Hosso v European Credit Management Ltd [2011] EWCA Civ 1589

[2011] EWCA Civ 1589Case No A2/2011/0331
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE EMPLOYMENT APPEAL TRIBUNAL
HHJ PETER CLARK
UKEAT/0475/09/CEA
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 20/12/2011
Before
LORD JUSTICE MUMMERYLORD JUSTICE STANLEY BURNTONLORD JUSTICE PATTEN
Between
MS ANDREA HOSSOAppellantEUROPEAN CREDIT MANAGEMENT LIMITEDRespondent
Michael Ford and Rohan Pirani (instructed by City Law Financial LLP) for AppellantRobin Allen QC and Oliver Isaacs (instructed by Berry Smith LLP) for RespondentHearing Hearing date: 3 November 2011
Judgment
[1]This is an appeal by Andrea Hosso, the appellant, against the decision of the Employment Appeal Tribunal (His Honour Judge Peter Clark, Mrs R Chapman and Mr D Jenkins OBE) (“the EAT”) dismissing her appeal against the decision of the Employment Tribunal and allowing the respondent’s cross appeal.[2]Sadly, the issues before the Tribunals and this Court concerned not the substantive merits of her complaint against her former employer, the respondent, but whether her claim was properly brought under the Equal Pay Act 1970 (“the EPA”) rather than the Sex Discrimination Act 1975 (“the SDA”). This was because it was conceded before the Employment Tribunal (I have no reason to believe wrongly) that her claim under the SDA had been brought out of time.[3]Sadly, also, it seems to me that the issues to be determined on the narrow but crucial question of the jurisdiction of the Employment Tribunal (to which I shall refer as “the Tribunal”) to entertain the appellant’s claim under the SDA were not properly analysed or formulated either before the Tribunal or before the EAT. The result is that my judgment bears little relationship to those of the Tribunal and the EAT.

The facts

[4]The respondent is a fund management company. The appellant entered its employment as a research analyst in September 2002 under the terms of a contract of employment signed on 12 July 2002. She later became a Senior Research Analyst. She received a fixed salary, rising to £125,000 a year by the time of her resignation in 2007, plus annual bonuses. This appeal is not concerned with her salary or her bonuses.[5]In 2003, the respondent established a share option scheme. It is not referred to in the appellant’s contract of employment, and the Tribunal did not find that there was a relevant term of her contract of employment incorporating or referring to the scheme.[6]The scheme was, of course, in writing. Its rules defined eligible employees, of which the appellant was one. It defined the duration of the options granted under the scheme: generally, they had to be exercised within 40 days of the termination of employment, failing which they lapsed. Rule 2 stated that the grant of options under the scheme was “for commercial reasons in order to recruit and/or retain certain employees”. Rule 3 was as follows:
“(a) Subject to Schedule 5 and subject to these Rules, the Board, acting for an on behalf of ECM, may grant any Eligible Employee an Option over such number of Shares at such Option Price and with such conditions of exercise as they may determine. (b) An Option shall be granted in accordance with the provisions of Schedule 5. (c) Options shall only be granted to individuals who are Eligible Employees.”
[7]The reference to Schedule 5 was to Schedule 5 of the Income Tax (Earnings and Pensions) Act 2003. Options granted under a scheme complying with Schedule 5 have distinct tax advantages. Paragraph 1(3) of the Schedule provides that its requirements include:
“(c) that the individual to whom it is granted is an eligible employee in relation to that company …, (d) that the option is granted to the employee by reason of the employee's employment— (i) with that company, or (ii) if that company is a parent company, with that company or another member of the group, …” (i) with that company, or (ii) if that company is a parent company, with that company or another member of the group, …”
[8]The appellant was an eligible employee. She was granted share options for each year in which the scheme operated, between 2003 and 2006, but not as many as her male comparator, Mr Apsbury. The difference formed the basis of her claim. In her Form ET1, she alleged:
“… The Respondent was under a statutory duty to operate the [share option] scheme in a non discriminatory manner and to ensure, in particular, that disproportionate awards of share options were not made to those carrying out work of a broadly similar nature to the Claimant. In breach of its duty the Respondent in fact operated the Scheme in a discriminatory manner …”
[9]Although this was the language of a statutory tort, i.e. that of the SDA, rather than of breach of contract, which is the remedy conferred by the EPA, the claim was treated as advanced under both, until the appellant conceded that her claim under the SDA was out of time.

