United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MR JOHN BOWERS (One of Her Majesty's Counsel) and MR JEREMY LEWIS (of Counsel) Instructed by: Messrs Beachcroft LLP Solicitors St Ann's House St Ann Road MANCHESTER M2 74P
For the First Respondent	MS ELIZABETH JANE McNEILL (One of Her Majesty's Counsel) and MR BEN COOPER (of Counsel) Instructed by: Messrs Thompsons Solicitors Congress House Great Russell Street LONDON WC1B 3LW
For the Second Respondent	MR JOHN BOWERS (One of Her Majesty's Counsel) and MR JEREMY LEWIS (of Counsel) Instructed by: Messrs Eversheds LLP Solicitors Central Square South Orchard Street NEWCASTLE-UPON-TYNE NE1 3XX

SUMMARY

EQUAL PAY ACT

JURISDICTIONAL POINTS: Claim in time and effective date of termination

The claimants alleged that their employer had been in breach of their rights under the Equal Pay Act 1970. They had been transferred pursuant to a TUPE transfer and claimed their equal pay rights some five years later. Their claims relied upon establishing equal pay with comparators who had been employed by the transferor but had not been transferred to the transferee.

The employers argued that the claims were out of time and should have been brought within six months of the transfer as required by section 2ZA of the Equal Pay Act. They relied upon the decision of the House of Lords in Powerhouse Retail Limited v Burroughs and others [2006] IRLR 381 as interpreted in Unison v Allen [2007] IRLR 975. The Employment Tribunal held that these authorities applied only where the breach in issue was that of the transferor. They did not apply where, as in this case, the allegation was that the transferee was personally liable for breach of the transferred terms.

The EAT allowed the employer's appeal but only in so far as the claims related to the period when the transferor was in breach of the equality clause. They held that Powerhouse would apply so as to render out of time any claims against the transferor (even although liability for those breaches had transferred to the transferee). However, the EAT dismissed the appeal with respect to the claims against the transferee for his failure personally to respect the transferred terms; that claim could be brought at any time within six months from the end of the relevant employment with the transferee.


 


THE HONOURABLE MR JUSTICE ELIAS (PRESIDENT)

1. This case raises an important issue concerning the right of employees who are transferred from employer A to employer B pursuant to the Transfer of Undertakings Regulations to bring equal pay claims where their chosen comparators were not so transferred. In particular, it raises the question what is the appropriate time limit for bringing such a claim. It also involves determining the proper interpretation of the judgment of the House of Lords in Powerhouse Retail Limited v Burroughs and others [2006] IRLR 381 (also reported as Preston and others v Wolverhampton Healthcare NHS Trust and others (No. 3) [2006] ICR 606).
2. The case before the Tribunal was fought on certain assumed facts. They were reproduced in the employment judge's reasons as follows:

"(i) The claimants (who were 'domestics' or 'cleaners' mainly) were all employed by North Tees and Hartlepool NHS Trust prior to 1^st July, 2001.

(ii) The claimants all worked at Hartlepool General Hospital.

(iii) The claimants' comparators are maintenance assistants who were also employed by the Trust prior to (and after) 1 July 2001 (I believe at the same establishment).

(iv) All the claimants transferred to the respondent on 1 July 2001 as part of the domestic services contract which the respondent then provided to the Trust (and carried on doing the same job in the same place alongside their comparators).

(v) None of the comparators transferred to the respondent on that date or subsequently.

(vi) These proceedings were not commenced until 28 December 2006 (and subsequent dates shown in an agreed schedule)."

3. The right to recover back pay is limited to a period of six years. Consequently, if full recovery were permitted, it would include recovering for a period in respect of which the claimants were not employed by the transferee at all, but rather by the transferor, the North Tees & Hartlepool NHS Foundation Trust.

The statutory provisions.

4. Section 1 of the Equal Pay Act 1970 provides, so far as is material:

"1 Requirement of equal treatment for men and women in the same employment

(1) If the terms of a contract under which a woman is employed at an establishment in Great Britain do not include (directly or by reference to a collective agreement or otherwise) an equality clause they shall be deemed to include one.

(2) An equality clause is a provision which relates to terms (whether concerned with pay or not) of a contract under which a woman is employed (the "woman's contract"), and has the effect that –

…

(c) where a woman is employed on work which, not being work in relation to which paragraph (a) or (b) applies, is, in terms of the demands made on her (for instance under such headings as effort, skill and decision), of equal value to that of a man in the same employment –

(i) if (apart from the equality clause) any term of the woman's contract is or becomes less favourable to the woman than a term of a similar kind in the contract under which that man is employed that term of the woman's contract shall be treated as so modified as not to be less favourable.

…

(6) Subject to the following subsections, for the purposes of this section –

(a) "employed" means employed under a contract of service or of apprenticeship or a contract personally to execute any work or labour, and related expressions shall be construed accordingly;

…

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."

5. The time limit in this case for pursuing equal pay claims is established by section 2(4) of the Act, read together with section 2ZA. Section 2, so far as is material, says this:

"Disputes as to, and enforcement of, equal treatment

(1) Any claim in respect of the contravention of a term modified or included by virtue of an equality clause, including a claim for arrears of remuneration or damages in respect of the contravention may be presented by way of a complaint to an employment tribunal.

