Scullard v Knowles & Anor [1995] UKEAT 1011_93_1810

EAT
Scullard v Knowles & Anor
[1995] UKEAT 1011_93_1810 · 1995-10-18
MR JUSTICE MUMMERY (PRESIDENT) This appeal raises a short and important point on the effect of European Community Law on key provisions of the Equal Pay Act 1970 ("the 1970 Act") relating to "associated" employers.The appeal is against the unanimous decision of the Industrial Tribunal held in Reading on 28th May 1993. As explained in Full Reasons notified to the parties on 18th October 1993, the Tribunal unanimously dismissed Mrs Susan Scullard's application under the 1970 Act. Mrs Scullard appealed by Notice of Appeal served on 29th November 1993. On the hearing of the appeal Ms Gill appeared for Mrs Scullard and Ms Hill for the Respondent, Southern Regional Council for Education and Training ("SRCET"). We are grateful to them for their assistance.

The Facts

The basic facts found by the Tribunal can be shortly summarised.(1) Mrs Scullard was employed in 1991 by SRCET as a Manager and Director of a Further Education Euro Unit. Mr Knowles, the other Respondent to the proceedings, is the secretary of SRCET.(2) There are 12 such Units in Great Britain, most of them attached to Regional Advisory Councils. Each Unit has a Manager or Director. All the Managers, with the exception of Mrs Scullard, are men and all receive higher salaries than she does for the same or similar work.(3) The Units are supported and funded by the Training and Education Directorate of the Department of Employment ("TEED") at Moorfoot, Sheffield. TEED monitors the performance of the contract in respect of each Unit, but does not employ any of Unit Managers. The Contract with SRCET is dated September 1991. Under it the Department agrees to re-imburse SRCET for items of expenditure up to a stated maximum for each item.Hence Mrs Scullard's complaint under the 1970 Act against SRCET and her reliance on the directly effective provisions of Article 119 of the Treaty of Rome and the Equal Pay Directive.

Provisions of the 1970 Act

Section 1 provides that -

"(1) If the terms of the contract under which a woman is employed at an establishment in Great Britain does 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."
"(6) Subject to the following sub-sections, for the purposes of this section - (a) ... (b) ... (c) two employers are to be treated as associated if one is a company of which the other (directly or indirectly) has control or both are companies of which a third person (directly or indirectly) has control,
and men shall be treated as in the same employment with a woman if they are men employed by her employer or any associated employer at the same establishment or at establishments in Great Britain which include that one and at which common terms and conditions of employment are observed either generally or for employees of the relevant classes."The definition of "associated employer" is the same as in S.153 of the Employment Protection (Consolidation) Act 1978.

Article 119 of the Treaty of Rome

Article 119 provides that -

"Each Member State shall during the first stage ensure and subsequently maintain the application of the principle that men and women should receive equal pay for equal work.
"For the purpose of this Article "pay" means the ordinary basic or minimum wage or salary and any other consideration, whether in cash or in kind, which the worker receives, directly or indirectly, in respect of his employment from his employer."
Equal pay without discrimination based on sex means:(a) That pay for the same work at piece rates shall be calculated on the basis of the same unit of measurement;(b) that pay for work at time rates shall be the same for the same job."

The Decision of the Industrial Tribunal

The Tribunal's Reasons for dismissing Mrs Scullard's claim may be summarised as follows:-(1) Neither SRCET nor the other Regional Advisory Councils are "companies" within the meaning of S.1(6) of the 1970 Act.(2) The Regional Councils cannot, therefore, be "associated employers". It follows that the comparators (ie the male Unit Managers employed by other Regional Advisory Councils) are not employed by associated employers for the purposes of S.1(6).(3) The comparators are not employed within the meaning of S.1(6) at establishments in Great Britain at which common terms and conditions of employment are observed either generally or for employees of the relevant classes.(4) Although there are Government connections, through funding by the Department of Employment, SRCET and the other Regional Advisory Councils are not under the control of the Secretary of State for Employment nor are they "emanations of the State" for the purposes of Community law.(5) There was no discrimination against Mrs Scullard on the ground of sex. She was not therefore able to establish a breach of Article 119 of the Treaty of Rome.

Submissions of SRCET

Ms Hill made the following submissions in opposition to the appeal.(1) Mrs Scullard was at all material times employed by SRCET, an independent voluntary association of Local Education Authorities established for the purpose of coordinating the work of Colleges of Further Education and the exchange of information about further education. (The Councils have since become incorporated as companies limited by guarantee).(2) There is no central bargaining body which provides common terms of employment or standard job descriptions for all the Unit Managers employed by the Councils.(3) The role of the Department of Education is one of contractor, adviser and monitor, not that of employer. The Department is not a company with direct or indirect control over the Regional Councils who are the employers.(4) It is now accepted by Mrs Scullard that the male comparators (ie the Unit Managers employed by the other Councils) on whom she seeks to rely are not persons employed by an "associated employer" within the meaning of S.1(6).(5) The fact that persons generally employed by Regional Council share common terms and conditions (ie, the Purple Book containing Local Authority conditions) does not make the Regional Councils "associated employers" for the purposes of the 1970 Act.(6) As for Article 119 of the Treaty and the Equal Pay Directive, it is accepted that the Regional Council is not an emanation of the State. Mrs Scullard has no basis for her claim under either the Article or the Directive. Article 119 only applies if the work carried out is in the "same establishment or service". It does not extend to doing the same type of work for different employers. It is a fatal objection to Mrs Scullard's case that she and her male comparators are employed by separate organisations.