The decisions of the Tribunal and EAT

[10]Before the Tribunal and the EAT, attention was focused on section 6(6) of the SDA. So far as is relevant, section 6 was at the material time (having since been repealed by the Equality Act 2010) as follows: “(2) It is unlawful for a person, in the case of a woman employed by him at an establishment in Great Britain, to discriminate against her-(a) in the way he affords her access to opportunities for promotion, transfer or training, or to any other benefits, facilities or services, or by refusing or deliberately omitting to afford her access to them, or(b) by dismissing her, or subjecting her to any other detriment. …. (6) Subsection (2) does not apply to benefits consisting of the payment of money when the provision of those benefits is regulated by the woman’s contract of employment.” (a) in the way he affords her access to opportunities for promotion, transfer or training, or to any other benefits, facilities or services, or by refusing or deliberately omitting to afford her access to them, or (b) by dismissing her, or subjecting her to any other detriment.[11]It was assumed that the grant of share options was the payment of money for these purposes. It seems also to have been assumed that if the grant of the appellant’s options were “regulated by [her] contract of employment” within the meaning of section 6(6), and therefore excluded from the scope of section 6(2) of the SDA, her claim lay under the EPA, on the basis that these statutes are to be read together and should be interpreted as covering the whole field of discrimination in employment.[12]In their reasons for their decision upholding the appellant’s claim under the EPA, the Tribunal stated that it had had regard to the judgment of the Court of Session in Hoyland v Asda [2006] IRLR 46. However, I am unable to discern from their reasons what they considered to be the meaning and effect of section 6(6), or the basis for upholding the claim under the EPA.[13]The EAT allowed the employer’s appeal. Their reasons are in paragraph 24 of their judgment, given by His Honour

Judge Peter Clark:

“… Assuming in the Claimant’s favour that the allocation of share options is a benefit, with a monetary value, amounting to deferred pay provided to the Claimant by virtue of her eligibility for the scheme as a result of her employment with the Respondent, the question still remains whether the provision of that benefit is regulated by her contract of employment. In that respect, her case fails on two grounds, each of which is fatal to her contention that this claim is properly brought under the Equal Pay Act. First, the share option scheme was not, on the Employment Tribunal’s findings of fact, incorporated into the Claimant’s contract of employment. However, even if it was so incorporated, the scheme was genuinely discretionary as to the number of shares, if any, which the relevant director decided to allocate to her in any one year. The position here is wholly different from the bonus scheme in Hoyland. There, the facts found by the Employment Tribunal, recited at para 12 of the judgement of Bean J, indicate a clear entitlement to a fixed amount by way of bonus for all eligible employees, including the claimant. That is not the case here. On this Employment Tribunal’s findings this was a wholly discretionary scheme. We agree with the Employment Tribunal’s statement of the law at para 6.3 of their Reasons. This was a genuinely discretionary element of ‘pay’ which was not covered by the Equal Pay Act, since it was not, on any view, regulated by the contract of employment.”

