by case basis. Technical limitations, such as dates when the comparator and applicant were employed, will not be allowed to defeat the application of the article. But there must be a line to be drawn somewhere, as the Court of Justice recognised in the Defrenne case as we read it."
The Appeal Tribunal then reasoned as follows :-
" Not in every case where article 119 applies will the same entity be employer of both applicant and comparator, nor will they necessarily be associated employers within the meaning of the section. But it does not follow that the article applies whenever the employers are unconnected other than by the nature of the industry to which they belong. There must be something other than common identity or direct association which provides the boundary line.....It seems to us that, absent any further agreement between member states or a Directive, we cannot say more precisely where the boundary line lies save that the applicant and the comparator must be "in a loose and non-technical sense in the same establishment or service." By " loose and non-technical sense" we mean to embrace within the definition such cases as Hasley and Scullard and any similar cases .
It follows that we reject Mr Langstaff's argument that article 119 of the EC Treaty is to be given a much wider range of application. Such a construction would be likely to create a substantial economic effect of the sort which, no doubt, the Court of Justice had in mind in the Defrenne case and which would need legislation. Further, without such legislation, a wide interpretation would deny the respondent any effective opportunity for a defence of justification. Again, no doubt, the Court of Justice had in mind the need for progressive implementation of any industry wide application with proper safeguards built in to accommodate some kind of justification defence."
Reference to the Court of Justice
We have reached the conclusion that it is not possible for this court to state with complete confidence that it is clear, on the basis of the existing jurisprudence of the Court of Justice on equal pay, either that Article 141 of the Treaty is directly applicable or that it is not directly applicable to the circumstances of this case. The contentions of the applicants raises a novel and difficult question on the proper interpretation of the scope of direct application of Article 141. The answer is not clearly stated in any decision of the Court of Justice. The question of the identification of appropriate comparators in an equal pay claim is one of general importance in Community law. The answer may have far reaching effects in other cases both in this country and in other member states, in particular in the context of the transfer of undertakings effected by the contracting out of services by public authorities.
We have accordingly decided to refer two questions of interpretation of Article 141 to the Court of Justice under Article 234 of the EC Treaty. We consider that a ruling of the Court of Justice on the interpretation of Article 141 is necessary to enable this court to decide this appeal.
We order that the following questions be referred, namely:-
1. Is Article 141 directly applicable in the circumstances of this case (as set out in this judgment) so that it can be relied upon by the applicants in national proceedings to enable them to compare their pay with that of men in the employment of the North Yorkshire County Council who are performing work of equal value to that done by the applicants ?
2. Can an applicant who seeks to place reliance on the direct effect of Article 141, do so only if the respondent employer is in a position where he is able to explain why the employer of the chosen comparator pays his employees as he does ?
We invite the submissions of counsel on the precise form and wording of the order for a reference.
Order: Case referred to the European Court of Justice; costs reserved.