…

(4) No determination may be made by an employment tribunal in the following proceedings:

(a) On a complaint under subsection 1 above;

…

unless the proceedings are instituted on or before the qualifying date (determined in accordance with section 2(Z)(A) below."

6. Section 2ZA which is headed "'Qualifying date' under section 2(4)" is as follows:

"(1) This section applies for the purpose of determining the qualifying date, in relation to proceedings in respect of a woman's employment, for the purposes of section 2(4) above.

…

(3) In a standard case the qualifying date is the date falling six months after the last day on which the woman was employed in the employment."

7. Section 2ZB then provides:

"(3) In a standard case, the arrears date is the date falling six years before the day on which the proceedings were instituted."

It is common ground that this is a "standard case" within sections 2ZA and 2ZB.

8. The Transfer of Undertakings (Protection of Employment) Regulations 1981 ("TUPE") ensures that where there is a transfer of an undertaking as defined (and it is not disputed that there was a TUPE transfer here) then a contract of employment which would otherwise have been terminated by the transfer will take effect after the transfer as if originally made between the transferee and the employee: see regulation 5(1). (The 1981 Regulations have now been replaced by fresh regulations with effect from 6 April 2006, but nothing turns on that.)
9. Regulation 5(2) is as follows:

"Without prejudice to paragraph (1) above, but subject to paragraph (4) below, on the completion of a relevant transfer –

(a) all the transferor's rights, powers, duties and liabilities under or in connection with any such contract shall be transferred by virtue of this Regulation to the transferee; and

(b) anything done before the transfer is completed by or in relation to the transferor in respect of that contract or a person employed in that undertaking or part shall be deemed to have been done by or in relation to the transferee."

10. Regulation 6 transfers the effect of collective agreements and deems acts done pursuant to them by the transferor to have been done by the transferee.
11. Regulation 7 excludes from the automatic principle in regulations 5 and 6 those provisions in a contract of employment or collective agreement which relate to an occupational

pension scheme:

"Regulations 5 and 6 shall not apply –

(a) to so much of a contract of employment or collective agreement as relates to an occupational pension scheme …

(b) to any rights, powers, duties or liabilities under or in connection with any such contract or subsisting by virtue of any such agreement and relating to such a scheme or otherwise arising in connection with that person's employment and relating to such a scheme."

The issue before the Tribunal.

12. The issue before the Employment Tribunal was whether the claimants could pursue their claims for equal pay in circumstances where their comparators remained with the transferor and they did not initiate their claims until more than five years after the transfer. This in turn raised the question what is the relevant "employment" for the purposes of section 2ZA(3). It is at the end of that employment that the six month period begins to run. More specifically, the question is whether the "relevant employment" spans the periods of employment with transferor and transferee or whether it is limited only to the employment with the transferor.
13. It is pertinent to note that it has never been the claimants' case that they were entitled to continue to compare themselves with the employees of the transferor who remained with the transferor after the transfer. Rather their case is that the effect of the equality clause was to confer upon them enhanced contractual rights which initially the transferor was obliged to honour, and which then transferred to the transferee as contractual rights on transfer. They took with them such rights as existed at the time of transfer.
14. However, it was conceded that they could not, with respect to the period after the transfer, continue to receive the benefit of any improvements in the terms and conditions afforded to the comparators. The equality clause could not continue to operate with respect to employees of the transferor once claimant and comparator were employed by a different employer. Comparison across employers is exceptionally possible, but only where there is a common source of funding between the two employers: see Lawrence v Regent Office Care [2003] ICR 1092 (ECJ). The claimants concede that this is not the case here.

The decision of the Employment Tribunal.

15. In a detailed and careful analysis of the statutory provisions and the relevant authorities, the employment judge broadly accepted the submissions of the claimant and concluded that they were entitled to bring their claims. At the risk of some simplification of the employment
    

judge's detailed legal analysis, I think the reasoning can fairly be summarised as follows:

(1) The application of the equality clause between the claimant and the comparator employed by the transferor would (assuming the necessary conditions for its application are satisfied) have had the effect, prior to the transfer, of substituting more favourable terms and conditions of employment into the claimant's contract of employment.

(2) The effect of TUPE was that those more favourable terms and conditions derived from the equality clause were then automatically transferred to the transferee. By failing to honour those terms, the transferee continued to be in breach of the equality clause.

(3) That was so whether a legal ruling had been obtained against the transferor about the effect of the equality clause or not. The right to the benefit of the equality clause bites immediately the conditions for its application apply. There is no need for successful proceedings to have been taken to establish the right.

(4) With respect to that claim against the transferee, the "employment" to which the claim relates, for the purposes of section 2ZA(3), is therefore the employment with the transferee, (or it may be that the judge thought that it was employment with both transferor and transferee taken as a single period of employment).

(5) It follows that the six months period does not start to run pursuant to section 2ZA(3) until the date of termination of the employment with the transferee.

(6) This analysis is entirely consistent with both the decision of the House of Lords in Powerhouse and also the decision of the EAT (Elias P presiding), interpreting Powerhouse, in Unison v Allen. [2007] IRLR 975. Those cases established that the six months time limit would run from the end of the employment with the transferor where the breach of the equality clause was by the transferor alone (even though the transferee may pick up the liability for pre-transfer breaches). However, neither case had any application in circumstances where the transferee was also personally in breach of the obligation to meet the enhanced terms. In that case the six months did not begin to run until the employment with the transferee had ceased.

