England and Wales Court of Appeal (Civil Division) Decisions

ON APPEAL FROM THE EMPLOYMENT

APPEAL TRIBUNAL

NANETTE YOUNG

As Approved by the Court

2. The ET found that Mrs Young was employed by National Power PLC and its predecessors from 7th July 1969 until she was dismissed as redundant on 31st October 1996. She had qualifications in management studies and was a member of the Chartered Institute of Purchasing and Supply. Her contract of employment incorporated the Company Agreement for Professional Staff which at paragraph 5.2 provided:
‘Employees shall be appointed to a company grade on the basis of the duties and responsibilities that they are required to undertake...... Employees will be expected to undertake duties and responsibilities commensurate with their grade and competency’.

3. Over the years, Mrs Young worked in several different departments but in 1991 she was transferred, without change of grade, from the Contracts and Procurement Department to the Internal Audit Department as a ‘Value for Money’ (VFM) analyst in the VFM Group. Initially she was the only VFM analyst; then another was appointed. During the next 3 years she participated in several VFM studies. In November 1994, she became ill and was off work, save for 3 days in January 1995, until 30th May 1995. On her return she was not given any further VFM work and on 3rd July she was seconded to a department known as ‘Group Technology’ to work on a project in which her procurement and VFM skills were required. However, she was not working as a VFM analyst. When that project was complete, she remained on secondment with Group Technology. From January until May 1996 she worked at Pembroke Power Station on procurement. She then returned to the Internal Audit Office, which was by then being reduced in size. At about this time, the VFM group ceased to exist. Mrs Young was at risk of redundancy and on 30th May 1996, she volunteered to leave under a severance scheme. Thereafter she worked in the Internal Audit Department until July although not as a VFM analyst. From August she was not given any specific duties but was allowed to use company facilities for the purpose of seeking other employment. The ET found that although the employment did not terminate until 31st October 1996, Mrs Young had not worked as a VFM analyst since 30th May 1995.

4. On 24th April 1997, Ms Young presented an Originating Application under section 1 of the Equal Pay Act 1970. According to its preamble, the Equal Pay Act is ‘An Act to prevent discrimination as regards terms and conditions of employment between men and women’. Section 11 of the Act is entitled: ‘Requirement of equal treatment for men and women in the same employment’. Section 1 (1), as amended by section 8(1) of the sex Discrimination Act 1975, provides:
‘If the terms of a contract under which a woman is employed at an establishment in Great Britain do not include (either directly of by reference to a collective agreement or otherwise) an equality clause, they shall be deemed to include one.’

Section 1(2) explains the effect of an equality clause. Briefly summarised, an equality clause has the effect that where a women is employed on either ‘like work’ or ‘work rated as equivalent’ or ‘work of equal value’ as a man in the same employment, any term of the woman’s contract which is less favourable than the comparable term in the man’s contract shall be modified so as to be no less favourable.

5. Mrs Young alleged that she should have been entitled to receive the same pay as two men in the Internal Audit Department, named Dr Gilbert and Mr Williams, on the basis that, as a VFM analyst, she was doing work of equal value to theirs. National Power resisted the application on several grounds including reliance on section 2(4) of the Act. So far as relevant, section 2(4) provides:
‘No claim in respect of the operation of an equality clause relating to a woman’s employment shall be referred to an industrial tribunal ....... if she has not been employed in the employment within the 6 months preceding the date of the reference’.

6. It is common ground that the word ‘reference’ in that subsection includes the presentation of an originating application. The point taken by National Power under section 2(4) was that Mrs Young’s claim was based on a comparison of her work as a VFM analyst with two men who had also worked in the VFM function. Mrs Young had not worked as a VFM analyst since 30th May 1995 so she was only able to make an equal pay claim based on that work if she presented her application before 30th November 1995. Her employment with National Power, which had continued until 31st October 1996, (which was within 6 months of the date of presentation of the application) was employment in a capacity other than as a VFM analyst. So, by 24th April 1997, she was out of time and unable to present an application based on her work as a VFM analyst.

7. The Regional Chairman directed that jurisdiction under section 2(4) be determined as a preliminary issue. Mrs Young disputed the facts about her employment, contending that she had been employed on VFM work throughout. On that issue she lost. She did not contend that by presenting her application within the 6 months after the termination of her employment with National Power she had satisfied the requirements of section 2(4). The ET accepted National Power’s submissions on the facts and assumed without argument that their submissions as to the proper construction of section 2(4) were correct. They held that Mrs Young was too late to base a claim on her work as a VFM analyst. As there is no provision in the Equal Pay Act 1975 for time to be extended on discretionary grounds, the ET struck the claim out.