The parties’ contentions before us

[14]For the appellant, Mr Ford contended that the appellant’s right to share options was regulated by her contract of employment. In his oral submissions he put her case in three ways:(1) Her contract of employment was a pre-requisite of entitlement under the scheme, and in this sense her right was regulated by the contract.(2) Her contract of employment regulated her eligibility under the scheme and the duration of options granted under it: the duration of the options was regulated by the duration of her contract of employment. The options expired 40 days after the termination of the employment contract.(3) The implied term of trust and confidence, implied in her contract of employment, required the discretion conferred by the scheme to be exercised in a non-discriminatory manner, and thus regulated the benefits she received under the scheme.[15]The first of these ways of putting the appellant’s case appears to be supported by the decision of the Court of Session in Hoyland v Asda. That case concerned a discretionary bonus scheme. Giving the judgment of the Court, Lord Johnston said:
“[14] In seeking to resolve this matter we consider that the important word in section 6(6) is "regulated". While we recognise that the word "discretionary" is used by the employer in referring to the bonus scheme, that can be construed as relating only to the amount being paid in any one year and we recognise that the Tribunal found, as a matter of fact, that every employee received a bonus. We have no doubt that that entitlement, if it be such in law, arose out of the contract of employment and is regulated by it in the sense that but for the existence of the contract of employment the bonus would not be paid and it is therefore being paid as a consequence of its very existence. It does not seem to us to be necessary for section 6(6) to have any application in a given situation that the entitlement in question should be part of the formal contract of employment. This conclusion reflects the dichotomy between equal pay and equal treatment, and avoids an employer being exposed to double jeopardy. [15] We are therefore in no doubt that the employment tribunal and the Employment Appeal Tribunal reached the correct decision in construing the arrangements for bonus payments in respect of the appellant as falling within the terms of section 6(6) and thus excluding any claim for sex discrimination under the 1975 Act.”
[16]If Lord Johnston was stating that any benefit consisting of the payment of money that is given only to employees is regulated by their contract, without more, I would respectfully disagree. If Parliament had intended section 6(6) to exclude benefits received by an employee as such, irrespective of the terms of his or her contract, it would have used very different and simpler words, such as those found in Schedule 5, “granted to the employee by reason of the employee's employment”. Moreover, as Mr Allen pointed out, since section 6 only applies to employees, if subsection (6) is given this interpretation, it deprives the remainder of the section of any effect.[17]To my mind, a benefit may be said to be regulated by a contract of employment, in the normal and literal meaning of the words, if the express or implied terms of the contract govern the right to, or at least eligibility for, the benefit, and probably also its amount. But I do not think that Lord Johnston intended to hold otherwise. As Judge Clark pointed out, his judgment must be read in the context of the facts of the case, which are to be found in the judgment of the EAT, given by Bean J, and reported at [2005] UKEAT 0058_04_2202 [2005] ICR 1235. Bean J set out the ET’s relevant findings of fact at paragraph 12 of his judgment:
“As to the suggestion that the bonus was a non-contractual payment, [the ET] said at para 27:- ‘In the present case the decision about whether the applicant should receive her bonus in full was regulated by the bonus scheme. If the applicant complied with the rules of the bonus scheme she was entitled to be paid the bonus. This was not a matter left to the discretion of the employers. In addition, the amount of bonus to be paid was not discretionary within the terms of the scheme. For the purposes of work undertaken during 2002, the bonus scheme formed part of her contract of employment. The claimant appeared to acknowledge the contractual status of the bonus by referring to it as a right connected with her employment contract and by comparing her right to a bonus with other contractual rights such as annual leave and accrual of occupational pension rights, as in the case of Boyle v Equal Opportunities Commission (Case C-411/96) [1999] ICR 360’” ‘In the present case the decision about whether the applicant should receive her bonus in full was regulated by the bonus scheme. If the applicant complied with the rules of the bonus scheme she was entitled to be paid the bonus. This was not a matter left to the discretion of the employers. In addition, the amount of bonus to be paid was not discretionary within the terms of the scheme. For the purposes of work undertaken during 2002, the bonus scheme formed part of her contract of employment. The claimant appeared to acknowledge the contractual status of the bonus by referring to it as a right connected with her employment contract and by comparing her right to a bonus with other contractual rights such as annual leave and accrual of occupational pension rights, as in the case of Boyle v Equal Opportunities Commission (Case C-411/96) [1999] ICR 360’”
[18]Clearly, therefore, the employee’s right to a bonus was governed, and both her right to it and its amount, regulated in the fullest sense of the word by her contract of employment.[19]The second and third ways in which Mr Ford put the appellant’s case on section 6(6) are more promising. Neither was relied upon below, and we have no relevant findings of fact. However, his second contention is based on documents in evidence, and his third raises a question of law.[20]Mr Allen’s response to Mr Ford’s submission was to refer the Court to provisions of the EPA that had not previously been addressed, either in the decisions below or in the skeleton arguments before us. The jurisdiction of the Tribunal in respect of claims under that Act is conferred by section 2. Clearly, it does not help the appellant to raise an argument as to the construction of section 6(6) of the SDA unless her claim under the EPA is one that the Tribunal has jurisdiction to entertain. Mr Allen accepted, indeed contended, that the two Acts must be read together, and that discrimination by an employer should be subject to one or the other. But he submitted that the terms of section 2 of the EPA are clear, and that there is no basis for an interpretation that would be consistent with the ET having jurisdiction under that Act in the present case. In effect, whatever the meaning and effect of section 6(6), it does not assist the appellant. In essence, Mr Allen submitted that the jurisdictional issue had been looked at from the wrong end, from the provision removing the case from the scope of the SDA rather than at the provision conferring jurisdiction on the ET under the EPA.[21]Since Mr Ford had not had a sufficient opportunity to consider Mr Allen’s submissions, the Court gave Mr Ford permission to make further submissions in writing, to which Mr Allen could respond. In his written submissions, Mr Ford emphasised that it would be inappropriate for the claim of an employee to depend on whether it relates to a breach of a contract term or the exercise of a contractual discretion. He submitted that once a decision was made by the board of the respondent to award share options, there was an express or implied term of her contract requiring the respondent to give her those options, on which the equality clause could bite.