16. The claimants submit that the Employment Tribunal was correct in its analysis. The equality clause bites from the moment the conditions of its application apply. Thereafter, the enhanced terms continue until lawfully varied or revoked. This is so even if claimant and comparator cease to be in the same employment. The enhanced terms transfer and a failure to honour those terms by the transferee is a breach of the equality clause by him. The time limit for bringing that claim is six months from the termination of that employment with the transferee. Furthermore, it would undermine the protection afforded by TUPE if this were not the case.
17. Indeed, in one respect Ms McNeill QC, counsel for the claimant, goes further than the Employment Tribunal. She submits that, properly analysed, the Powerhouse case only determined that time runs from the date of transfer with respect to occupational pension rights, the reason being that these rights are not transferred to the transferee under TUPE. Where other rights under the equality clause are in issue, the effect of transferring liability to the transferee is that the time limit is to be defined by treating the employment with the transferor and the transferee as a single continuous period of employment. It follows that even if there were no separate and continuing breach of the equality clause by the transferee, nevertheless the effect of TUPE would be to treat the employment as one continuous period so that the six months does not run until the end of the employment with the transferee. To the extent that this analysis is inconsistent with the ruling of the EAT in the Unison case, that decision was wrong.
18. It necessarily follows that if the claimants were in time to establish the right to equal pay with respect to the alleged breach by the transferor, it would establish their right to those enhanced terms as at the date of transfer and those rights would have carried across to the transferee. In short, if the analysis of Powerhouse is limited to pension rights, then the claimant must succeed. If the claim is in time with respect to the employment with the transferor, it must perforce be in time with respect to the transferee. It is only if Powerhouse lays down a rule which treats employment with the transferee as new employment with respect to all equal pay rights that the analysis adopted by the Tribunal is needed to make good the equal pay claim.
19. Mr Bowers QC, counsel for Sodexo, disputes the claimant's analysis of Powerhouse and supports the interpretation given in Unison v Allen. He also challenges the claimants' alternative analysis which broadly reflects the Tribunal's decision. He does so, on two distinct grounds. The first, which we set out more fully below, is in substance that the contractual rights against the transferee are not part of the equality clause with the transferee but are derived from the operation of the equality clause with respect to employees of the transferor. Accordingly, the question is when time starts to run with respect to that claim, and in accordance with Powerhouse that is on transfer, when the employment with the transferor comes to an end.
20. An alternative argument, not advanced before the Employment Tribunal, was that the right to equal pay only lasted for the period during which the comparator and claimant were employed in the same employment. Once that condition ceased, the equality clause ceased to operate and (as I understood the argument) the claimant reverted to the pay earned prior to the equality clause taking effect. On this analysis, which has very far reaching implications, there never was a right to the enhanced terms after the transfer in any event, and the issue of time limits does not arise.

Discussion.

21. I first consider the effect of Powerhouse because, as I have said, if the claimants are right in their interpretation of that case, the appeal is bound to fail.
22. I then consider the alternative argument, namely that even if Powerhouse does require a claim to be brought within six months of the termination of the contract with the transferor for breach of the equality clause by the transferor, that would not be the case with respect to the independent and continuing breach of the equality clause by the transferee. The relevant employment for that purpose, it is said, is the employment with the transferee.

The proper interpretation of the Powerhouse decision.

23. The issue before the House of Lords was when time started to run to enforce an equality term relating to occupational pensions. More specifically, what was the relevant employment for the purposes of applying section 2ZA(3)? Was it the employment with the transferor, or the employment with the transferor and transferee considered as a single continuous period of employment?
24. The Court of Appeal had held that the relevant employment for the purposes of a pension claim was the employment with the transferor. It is clear, however, that the basis of that analysis was that the liability for pension rights did not transfer to the transferee. In effect, the Court of Appeal treated the concept of employment for pension purposes as being quite different from the concept applicable to those rights which were transferred.
25. The leading judgment was given by Pill LJ, with whose judgement Parker LJ and Laddie J agreed. Pill LJ first summarised the respective arguments. Essentially the argument for the claimants was that the equality clause was transferred under regulation 5 and the effect of TUPE was that the two contracts with the transferor and transferee respectively should be treated as one. It was immaterial that pension rights were not transferred. The crucial issue was whether the contract of employment continued.
26. This emphasis on whether the contract continued reflected the approach of Lord Slynn of Hadley when making the leading speech in the House of Lords in Preston v Wolverhampton (No. 1) [1998] ICR 228 where an applicant had had a succession of contracts of employment with the same employer. His Lordship stated, at page 237, that the equality clause referred to in Section 2(4)

"is a clause in a contract of employment which as I see it can only be the specific contract in respect of which the claim is made."