8. Mrs Young appealed and following amendment of her notice of appeal the question of the construction of section 2(4) was fully argued before the EAT. It was argued on her behalf that by lodging her application within 6 months of the termination of her employment, she had complied with section 2(4). National Power sought to argue that the expression ‘employed in the employment’ in section 2(4) related to the actual job on which the applicant based her claim. It did not relate to the overall employment relationship. It submitted that Mrs Young had had several different jobs during her years with National Power. The two year period specified in Section 2(4) began to run each time she was moved to different work within her overall employment. It submitted that the position of someone like Mrs Young was analogous to the applicants in the case of Preston and others v Wolverhampton Healthcare Trust and others [1998] ICR 227, in which the House of Lords had considered inter alia how section 2(4) should be applied to employees who had been employed on a number of distinct short term contracts of employment. They had held that time ran from the end of each separate contract. The EAT rejected this argument. They noted that the ET had not found that Mrs Young had had separate contracts of employment with National Power. She had had only one. Thus, the case of Preston was to be distinguished. They considered that the definition provisions of section 1(6) (to which we will refer in due course) should be used as an aid to construction of section 2(4). With such aid, the meaning of section 2(4) was clear. It was sufficient if an applicant brought her claim within 6 months of the termination of her employment. She did not have to bring it within 6 months of ceasing to do the work on which she would rely in order to establish her claim.

9. In this appeal, both sides have repeated the submissions made in the EAT. National Power submitted that the EAT misconstrued section 2(4). It submitted again that the word ‘employment’ in section 2(4) related to particular job on which the woman bases her claim to an equality clause. On its behalf, Mr Brown argued that this approach is consistent with the scheme of the legislation which requires the tribunal to analyse the work which the woman does and to compare it with the work done by the man to see if her work is like work or equivalent work or work of equal value to his. The whole focus of the application is on the work the woman and man have done or are doing. Thus it is logical that the limitation period should relate to the time when the woman was doing that work.

10. Second, Mr Brown submitted that the case was governed by the House of Lords decision in Preston (supra). Although the 1998 decision in Preston in 1998 has been superseded on some issues following reference to the European Court of Justice, the decision still stands on the interpretation of section 2(4) which is a matter of domestic law. At page 237F, Lord Slynn of Hadley observed that the structure of the Act appeared to be based on the incorporation of an equality clause into a specific contract of employment and not into an ‘employment relationship’. In that case the term ‘employment relationship’ was used to denote the whole period during which the women had been employed under a succession of discrete contracts of employment. The House held that the word ‘employment’ in section 2(4) referred to a discrete contract of employment. Mr Brown argued that when Mrs Young was moved from job to job by National Power, she had in effect a new contract of employment. Her ‘employment relationship’ lasted from 1969 until 1996 but her contract of employment as a VFN analyst only lasted from 1991 until May 1995. Thus by analogy with the reasoning in Preston, her ‘employment’ for the purposes of the application of section 2(4) to her claim for an equality clause based on her work as a VFN analyst meant her employment in that capacity.

11. Mr Brown’s third submission was that the approach he advocated accorded with sound policy considerations and common sense. If Mrs Young’s submission were right, an employer might be faced with the task of investigating an equal pay claim where the applicant had not done the work concerned for many years. Employment Tribunals and the experts instructed to carry out job evaluations would have to analyse the content of a job which neither the applicant nor possibly anyone else had done for several years. This would not be fair on employers and could not have been the intention of Parliament. As a matter of policy, it was in the public interest that a discriminatory practice or pay scheme should be rectified as early as possible. Moreover, the public would not have confidence in a system which allowed stale claims to be brought.

12. Mr Brown recognised that at the time the Equal Pay Act was drafted in its present form, Section 2(5) operated to prevent a woman from recovering any award by way of arrears of remuneration in respect of a time earlier than 2 years before the date on which the proceedings were commenced. He accepted that sections 2(4) and 2(5) read together would to some extent prevent a claim being brought after a long delay. However he submitted that even though no claim could be brought for financial loss incurred more than two years before, it might well be that an applicant would seek a declaration that she had been entitled to an equality clause many years before. He did not accept that such a claim would be struck out as an abuse of process. He also drew our attention to the recent decision of Levez v T.H. Jennings (Harlow Pools) Ltd [2000] ICR 58, in which the EAT implemented the effect of a ruling of the European Court of Justice that section 2(5) of the Equal Pay Act 1970 was not compatible with article 119 of the EC Treaty (now article 141) and Council Directive (75/117/EEC) article 2, which requires member states to introduce into their domestic law such measures as are necessary to enable all employees who consider themselves wronged by failure to apply the principle of equal pay to pursue their claims by judicial process. In Levez, The European Court had held that a claim limited to two years’ loss was not an adequate remedy but had left it to the domestic court to decide how long the period should be. The EAT held that 6 years was appropriate as the claim for equal pay was analogous to a claim in breach of contract. The effect is that it will be open to an applicant to claim up 6 years’ arrears of pay if successful. Mr Brown submitted that this underlined the policy need for there to be an appropriate restriction on the time which could elapse between when the applicant stopped doing the relevant work and the date of her application.