Discussion

[22]At this point, it is necessary to set out the relevant provisions of sections 1 and 2 of the EPA, as they were at the relevant time: “1. Requirement of equal treatment for men and women in 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— (a) where the woman is employed on like work with 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, and (ii) if (apart from the equality clause) at any time the woman’s contract does not include a term corresponding to a term benefiting that man included in the contract under which he is employed, the woman’s contract shall be treated as including such a term; (b) where the woman is employed on work rated as equivalent with that of a man in the same employment— (i) if (apart from the equality clause) any term of the woman’s contract determined by the rating of the work 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, and (ii) if (apart from the equality clause) at any time the woman’s contract does not include a term corresponding to a term benefiting that man included in the contract under which he is employed and determined by the rating of the work, the woman’s contract shall be treated as including such a term. [Subsection (c) omitted](3) An equality clause shall not operate in relation to a variation between the woman’s contract and the man’s contract if the employer proves that the variation is genuinely due to a material factor which is not the difference of sex and that factor— (a) in the case of an equality clause falling within subsection (2)(a) or (b) above, must be a material difference between the woman’s case and the man’s; and (b) in the case of an equality clause falling within subsection (2)(c) above, may be such a material difference. 2. Disputes as to, and enforcement of, requirement 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. (1A) Where a dispute arises in relation to the effect of an equality clause the employer may apply to an employment tribunal for an order declaring the rights of the employer and the employee in relation to the matter in question. …” (a) where the woman is employed on like work with 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, and (ii) if (apart from the equality clause) at any time the woman’s contract does not include a term corresponding to a term benefiting that man included in the contract under which he is employed, the woman’s contract shall be treated as including such a term; (b) where the woman is employed on work rated as equivalent with that of a man in the same employment— (i) if (apart from the equality clause) any term of the woman’s contract determined by the rating of the work 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, and (ii) if (apart from the equality clause) at any time the woman’s contract does not include a term corresponding to a term benefiting that man included in the contract under which he is employed and determined by the rating of the work, the woman’s contract shall be treated as including such a term. [Subsection (c) omitted] (3) An equality clause shall not operate in relation to a variation between the woman’s contract and the man’s contract if the employer proves that the variation is genuinely due to a material factor which is not the difference of sex and that factor— (a) in the case of an equality clause falling within subsection (2)(a) or (b) above, must be a material difference between the woman’s case and the man’s; and (b) in the case of an equality clause falling within subsection (2)(c) above, may be such a material difference.[23]In order for the appellant to have a claim for which the ET has jurisdiction under section 2, she must show that it is a claim for contravention of a term of her contract of employment (the “woman’s contract”) that was modified or included by virtue of the equality clause. The judgments of the House of Lords in Hayward v Cammell Laird (No. 2) [1988] AC 894 emphasise the need to identify that term. No breach of any such term was alleged below. Indeed, it was not suggested that there was any such term. Leaving aside this procedural point, which is not without its merits, the evidence is clear that there was no difference between the terms of the share option scheme in relation to the appellant and those relating to Mr Apsbury. There were standard written terms of the scheme. Quite apart from the question whether the scheme was incorporated in the appellant’s contract of employment, therefore, she is unable to show that there was any term of any relevant contract that was less favourable than the corresponding term of any of Mr Apsbury’s contracts (section 1(2)(a)(i) of the EPA) or that any contract of his included any relevant term that was absent in any contract of hers (section 1(2)(a)(ii)). Hence the equality clause included by section 1(1) of the EPA had no operation. If so, there was no valid claim for the contravention of any term modified or included by the equality clause, and therefore no claim within the jurisdiction of the ET under section 2.[24]The implied term suggested by Mr Ford in his response to Mr Allen’s submissions is an unnecessary implication into the contract of employment. Moreover, he seeks to insert into the appellant’s contract of employment a term resulting from the exercise of the employer’s discretion under the option scheme in circumstances in which the ET, having been asked to make a finding that the terms of the option scheme were incorporated into her contract of employment, made no such finding. If his submission were well founded, it would be difficult to see any scope for section 6(2) of the SDA.[25]What the appellant was complaining of was not a difference in contract terms, but a difference in the exercise of a discretion conferred by a standard contract. Such a claim must be made under the SDA.