27. The appellant employers and the Secretary of State accepted, and indeed asserted, that the contract transferred. However, they did so for the purpose of contending that since there was no continuing employment with respect to the transferor, that contract had come to an end. Furthermore, since the occupational pension rights did not transfer, time limits had to run from the moment when the employment with the transferor came to an end.
28. Pill LJ then referred to various policy arguments which were advanced but which did not, in his view, take matters any further, and concluded as follows:

"22. In my view, the issue is essentially one of statutory construction. It can be resolved without recourse to the concerns expressed on behalf of the appellants about the uncertainties with which they would be faced if the decision of the EAT is upheld. …

24. I accept the appellants' submissions. …. Regulation 5 does not deem the contract of employment with the transferor never to have happened; it deems that what happened was between the employee and transferee. By virtue of Regulation 7, the pension terms fall out of the contract of employment with the transferee and no further pension rights can be acquired against the transferor though, at the time of transfer, there is a cause of action against the transferor with respect to pension rights.

25. The continuing contract of employment is deemed always to have been with the transferee but it must be acknowledged that the pension rights have been removed from it and it cannot be treated as if they have not. It cannot be regarded as the specific contract of employment, giving rise to the claim for pension rights, which existed between the transferor and the employee before the transfer took place. The employment under a contract of employment about which complaint is made is the contract between transferor and employee, with its equality clause providing pension rights, and the post-transfer contract of employment, shorn as it is by statute of existing pension rights, is not the specific contract of employment for the purposes of Section 2(4). The claim is based on the previous contract and, in so far as its terms have not been transferred, it terminated upon the transfer and time began to run. The existence, in each of the contracts, of an equality clause does not mean that they can be treated as the same contract."

29. I have focused on this decision because both sides have placed emphasis upon it. I accept fully that if the judges in the House of Lords were intending to approve this analysis, then there can be no doubt that the claimants are correct, that time runs from the date of transfer only with respect to pension rights, and that the claims in this case are in time even with respect to the period of employment with the transferor. The relevant employment would be the employment with the transferee (and, presumably, any successive transferee) and the six months would not begin to run until relevant contract is terminated, which may be when the final period of TUPE employment comes to an end.
30. It is necessary to emphasise that in the Court of Appeal both parties were relying on the analysis of Lord Slynn in Preston (No.1) to the effect that the relevant "employment" for time limit purposes was the employment contract with respect to which the claim was made. The arguments then focused on what was that contract in the context of a claim relating to occupational pensions. Pill LJ agreed with the appellants' submission that it was not the contract with the transferee because the pension rights had never been transferred to take effect pursuant to the contract with the transferee. Nor was it the same contract merely because there was an equality clause in operation with respect to both transferor and transferee, because that was not the same equality clause.

The decision in the House of Lords.

31. In the House of Lords the leading speech was given by Lord Hope with Lords Scott, Rodger, Carswell and Brown concurring. Since this is such a central part of this appeal, it is necessary to set out in some detail certain passages from Lord Hope's speech. His Lordship first set out the facts and the statutory provisions. He then outlined the decision of the lower courts, citing in particular part of paragraph 24 of the judgment of Pill LJ which is reproduced above. He then summarised the appellants' argument, advanced by Mr Cavanagh QC, which was to the effect that the contract was transferred and that following the analysis of Lord Slynn in Preston (No.1), since it was the same contract before and after the transfer, it had also to be the same employment. The fact that pension rights were not transferred, it was argued, did not in any way undermine that analysis. Moreover, the appellants were relying on the equality clause which was imported into every contract of employment.
32. Lord Hope rejected this analysis in the following way (paras 22ff ):

"22. I am unable to accept these arguments. As with any other issue of statutory construction, the question begins and ends with the words of the statute. The first point that must be made is that the word "contract" does not appear anywhere in section 2(4). It was used by Lord Slynn in the passage from his speech in the first Preston case, but that was in a different context. The question which he was addressing in that case was how the word "employment" was to be applied to a situation where the woman was employed by the same employer but under a succession of different contracts. For the reason that he gave, the argument that a succession of contracts could be treated as a single contract for the purposes of the time limit had to be rejected. Where there was a succession of contracts with the same employer, the contract in respect of which the claim was made in respect of the operation of the equality clause was the relevant contract of employment for the purposes of the time limit. But in my opinion his analysis does not provide the answer to the quite different question that has been raised in this case about the operation of the time limit where there has been a TUPE transfer.

23. The second point is that the word that the subsection uses to identify the moment which starts the running of the time limit is the word "employment". The question which it asks is whether the woman was employed "in the employment" within the six months preceding the reference of the claim to the tribunal. The claim to which the time limit is to be applied is, of course, the claim in respect of the operation of an equality clause relating to the woman's employment: see the opening words of the subsection. When the subsection is read as whole, its plain and natural meaning is that the claim must be brought within six months of the end of the employment to which the claim relates.

24. It comes as no surprise, then, to find that the first question that was referred by the House to the European Court of Justice at the conclusion of the first Preston case [1998] ICR 227 was, so far as relevant to this case, framed in these terms:

"1.  Is … a national procedural rule which requires that a claim for membership of an occupational pension scheme (from which the right to pension benefits flows) which is brought in the industrial tribunal be brought within six months of the end of the employment to which the claim relates…compatible with the principle of Community law that national procedural rules for breach of Community law must not make it excessively difficult or impossible in practice for the claimant to exercise her rights under article 119?" [emphasis added]

The European Court adopted the same wording when it answered this question in the negative: Preston and others v Wolverhampton Healthcare N H S Trust and others (Case C-78/98) [2000] ICR 961 (ECJ), para 35.