The Impact of Article 119

We agree with Ms Gill that there is an error of law in the decision of the Industrial Tribunal, that the appeal should be allowed and the case remitted to a different Industrial Tribunal. The error of law is in the misunderstanding of the effect of Article 119, as properly interpreted and applied in relation to the relevant provisions of the 1970 Act concerning comparators. The Industrial Tribunal held that Mrs Scullard was confined in respect of comparators to men who were in the same employment, as defined in S.1(6) ie, employees of associated companies at establishments in Great Britain at which common terms and conditions of employment were observed either generally or for employees of the relevant classes. That definition excludes, for example, employees of different employers who, though not companies, are all under the direct or indirect control of a third party and have common terms and conditions of employment. The crucial point is that the class of comparators defined in S.1(6) is more restricted than that available on the application of Article 119, as interpreted by the European Court of Justice. Article 119 is not for example, confined to employment in undertakings which have a particular legal form, such as a limited company.

In our view, the legal position is as follows:-

(1) Article 119 has direct effect as between individuals in member states. The European Court of Justice held in Defrenne No.2 [1976] ECR 455 at 476 (paragraph 40) that"... the principle of equal pay contained in Article 119 may be relied upon before the national courts and ... these courts have a duty to ensure the protection of the rights which this provision vests in individuals, in particular as regards those types of discrimination arising directly from legislative provisions or collective labour agreements, as well as in cases in which men and women receive unequal pay for equal work which is carried out in the same establishment or service, whether private or public ." (Our emphasis)See also p.481.In their judgment the European Court of Justice cited as instances of direct discrimination contrary to Article 119 "cases where men and women receive unequal pay for equal work carried on in the same establishment or service whether public or private" (paragraph 22 at p.474)

(Paragraph 24)

"In such situations, at least, Article 119 is directly applicable and may thus give rise to individual rights which the courts must protect."
In Defrenne no distinction is drawn between work carried out in the same establishment or service of limited companies and of other employers, whether incorporated or not.(2) In Macarthys Ltd v. Smith [1980] IRLR 209 at 215 paras 62-64 the European Court of Justice interpreted Article 119 as applying to a case where the man and women are not employed at the same time . It was recognised by the Court of Appeal, after the reference had been answered by the European Court of Justice, that the European Court's ruling took
"... priority over anything in our English statute on equal pay which is inconsistent with Article 119."That priority is given by our own law. It is given by the European Communities Act 1972 itself ... . The woman is entitled to equal pay for equal work, even when the woman is employed after the man has left. That interpretation must be given by all the courts of England. It will apply in this case and in any such case hereafter."
In their judgment the European Court of Justice referred (in para 63) to Defrenne as deciding that Article 119" applies directly, and without the need for more detailed implementing measures on the part of the Community or the Member States, to all forms of direct and indirect discrimination which may be identified solely with the aid of the criteria of equal work for equal pay referred to by the Article in question. Among the forms of discrimination which may be thus judicially identified, the court mentioned in particular cases where men and women receive unequal pay for equal work carried out in the same establishment or service ." (See also paragraph 68).The Court rejected the suggestion that the Article should be restricted by the introduction of the requirement of contemporaneity of employment of men and women.(3) In Hasley v. FEA [1979] IRLR 106 the Northern Ireland Court of Appeal recognised that the principle of Article 119 is so general that there must be some limits or boundaries to its operation in practice (para 20). The Lord Chief Justice (Lord Lowry) cited passages in Defrenne and Macarthys which referred to the "same establishment or service" though, as observed by Lord Lowry at paragraph 22, the judgment in Defrenne did not treat Article 119 as "confined to work carried out in the same establishment or service." See also paragraph 26 where Lord Lowry set out the argument for the view that Article 119 takes in people in public service of the same kind as bodies dependent on the State for their existence and financial upkeep.(4) The crucial question for the purposes of Article 119 is, therefore, whether Mrs Scullard and the male Unit Managers of the other Councils were employed "in the same establishment or service". The Tribunal did not ask or answer that question. To the extent that that is a wider class of comparators than is contained in S.1(6) of the 1970 Act, S.1(6), which is confined to "associated employers", is displaced and must yield to the paramount force of Article 119. On this aspect of the claim it will be relevant for the Industrial Tribunal to examine factual areas which have not so far been explored namely, whether the Regional Councils (even though none is a company) were directly or indirectly controlled by a third party (TEED), the extent and nature of control and whether they constitute the "same establishment or service". For that purpose it will also be relevant to consider whether common terms and conditions of employment were observed in the Regional Advisory Councils for the relevant class of employees.(5) There was no finding by the Tribunal as to the terms and conditions of the comparators at the respective establishments. As the Industrial Tribunal made insufficient findings of facts to determine this issue, it will be for the Industrial Tribunal to whom this case is remitted to make appropriate findings about the terms and conditions applying to the comparators at the establishments. For those reasons the appeal is allowed and the matter is remitted to a different Industrial Tribunal to hear evidence and make findings of fact relevant to the test under Article 119, as interpreted by the European Court of Justice.

The Review Application

Finally, we mention an application by Mrs Scullard in relation to her claim for unfair dismissal which was rejected for lack of jurisdiction on the ground that she had less than 2 years' service at the date of dismissal. Her appeal was rejected at a preliminary hearing on 5th October 1994. She now relies on the recent decision of the Court of Appeal in R v. Secretary of State for Employment ex parte Seymour Smith [1995] IRLR 464 ruling on the incompatibility of the 2-year service requirement with Community Law. An application for the review of the order rejecting the appeal is made under Rule 33 of the EAT Rules. As the case of Ex p. Seymour Smith is the subject of a pending appeal in the House of Lords, we adjourn the review application to await the outcome of the appeal.