[26]Having taken into account the provisions of sections 1 and 2 of the EPA, I can return to the second and third ways that Mr Ford put the appellant’s case in his oral submissions. So far as the second is concerned, the terms of the share options under the scheme referred to the appellant’s contract of employment: her eligibility was dependent on her having such a contract, and the duration of the options was defined by reference to the duration of her contract of employment. But, as I have already mentioned, these facts do not give rise to a claim within section 2 of the EPA.[27]Lastly, Mr Ford’s third basis was a claim for breach of the implied term requiring the employer to act in good faith and in a non-discriminatory manner. This term was equally part of Mr Apsbury’s contract. It was not included or modified by virtue of the equality clause, and any claim for its contravention is outwith the jurisdiction of the ET under section 2.[28]It follows that I would dismiss this appeal.[29]I can now venture to address the effect of section 6(6) of the SDA. I do not think that a benefit that is conferred by an exercise by the employer of a discretion under a contract of employment is “regulated” by the provisions of that contract. In such a case, the contract does not regulate the benefit. If, however, the contract determines the amount of benefit to which the employee is entitled, the provision of that benefit is regulated by it. If its provisions confer on the woman employee a right to a lesser benefit than her male equivalent, the equality clause will modify her contract to confer an equal benefit on her, and the employer’s failure to honour her contract so modified will be a contravention of a term of her contract so modified within the scope of section 2(1) of the EPA. If her contract contains no provision entitling her to a relevant benefit, and her male equivalent’s contract includes such a provision, the equality clause will deem that provision to be included in her contract, and again any failure of the employer to honour the term included by the equality clause will give rise to a claim under section 2(1) of the EPA, rather than the SDA: her benefit under the included clause is regulated by her contract of employment as varied by the equality clause.[30]Lastly, I would venture to suggest that the relatively complex division of jurisdiction between the SDA and the EPA, when there are different limitation periods applicable to claims under them, was a trap for the unwary and unsophisticated that should not have found a place in employment law, which should be straightforward and accessible. I accept Mr Ford’s comments on the undesirability of distinctions such as those addressed in this appeal. However, the difficulties to which he has referred were inherent in the division of regulation in employment cases between these two statutes. In essence, the appellant’s claim has failed, if it was otherwise well-founded, simply because she failed to commence her proceedings in the Tribunal within the time required by the SDA. Lord Justice Patten[31]I agree. Lord Justice Mummery: Introduction[32]This appeal raises an equal pay point.[33]The frontiers of(a) the Equal Pay Act 1970 (the EPA) and its impact on employment contracts and(b) the Sex Discrimination Act 1975 (the SDA) and its impact on non-contractual pay differences are relatively unexplored territory. In this case the alleged sex discrimination in pay stems from the discretionary allocation, over a period of three years, of share options to female and male employees under their employer’s Share Option Scheme. Does the discrimination claim have to be brought under the SDA? Or can it be brought under the EPA?[34]Although the EPA was passed 5 years earlier, both the EPA, as amended, and the SDA came into force on the same date (29 December 1975). Together the two Acts (since replaced by the Equality Act 2010) constituted a single code for the elimination of discrimination on the ground of sex. Their broad aim was the same, but the legislative frameworks were different. One difference was that the SDA did not apply to contractual pay. That fell under the EPA. The legislative technique adopted in the EPA involved identifying the source of the inequality in the treatment of employees by first considering the discriminatory effects of the relevant contractual employment term. It then modified the less favourable term by the device of inserting an equality clause in the contract of employment. The effect of the equality clause was that the relevant term was not less favourable than the contract of employment of a comparator of the other sex. In this way comparable contractual benefits for like work were to be equalised upwards.[35]As with any other contract the relevant contractual terms might be included in more than one document. They might also confer a discretion on the employer with regard to the employee’s contractual benefits.[36]In this judgment there is no need to repeat the summary of the facts or the judgments of the Tribunal and the EAT, or the relevant provisions of the EPA and the SDA, all of which are in the judgment of Stanley Burnton LJ. I gratefully adopt them.[37]The contentions of the parties that evolved in the Tribunal, in the EAT and in the course of the oral hearing in this court left me with some concerns about the outcome of the appeal. Neither the Tribunal nor the EAT had the benefit of all the detailed legal submissions advanced in this court by Mr Michael Ford, who now appears for the appellant, and by Mr Robin Allen QC, who now appears for the respondent. At the request of the court Mr Ford submitted additional written submissions dated 10 November 2011. Mr Robin Allen QC responded with additional written submissions dated 16 November 2011. The clarification of the arguments developed at the hearing and further developed in the additional written submissions have dispelled my doubts about the proper disposal of this appeal. I agree with Stanley Burnton LJ that the appeal should be dismissed. I am in broad agreement with his reasoning, but wish to say something in my own words.