25. Why then should the subsection be given a different meaning when the time limit is invoked in the context of a claim relating to the operation of an equality clause which relates to a period of employment prior to the date of a TUPE transfer? It is true that section 2(4) of the 1970 Act was enacted before the coming into effect of the Acquired Rights Directive and, consequently, before the making of the TUPE regulations which transferred all the transferor's rights, powers, duties and liabilities under or in connection with the contract of employment to the transferee but left any rights, powers, duties and liabilities under or in connection with an occupational pension scheme with the transferor: see regulations 5(2)(a) and 7(1)(b) of TUPE. But I do not think that the subsection can be taken to mean different things depending upon the part of the TUPE arrangements to which the claim relates.

26. It is often said that a statute is always speaking. This is so, and where the language permits there is this element of flexibility. It can be adapted to contexts that were not foreseen when it was enacted. But the metaphor must not be pressed too far. A statute cannot speak with two different voices at one and the same time. The rule that section 2(4) originally laid down was that a claim in respect of the operation of an equality clause must be brought within six months of the end of the employment to which the claim related. It applied to each and every claim that might be made in respect of the contravention of a term modified or included by virtue of an equality clause: see regulation 2(1). The same rule must be applied where there has been a TUPE transfer. The only question is: to which employment does the claim relate? The answer, where the claim is in relation to the operation of an equality clause relating to an occupational pension scheme before the date of the transfer, is that it relates to the woman's employment with the transferor.

27. Mr Jeans QC for the respondents submitted that this interpretation of section 2(4) had the advantage of certainty. Why, he said, should time begin to run from a date that had nothing to do with the claim in question? It was to be assumed that the rule was intended to enable potential defendants to know exactly when it was that time had run out for the making of claims against them. The effect of the appellants' argument was that a transferor would be exposed to claims relating to its occupational pension scheme indefinitely. The problems that it would face in maintaining the necessary records long after the business had been transferred should not be underestimated. One of the aims of TUPE was to achieve a smooth and orderly transfer. This would be inhibited if the transferor's liability in respect of occupational pension schemes was subject to a time limit which had nothing to do with the transferor, but was linked instead to the woman's employment with a transferee who was excluded by regulation 7 from any share in the liability.

28. Mr Cavanagh said that some lack of legal certainty was inevitable, given that the time limit ran not from the date of the breach or from loss sustained as a result of it but from the end of the employment. He gave various examples of how uncertainty could arise even on the respondents' interpretation of section 2(4). I think that on balance greater uncertainty is likely to be produced by the appellants' interpretation of it. But there is much more force in Mr Jeans' point that the best way of achieving the purpose of the time limit is to link it as closely as possible to the liability which is the subject of the claim. This is achieved if the period of six months within which the claim relating to the operation of an equality clause with regard to an occupational pension scheme provided by the transferor must be brought runs from the end of the claimant's employment with the transferor, to whom the liability belongs, rather than the end of her employment with the transferee. The fact that, where disputes arise, it is the link between the employee and the employer whose rights and obligations are in issue that matters is demonstrated by section 2(1A) of the 1970 Act, which enables an employer to apply to an employment tribunal for an order declaring the rights of the employer and the employee where a dispute arises in relation to the effect of the operation of an equality clause. There is an element of symmetry here which supports the meaning that is conveyed by the words of the subsection. It is reassuring too that it was this interpretation of the subsection that the European Court of Justice had in mind when it ruled that the limitation period was compatible with the fundamental principle of legal certainty and did not make the exercise of rights conferred by Community law virtually impossible or excessively difficult. "

Accordingly the appeal was dismissed.

33. I had to consider the effect of this decision when giving the judgment of the EAT in Unison v Allen. I considered that although the speech was not wholly without its difficulties, the better analysis was that time began to run from the date of the transfer with respect to all rights arising under an equality clause, and not merely with respect to pension rights, at least with respect to cases where the alleged breach was solely by the transferor. Unlike this case, it was not alleged that the transferee was in breach of any obligation conferred directly on him.
34. I will not repeat my analysis in the Unison case since I have analysed the Powerhouse judgment again, taking into account the arguments advanced by Ms McNeill, to see if I still take the same view as to its effect. After carefully considering the judgment, I do remain of the same opinion, although I readily admit that certain passages from the speech lend succour to the arguments of each party.
35. In my judgment, the first point to note is that the basic premise on which the case was argued before the Court of Appeal was rejected by Lord Hope. As we have seen, that decision was premised on reading certain observations of Lord Slynn in the Preston (No.1) case as requiring that the concept of employment was to be identified with the relevant contract of employment. On that assumption, the issue was whether with respect to pension rights it was correct to say that there was a single ongoing contract even although pension rights were not transferred.
36. As I read Lord Hope's judgment, he is rejecting that fundamental premise. He states, in the last sentence of paragraph 22, that Lord Slynn's approach provides no assistance in determining what constitutes "employment" in the context of a TUPE transfer. This is in my view extremely important because it suggests that Lord Hope was not accepting the analysis adopted by the Court of Appeal, and which was constrained by the arguments advanced before that Court. Had Lord Hope intended to accept the judgment of Pill LJ, he could have stated so in terms and his speech would surely have been considerably shorter.
37. Second, Lord Hope asks whether the meaning which would otherwise be given to the concept of employment should alter in the light of the protections now afforded by TUPE. I take this to be a response to an argument from Mr Cavanagh, which is reflected in the Court of Appeal judgment at paragraph 16 and was no doubt repeated in their Lordships' House, to the effect that the relevant construction of section 2(4) must now take account of TUPE. I take Lord Hope in paragraphs 25-26 to be rejecting the notion that TUPE has in any way altered the construction of section 2(4). The concept of employment must be given the same meaning after TUPE as it would have been given absent TUPE.
38. Moreover, it seems to me that the last sentence of paragraph 25 is clear; the subsection, says Lord Hope, cannot mean different things depending on which part of TUPE is in play. In my judgment this is unambiguously stating that the distinction which was being advanced by the parties before the Court of Appeal, which that Court accepted, and which depends on whether the right is or is not transferred, cannot be sustained.
39. If the speech ended there, I suspect that there could be little doubt as to its rationale. However, Ms McNeill strongly runs two arguments against this analysis. The first is that Lord Hope emphasises in the last sentence of paragraph 26, and indeed elsewhere in his speech, that he is concerned with the effect of the equality clause relating to occupational pension rights. She submits that this is the context in which the whole speech should be read. However, it seems to me that this is simply an accurate statement of the legal effect in the particular context before him; it does not in any way undermine or alter the reasoning underpinning his analysis.
40. The second and arguably more powerful argument is that in paragraphs 27 and 28 Lord Hope does appear to be linking the time limit with the employer to whom the liability belongs. He has acceded to an argument of Mr Jeans that it would be unjust to allow time to run from a date which has nothing to do with the claim in question. Moreover, his Lordship stated in terms that:

"the best way of achieving the purpose of the time limit is to link it as closely as possible to the liability which is the subject of the claim."

41. However, whilst at first blush this may seem to support Ms McNeill's argument, I am not sure that it does. The liability which is the subject of the claim can sensibly be said to be the liability against the transferor. TUPE does not affect the nature of that liability; it merely shifts the burden of the party which ultimately has to bear the cost. That construction of the concept of liability would fit with the earlier passages in the speech.
42. But even if that is wrong, and paragraphs 27 and 28 do contradict the earlier passages, in my judgment they do not undermine the basic rationale of the judgment. They are presented as no more than supporting policy reasons for the conclusion which was reached by applying the principles enunciated in the earlier paragraphs. Moreover, as Lord Hope himself recognised, to an extent the policy arguments cut both ways. I do not think that they can be allowed to cast doubt on what is otherwise a clear and unambiguous statement of the relevant legal principles.
43. I would also observe that in practice indemnities are often secured from the transferor for any liabilities which are outstanding on transfer. This would to a significant extent mitigate against adopting a policy argument which relies on assumptions as to where the ultimate liability for transferred rights lies.
44. Accordingly, in my judgment the effect of Powerhouse is that the six month time limit runs from the date of transfer itself for all equal pay claims which derive from the equality clause with the transferor, at least with respect to alleged breaches by the transferor. This is so whether liability for breach transfers pursuant to TUPE or not.

Does the equality clause transfer?

45. I turn to the alternative submission that the equality clause itself transfers from the transferor to transferee. This ground is premised on the assumption that the claimants' argument on the scope of Powerhouse is wrong and that Powerhouse requires the claim for breach of the equality clause with the transferor to be brought within six months of the ending of the employment with the transferor. It is submitted that nevertheless this is of no relevance where there is a separate and independent claim against the transferee. That was not the position in either Powerhouse or Unison v Allen but it is precisely the effect of TUPE here; the obligation to respect the equality clause transferred to the transferee and was not honoured by him.
46. The submission is that the terms and conditions of employment are automatically varied as a result of the equality clause as soon as the conditions for its application arise. Accordingly, even if there has been no formal tribunal determination, the effect of the clause is to bring the pay of the claimant up to that of the comparator, and it is this term which is automatically transferred to the transferee as a result of contractual rights being transferred on transfer. Thereafter, the transferee is under a continuing obligation to honour those terms. That continues to be the right of the claimant as against the transferee until the contract is lawfully varied or terminated. The fact that the comparator was not transferred would not affect the continuing application of the clause; it merely prevents any continuing comparison with the employee of the transferor.
47. Reliance is placed on the following observation of Phillips J giving the judgment of the EAT in Sorbie v Trust House Forte Hotels [1976] IRLR 371 (para 9):

"One then goes on to see what the effect as prescribed is, and it is that that term, so identified, in the appellants' contracts shall be treated, as so modified, as not to be less favourable. It seems to us that the way it is treated, as so modified, as to strike out 85p and to substitute 97 1/2p. ……In other words, once the section is applied and the contract is modified, there is then a contract providing remuneration at that rate. It seems to us that the true way of looking at it is that that contract remains so modified until something else happens, such as a further agreement between the parties, a further collective agreement, or a further statutory modification by reason of a further operation of the equality clause."

48. In addition certain observations of HH Judge Ansell giving judgment for the EAT in the case of Armstrong v Newcastle Upon Tyne Hospital Trust UKEAT/0158/04 were prayed in aid:

"Miss Tether argued that the language of Section 1 (2) of the Equal Pay Act 1970 made it clear beyond doubt that the Equality Clause operates to modify individual terms of the contract of employment; it did not simply float over the contract until a claim was made. She relied on the words "that term of the woman's contract should be treated as so modified."