13. In response to these submissions, Mr Basu first drew our attention to what he described as the continuing effect of an equality clause. He submitted that where the woman shows that she has been employed on like work or equivalent work or work of equal value to a man in the same employment, the effect of sections 1(1) and 1(2) is to modify the terms of the woman’s contract of employment which are or have become less favourable than the terms of a similar kind in the contract of a man in the same employment. Once an equality clause has operated to modify the woman’s contract of employment, it remains so modified, even if she could not later satisfy the conditions for a claim under the Act, for example because the male comparator has left or been promoted and there is no one with whom she could compare herself: see Sorbie and Others v Trust House Forte Hotels Ltd [1977] ICR 55. Once modified, the woman’s contract remains modified even if the work she does is changed. That is so unless there is agreement to the contrary. Thus, argued Mr Basu, if Mrs Young were able to establish that she had been entitled to an equality clause modifying her contract (by increasing her pay) at any time from 1991 when she started work as a VFM analyst, she would have been entitled to retain that increase in pay when she was transferred away from VFM work in May 1995. Since the change in the law relating to section 2(5) in Levez, she would now (subject to section 2(4) ) be able to claim for any shortfall in her pay in the 6 years before presentation of her application on 24th April 1997. It would not matter that her position or those of her comparators had changed in the meantime. When the continuing effect of an equality clause is understood, it becomes clear that it must have been the intention of Parliament to limit the time by which an application be made by reference to the end of the contract of employment rather than the end of the period in which the woman had worked in the specific job by reference to which she brings her claim.

14. Second, Mr Basu submitted that the ordinary natural meaning of the words ‘employed in the employment’ in section 2(4) were clear. They mean employed under the contract of employment. Section 1(6) (a) provides that ‘employed’ means employed under a contract of service or of apprenticeship or a contract personally to execute any work or labour and related expressions are to be construed accordingly. Although the definition provisions in section 1(6) are said to apply for the purposes of that section, they must be applicable to section 2 as well, as it was inconceivable that the words ‘employed’ and ‘employment’ should have a different meaning in section 2 from section 1. In Preston the House of Lords had held that ‘employed in the employment in section 2(4) meant employed under a contract of employment. Here Mrs Young had only ever had one contract of employment, lasting from 1969 until 1996. The ET had not found that she had new separate contracts of employment whenever she changed jobs. Their reference to paragraph 5.2 of the Company Agreement for Professional Staff had stressed the continuing nature of the contract of employment. Thus, Preston was not directly in point and was of no assistance to the appellants. On the contrary, the decision of the European Court, gave some support to Mrs Young’s contentions. The European Court had said that although a provision such as section 2(4) was not in general incompatible with European law, it was objectionable if applied as it had been in the Preston case so as to prevent the women who had been employed on a succession of discrete short term contracts from relying on any contract which had terminated more than 6 months before. Where the women had been in a continuing relationship with the employer, the limitation period should run from the termination of that relationship. That, submitted Mr Basu, was of considerable assistance to him as it showed that a requirement that a woman should bring her equal pay claim within 6 months of the termination of her employment was incompatible with European law, if it was interpreted to prevent her from claiming in respect of earlier contracts within the same employment relationship. By analogy, it was submitted, a continuing contract of employment must involve a continuing employment relationship, even if it embraced different jobs from time to time, and it would be incompatible with European law if a woman was required to claim in respect of any such jobs before the end of the employment relationship.

15. Mr Basu drew our attention to the distinction in the Act between the use of the word ‘work’ and the word ‘employment’. This distinction was seen clearly in section 1(2) where there are set out the three different bases on which a claim may be brought. For example under 1(2)(a), the woman may make a claim on the basis that she has been `employed on like work with a man in the same employment’. Under (b) she may claim that she has been ‘employed on work rated as equivalent with that of a man in the same employment’. Under (c) she may claim that she has been `employed on work ..... of equal value to that of a man in the same employment’. Section 2(4) imposes a limitation period by reference to the woman’s employment, not the work she was doing. If Parliament had wished to impose a limitation period by reference to the cessation of the work on which the woman relied, it could easily have done so.