Discussion

[38]The appellant’s grievance is that the respondent employer allocated fewer share options to her than to her male comparator. It was common ground in the Tribunal that(a) the appellant was employed on “like work” with her male comparator;(b) the allocation of share options was capable of being “pay” within the meaning of the EPA; and(c) there was a disparity in the number of share options allocated to the appellant and to her male comparator. That common ground smacks of an unequal pay complaint. The appellant had ticked the box in the ET1 for a claim of discrimination on the ground of “Sex (including equal pay)”. In the Tribunal the proceedings were treated as brought under either the EPA or the SDA, or both. In the circumstances one might be forgiven for thinking that the appellant’s claim was of a kind available to her under the EPA.[39]However, there is a jurisdictional problem, which has potentially serious consequences for the appellant. If the EAT is correct in its conclusion that the case can only be brought under the SDA, the appellant’s claim could not be decided on its merits, because it is also agreed that the appellant was out of time for bringing a sex discrimination claim in the Tribunal under the SDA (see s.76). She was in time for bringing an equal pay claim under the EPA (see ss. 2(4) and 2ZA), but, according to the respondent, the Tribunal had no jurisdiction under the EPA to hear and determine the claim relating to the discretionary allocation of the share options.[40]In the Tribunal and the EAT the spotlight was shone on s. 6(6) of the SDA, which excludes from proceedings under the SDA the provision of certain benefits consisting of the payment of money. It was common ground that the grant of the share options was “the payment of money” within s. 6(6). The issue on the construction of s.6(6) was whether the provision of benefits in the form of the discretionary allocation of share options was “regulated by the woman’s contract of employment”. If it was so “regulated”, and the Tribunal held that it was, the SDA jurisdiction was excluded and the jurisdiction over her claim was under the EPA; if it was not so regulated, and the EAT held that it was not, the jurisdiction over her claim was under the SDA, but it had become barred by the expiration of the time limit.[41]In this court Mr Robin Allen QC correctly points out that s. 6(6) was a provision which could operate to exclude the jurisdiction of the Tribunal under the SDA in specified circumstances: it was not a provision which conferred jurisdiction on the Tribunal under the EPA. To find a provision that conferred jurisdiction on the Tribunal under the EPA it was necessary to turn, not to s.6(6) of the SDA, but to s.2(1) of the EPA. That provided for a claim to be made in respect of a contravention of a contractual term modified or included by virtue of an equality clause. That approach to the allocation of jurisdiction as between the SDA and the EPA fitted in with s. 8(5) of the SDA. That provided that an act did not contravene s.6(2) of the SDA, if it contravened a term modified or included by way of an equality clause, or it would contravene such a terms but for the fact that the equality clause was prevented from operating by s.1(3) of the EPA. On that approach contraventions of contractual provisions were for the EPA and complaints of discriminatory non-contractual matters were for the SDA.[42]Mr Allen submits that the appellant’s real problem is that no contractual term governing the discretionary allocation of the share options by the respondent under its Share Option Scheme was ever established or even asserted by the appellant in the Tribunal. There was simply no pleaded or proven term in her contract of employment in respect of the allocation of share options.[43]The appellant’s assertion was that share options could be granted to her by the respondent in accordance with the Share Option Scheme. However, the allocation was discretionary and the respondent could choose not to exercise the discretion at all. Further, the terms of the Share Option Scheme were the same in relation to both the appellant and to her male comparator. There was no term in the appellant’s contract of employment that was or became less favourable than a similar term in the contract of her male comparator. There was therefore no term which the equality clause could operate to modify. The claim under the EPA must fail.[44]On Mr Allen’s analysis the appellant’s complaint was not about a breach of a modified contractual term, as referred to in s.2(1) of the EPA, or a term which “regulated” the provision of discretionary benefits (in the form of the grant of share options) within the exclusionary provisions of s.6(6) of the SDA. Rather, it was a complaint of discrimination about the way in which the respondent decided to exercise its discretion under the Share Option Scheme so as to allocate to her fewer share options than to her male comparator. That claim was not excluded from the SDA by s.6(6). It had to be made, if at all, under the SDA. However, it could not be made under the SDA, because the time limit for making that complaint had expired.