49. Accordingly, it is submitted that once the equality clause has bitten, it is transferred automatically following a TUPE transfer and can thereafter be relied upon against the transferee. The time limit is therefore to be determined on the basis that the claim is against the transferee.
50. Ms McNeill seeks to support this argument by contending that it is consistent with the purpose behind TUPE, which is to safeguard employee rights on a transfer. The employee is transferred with all her contractual rights intact and that right should be fully protected after the transfer. She relies upon certain observations of Lord Justice Peter Gibson in Bernadone v Pall Mall Services Group [2000] IRLR 487 to the effect that TUPE must not be construed so as to deprive an employee of rights he would have had if he had continued in the employment of the transferor. It would be wholly inconsistent with that principle, submits Ms McNeill, if transferring the cause of action by a TUPE transfer started time running.
51. I also record that Ms McNeill advanced an argument in her skeleton argument, but not developed orally, relying on the principle of EU law that rights derived from EU law should not be treated less favourably than corresponding domestic law rights. A comparison is made between the time limits for certain breach of contract claims following a TUPE transfer made pursuant to the Employment Tribunals (Extension of Jurisdiction) Order 1994 and for claims under the equality clause as contended for by the employers. Ms McNeill submits that the latter would be less favourable. I am not satisfied that the contract claim can properly be described as a purely domestic right. In any event, this was not an argument run below; I heard no submissions on it from either party, and in the circumstances I do not think it appropriate that I should deal with it.
52. Sodexo's principal response to this argument can be summarised as follows:

(1) A proper analysis of the decision of the House of Lords in the Powerhouse case demonstrates that any equal pay claim made with respect to the transferor of a business must be made within 6 months of the date of transfer. The principle applied in Powerhouse was applicable to all claims under the equality clause; it was not simply a special case because pension rights were in issue; nor was the principle limited to cases where the only direct breach of the law was by the transferor. The effect of Powerhouse is that employment with the transferor and transferee should be treated as two separate employments within the meaning of section 2(4).

(2) Unless the claimants established their rights under the equality clause against the transferor, there was no basis on which they could establish their claims against the transferee. It is conceded that they could not do so by a direct application of the equal pay principles with respect to these comparators since the comparators had not been transferred to the transferee.

(3) The Tribunal was in error in treating the equality clause itself as transferred. What was transferred were the terms and conditions which resulted from the application of the equality clause. But they could not transfer in the abstract. They could only be relied upon where the claimants had first obtained a determination as to the effect of the equality clause. It was that determination which modified the contract so as to confer upon the claimants the same terms and conditions as her chosen comparator. Until that was done there was nothing to transfer.

(4) Accordingly, any claim against the transferee for breach of the terms is dependent on the claimants being able to establish a valid claim against the transferor for breach of the equality clause with respect to comparators employed by him. No valid claim can be lodged against the transferee once the time for claiming against the transferor is lost.

(5) If the claimants were right, it would distort the purpose of TUPE. The equality clause entitled a woman to compare herself with comparators in the same employment. The effect of TUPE is that after the transfer she can compare herself with employees of the transferee. However, the effect of the claimants' argument is that she could also after the transfer continue to compare herself with the transferor's employees. That does not simply involve preserving her rights on transfer; it gives her more favourable rights as a result of the transferor, which is inconstant with the purpose of TUPE: see Jackson v Computershare Investor Services Ltd [2008] IRLR 70.

53. I accept the claimants' submission that the equality clause does not simply hover over the employment relationship between an employer and employee; it bites once the conditions for its application are met. That does not however, take the claimants' case very far. If the right is disputed or dishonoured, it is nonetheless necessary to enforce that right within the appropriate time scale. If I fail to sue for a breach of contract in time, I may be correct in asserting that there always was a breach of contract, but it benefits me nothing if I make my claim too late. Similarly here; the fact that the contractual right is conferred automatically once the conditions for the application of the equality clause are met does not tell us anything about the time limits for giving effect to that right if it is disputed.
54. Nor do I think it is accurate to say that the equality clause itself has been transferred. If that were so it would mean that comparison could continue to be made with the employees of the transferor, but nobody suggests that is the case. If it were then it would be conferring more favourable terms after the transfer than had existed before. A claimant could retain comparison with her old colleagues and also with the employees of the transferee. Equally, however, I disagree with Mr Bowers that it would be more favourable to employees if they are entitled to enforce such rights as they had at the time of transfer.
55. In my judgment, the true position after the transfer is that the claimant is enforcing a contractual right which is derived from the equality clause operating with respect to the transferor. She could enforce against the transferee such terms as were enforceable against the transferor. The issue is, therefore, what is the time limit for enforcing this particular contractual right, and is it relevant that it is derived from a contractual term arising out of employment with another employer which it would now be too late to enforce against that employer?
56. I have not found this altogether easy. If the right is analysed as simply akin to any other contractual right but independent of the equality clause (because not directly related to the equality clause with respect to the transferee) then the Employment Tribunal does not even have jurisdiction to deal with that contract claim whilst the employee is still employed. (On the other hand, it seems likely that the claim could be taken in the ordinary courts for breach of contract, and there is a power for that court to transfer any issue concerning an equality clause to an employment tribunal and to stay proceedings in the interim: see section 2(3) of the Equal Pay Act. If that is so, then this debate is somewhat artificial in any event.)
57. Alternatively, if the fact that the term is linked only to the equality clause with the transferor means that it falls within the structure of the Equal Pay Act but that the time limits must be those for enforcing rights against the transferor, the consequence would be surprising. It would mean that an employee would be out of time for seeking to enforce a contractual right whilst still employed by the very same employer who, it is alleged, is in continuing breach of that right. That would be a strange result and would in my view be inconsistent with the fundamental purpose underlying TUPE. The employee would be worse off as a result of the transfer. Accordingly, whilst it is not in my judgment strictly accurate to say that the equality clause itself transfers, the contractual liability derived from it transfers and in my judgment the employee must be entitled to enforce that right as if it had arisen under an equality clause with the transferee.
58. In short, in my judgment, regulation 5(2) transfers two kinds of relevant liabilities with respect to the equality clause. First, there is the liability for what was done (or not done) by the transferor prior to the transfer. Liability for such acts is transferred under TUPE regulation 5(2). However, the time limit for enforcing that claim is, following Powerhouse, six months from the date of transfer. The transferee stands in the shoes of the transferor, but this does not alter the time limits applicable to those claims. Accordingly the claimants are too late to enforce that aspect of their claims.
59. Second, there is a continuing liability to honour the contractual terms in place at the point of transfer and this placed an obligation on the transferee personally to fulfil those contractual obligations. This liability transfers under TUPE regulation 5(1). In so far as reliance has to be placed on the equality clause as it operated with respect to the transferor in order to establish the contractual right that has been transferred under TUPE, that clause must be deemed to have transferred also. The relevant employment under section 2ZA is therefore the employment with the transferee.