16. Mr Basu also sought to rely on a ‘common sense’ argument. His interpretation of section 2(4) provides a ready and workable rule whereby an employee can know without doubt the time by which an application must be presented. Moreover, it does not require an employee to bring an equal pay claim during the course of the employment. Many employees might be reluctant to damage their relationship with their employer by making a complaint of this kind.

17. In summary, Mr Basu submitted that the position here is clear. Mrs Young was employed under a single contract of employment. Over the years her work varied. At times, she would have been able to compare her work with that of male colleagues and to claim that her contract had been modified by the operation of an equality clause to produce parity of terms. The terms so modified would remain in force unless validly varied. Mrs Young was entitled to present a claim to the ET at any time within 6 months after the termination of the contract of employment which contained the equality clause.

18. We have concluded that the EAT’s interpretation of section 2(4) was correct. It appears to us that, on the ordinary natural meaning of the words, section 2(4) requires a claimant to lodge her application within 6 months of the termination of her employment. We think that the definitions provided in section 1(6) must be applied to section 2 as well as section 1. So ‘employed in the employment’ in section 2(4) must mean ‘employed under a contract of service’. That accords with the House of Lords’ decision in Preston. There is a distinction within sections 1 and 2 between the words ‘employment’ and ‘work’. In our view, the distinction intended is that ‘employment’ refers to the contract of employment and ‘work’ refers to the actual job the employee was doing. So for example, for a claim under section 1(2)(c) the woman has to prove two distinct things: first that she was doing work of equal value to that of a man whom she names as her comparator and second that she and the male comparator were in the ‘same employment’. It is clear that the man and woman may be doing different jobs while in the same employment. So ‘employment’ must relate to the contract of employment. Section 2(4) imposes a limitation period by reference to the termination of employment. In our view, there is jurisdiction provided that the application brings her claim within 6 months of the termination of her contract of employment.

19. On the facts of this case, there was no finding by the ET that Mrs Young had had a new contract of employment when her work changed in 1991 or 1995. Indeed such a finding would have been inconsistent with the ET’s finding that clause 2(5) of the Company Agreement was part of her contract of employment. This effectively provided for her to be moved from one job to another suitable for her grade. It is plain that Mrs Young had one contract of employment which ran from 1969 until 1976. Accordingly we reject Mr Brown’s submission that this case is covered by the House of Lords’ decision in Preston. That case is of no assistance to National Power. Indeed, we think there is more force in Mr Basu’s argument that, if Mr Brown’s contention were right, Section 2(4) would be struck down by the European Court as incompatible with the Equal Treatment Directive. Had we thought that it was arguable that Mrs Young had had a series of discrete contracts, with a new contract beginning every time National Power moved her to new work, we would have had to consider the European Court’s view in Preston. However, that does not arise.

20. That is sufficient to deal with this appeal. We do not think it necessary or desirable to say anything about Mr Basu’s submission as to the effect of an equality clause. The point does not arise for decision in this appeal. As to the parties’ respective submissions based on policy and ‘common sense’, we say only that we accept that parliament could sensibly have adopted either of the opposite approaches for which the two parties before have contended. Parliament’s purpose must in the circumstances be gathered from the actual words it chose to use. Certainly we see no proper policy objection to a construction allowing the bringing of an equal pay claim which related back to work done by the applicant up to 2 years earlier. Parliament must have intended that sections 2(4) and 2(5) would together provide an appropriate balance between the interests of the two sides. Employers were protected from stale claims and employees were not obliged to bring their claims during their employment. The fact that the European Court has declared that the two years limit imposed by section 2(5) is too short cannot change the meaning of section 2(4). Since Levez, employers have reduced protection from old claims. We reject Mr Brown’s suggestion that employers will be open to claims for declaratory relief going back more than 6 years. We would be surprised if any ET were prepared to entertain any such claim which would, in our view, usually be struck out as an abuse of process.

21. Accordingly this appeal is dismissed and the case will be remitted, as directed by the EAT to be heard by a differently constituted ET.

LORD JUSTICE MANCE: I agree.

LORD JUSTICE SCHIEMANN: I also agree.

ORDER: Appeal dismissed, costs to be payed by the respondents.

(This order does not form part of the approved judgment)