[45]Mr Ford’s submissions seek to counter that unfortunate result by now relying on contractual terms that were not pleaded or proved before the Tribunal and therefore were not found by the Tribunal to be present in the appellant’s employment contract with the respondent.[46]Mr Ford’s starting point, as advanced in his submissions at the hearing, sounded more promising that it has turned out to be. He contended at the oral hearing that the exercise of the discretion to allocate to the appellant share options in any year would be controlled by an implied duty of trust and confidence or an implied obligation of good faith: Imperial Group Pension Trust Ltd v. Imperial Tobacco Ltd [1991] ICR 524 at 533D-E. Mr Allen could not and did not dispute that there was an implied duty of trust and confidence in the appellant’s employment contract, but pointed out that that same term was implied in the male comparator’s contract, and was not therefore capable of being modified in its terms by the EPA’s inclusion of the equality clause. The result was that there has not been any contravention of the equality clause in relation to that implied term.[47]In his additional written submissions Mr Ford contends also that, in relation to the three years in which the exercise of the discretion resulted in pay disparity, it was a term of the appellant’s contract that she be paid the options awarded to her. Once the discretion has been exercised to grant share options it is, according to Mr Ford, an express or implied term that the respondent’s employee is entitled to that benefit. It follows, he says, that the terms became less favourable to the appellant in each of the years in which she became entitled to the options granted to her. The equality clause implied by s. 1(1) of the EPA bit on this disparity in pay, so as to modify it upwards to the level of equalisation. The result was that the appellant was entitled to the same share options as her male comparator in each of the years.[48]Mr Ford commended this outcome(a) as sensible, in that all aspects of an employee’s remuneration are treated in the same way regardless of whether they are set out in the contract of employment or in other documents, agreements or schemes;(b) as ensuring that disputes as to pay within the meaning of Article 157 of the EU Treaty are channelled through the EPA route rather than the SDA route; and(c) as meaning that all contractual disputes in employment will fall under the EPA, leaving non-contractual disputes to the SDA.[49]In my judgment, the difficulty with this most recent re-formulation of the appellant’s submissions, which were not put to the Tribunal or the EAT or at the oral hearing of this appeal, is that there was no finding of fact by the Tribunal that the appellant’s employment contract contained a term relating to the discretionary allocation of share options(a) as a matter of express agreement, or(b) by reason of the incorporation of the Share Option Scheme in the appellant’s employment contract, or(c) as a matter of necessary implication on grounds of business efficacy. The suggested implied term is simply a reflection of the exercise of the employer’s discretion under the Share Option Scheme. The suggested implied term in the employment contract does not regulate the exercise of the employer’s discretion under the Share Option Scheme.[50]The combined effect of the limitation provisions in the SDA and of the limitation of the application of the EPA to contractual pay is unfortunate for the appellant in this case. Claimants under the SDA and /or the EPA and their advisors need to be aware both of the relevant time limits and of the clear, though somewhat confusing, line of demarcation between(a) the provisions affecting contractual equal pay claims, and(b) the provisions affecting equal treatment claims, even when all those provisions form part of a single anti-discrimination code.[51]On the facts of this case the discretionary allocations of the share options was not made under a term expressed or implied in the appellant’s contract of employment. It is therefore unnecessary to express a concluded opinion on the question discussed by Stanley Burnton LJ in paragraph [29] of his judgment whether a benefit conferred by an employer exercising a discretion under a term in a contract of employment is “regulated” by the provisions of that contract within the meaning of s.6(6) of the SDA. I prefer to leave that point open for decision if and when it actually arises on the facts of a future case.

Result

[52]I would also dismiss the appeal.

Cited in 1 later judgment