The alternative argument.

60. I finally turn to Sodexo's alternative argument. It is submitted that the equality clause operates only during the period when the applicant and her chosen comparator are in the same employment. Section 1(2)(c) makes it clear that the right to the equality clause is triggered only where that condition is met. Accordingly, so the argument goes, since the comparator was no longer in the same employment following the transfer, then the right to the comparator's pay came to an end.
61. It is to be noted that this argument has very much wider ramifications than simply applying to this case. Nor indeed would it be limited simply to cases involving transfers of undertakings. If correct, it would mean that a woman would lose her right to the enhanced pay she had secured under the Equal Pay Act if the comparator is promoted or leaves the company. In this connection Mr Bowers relies upon the observation of Phillips J in the Sorbie case (see above, para 47) in which he said that the contract would remain modified by the equality clause "until something else happens". He submits that the transfer of an undertaking is such an event that brings the operation of the equality clause to an end.
62. I have no doubt at all that this analysis is wholly misconceived. It misunderstands the way in which the equality clause operates. The identification with a comparator is necessary to demonstrate that there is discrimination on grounds of sex. Once the discrimination is established, the woman is entitled to receive what the man is paid. That is the proper non-discriminatory rate for the job. She does not just receive that increase for the period for which the man receives it, only to have her pay reduced again to the "woman's rate" if and when he ceases to be a comparator.
63. Common employment is necessary to establish the enhanced contractual terms, but not to maintain them. Of course, a woman cannot continue to compare herself with the man once he ceases to be a comparator, but she does not lose such enhanced rights as have already been incorporated into her contract. Those rights are by then crystallised and she remains entitled to enforce them as a term of the contract. It would be wholly at odds with the purposes of the Equal Pay legislation if the woman could receive the male rate only whilst the male was employed on equal work.
64. In my judgment, this analysis is confirmed by a number of indications. First, in the Sorbie case itself, on which Mr Bowers relies, an argument along precisely these lines was rejected by the Employment Appeal Tribunal. A female waiter had been employed on like work with a man who was subsequently promoted to banqueting supervisor. It was argued that since they were no longer employed on like work the female was not entitled to the higher pay. The EAT rejected that submission. I have no doubt that the reference to "until something else happens" in the part of the judgment extracted above, simply means until there is some event which either terminates or modifies or varies the woman's contract of employment. The transfer of an undertaking is not, in my judgment, such a "relevant event".
65. Second, the argument seems to me to be inconsistent with the decision of the European Court of Justice in Macarthys v Smith [1980] ICR 672. The court held that a woman could compare herself with a predecessor in the job. I do not see how this would be possible if Mr Bowers' argument were correct. It would mean that if the claimant followed the comparator into the job then she would be entitled to equal pay. However, if they were employed together and he then left, she would cease to be so entitled. However, his successor would be so entitled. There is no conceivable logic in that analysis.
66. Third, it would lead to extraordinarily complex results. Not only would the pay fluctuate as and when the comparator was created or removed, but there would be considerable difficulty in determining quite what the pay should be. Take the case of the woman who was employed on the same terms as the comparator for, say five years. If he then left, would she go back to the pay she was receiving five years ago? Or would there be some allowance for pay increases in the interim, and if so, what?
67. I have no doubt that this submission is wrong and I reject it.

Conclusions.

68. It follows that, in my judgment, the claimants can enforce their equal pay claims insofar as they relate to the failure by the transferee to honour their contracts, but it is now too late to claim with respect to the liability incurred by the transferor before the transfer.