THE HONOURABLE MR JUSTICE LANGSTAFF (PRESIDENT)
Introduction
1.
This case is about sex discrimination and pay. A claim for
discrimination usually involves treating people in like situations in an unlike
manner. Pay discrimination is no different. It involves a comparison, but
that comparison must be between people in comparable situations. So a woman who
works for employer A cannot normally expect to compare her wages with those of
a man working for employer B; they are in different situations. Where,
however, employer A hives off employees to company B of which it retains
control, this could all too easily permit discrimination unless a comparison
were permitted in that case too. A predominantly female workforce might be
placed in one subsidiary company and a predominantly male one in another and,
overall, disparity might flourish. This case concerns whether the law permits
a woman working for B to compare herself with an employee still working for A
where A and B are closely linked.
2.
Glasgow City Council (Glasgow) decided to transfer three services to
three separate bodies, each legally distinct from Glasgow which it set up for
the purpose. In each case it transferred its employees from its direct
employment to that of the new body. Its Culture and Leisure Community Services
went to Culture and Sport (Glasgow Trading Community Interest Company) which
has become known as Glasgow Life. Car parking and Parking, Fine and
Enforcement Services involving 56 employees went to a limited liability
partnership, City Parking (Glasgow) LLP. That began trading on 1 June 2007.
The Direct and Care Services which Glasgow provided to its citizens, were from
1 April 2009 provided by another limited liability partnership, Cordia
(Services) LLP. Glasgow Life, Parking and Cordia are known as Arms Length
External Organisations (ALEOs).
3.
Employees in each of the three services were thus in the same position
as women working for employer A who had transferred to work for employer B.
They argued as a preliminary point before an Employment Tribunal at Glasgow that they should be permitted to compare their pay with that of men still working
for Glasgow. By its decision delivered on 20 December 2011 with an addendum in
early January 2012, the Employment Tribunal held that the employees now working
for Glasgow Life were entitled to compare their terms and conditions of employment,
and in particular pay, with employees of the opposite gender still working in
the direct employment of Glasgow, but that that those worked at the LLP’s,
Parking and Cordia, were not.
4.
The central difference between them was that Glasgow Life was a
community interest company whereas Parking and Cordia were limited liability
partnerships. The central questions in these appeals brought by three groups
of separately represented Claimants is whether that conclusion was correct.
Each LLP is sufficiently controlled by Glasgow for it to consider that there
was no need for it to comply with regulation in respect of public procurement
requiring, for instance, open competition on a commercial basis, since each of
the three ALEOs was for that purpose as if part of Glasgow’s own organisation.
It was common ground before us that the ALEOs and Glasgow were so intimately
linked that Glasgow could, if it wished, control the operation of and decisions
made by the ALEOs. The Appellants argue that it defies reason for Glasgow to accept that but to deny responsibility for inequalities of pay between ALEOs
and Glasgow itself which it could not deny if all the employees were in its
direct employment.
The legal landscape
5.
The right to equal pay is actionable under either a United Kingdom statute (the Equal Pay Act 1970 was the applicable legislation at the
time relevant to this case) or under Article 157 of the Treaty for the European
Union. Those provisions are not mutually exclusive but operate in tandem. The
Equal Pay Act provided that each contract of employment would include an
equality clause. The equality clause operates only where a woman is employed
on like work or work rated as equivalent with that of a man or work of equal
value to a man who is “in the same employment” (see sections 1, 2 (a), (b) and
(c)).
6.
By section 1(6) it is provided that:
“…men shall be treated as in the same employment as a woman if
they are men employed by her employer or any associated employer at the same
establishment or establishments in Great Britain which include that one, and in
which common terms and conditions of employment are observed either generally
or for employees of the relevant classes.”
7.
What then is an associated employer? Section 1(6) also provides that:
“… for the purposes of this section …(c) two employers are to be
treated as associated if one is a company of which the other (directly or
indirectly) has control or if both are companies of which a third person
(directly or indirectly) has control…”
8.
The wording of Article 157 contains no similar requirement. It is
simplicity itself. It lays down the principle that equal work or work of equal
value is to be remunerated in the same way whether it is performed by a man or
a woman. By Council Directive 75/117 (The Equal Pay Directive) the principle
of equal pay means:
“For the same work or for work for which equal value is
attributed, the elimination of all discrimination on grounds of sex with regard
to all aspects and conditions of remuneration.”
9.
In Lawrence v Regent Office Care Ltd case 320/00 [2003] ICR 1092, the Court of Justice of the European Communities recognised that
there was nothing in the wording of Article 141(1), the then provision which is
replicated now in Article 157, to suggest that the provision was limited to
situations in which men and worked for the same employer. The Court had held
that the principle could be invoked where discrimination arose directly from
legislation or collective labour agreements and where work was carried out in
the same establishment “or service”, whether private or public. It went on to
recognise that there was a limitation to the breadth of this principle:
“18. However, whereas in the main proceedings here, the
difference as identified in the paid conditions of workers performing equal
work or work of equal value cannot be attributed to a single source, there is
no body which is responsible for the inequality and which could restore equal
treatment. Such a situation does not come within the scope of Article 141(1) EEC.
The work and pay of those workers cannot therefore be compared on the basis of
that provision.”
10.
Lawrence was a case in which a local authority had
transferred school catering and cleaning staff to an entirely separate
commercial company after a process of compulsory competitive tendering. The claimants
looked to compare their pay with men who were still employed by the local
authority. There was plainly no single source which was responsible for and
which could restore equal treatment.
11.
Allonby v Accrington & Rossendale College & Ors
[2004] IRLR 224 CA concerned a part-time lecturer who had been employed by the
college. It decided no longer to employ her directly; instead she was told
that if she wished to continue to work at the college she would have to provide
her services as a self-employed worker through an agency with whom the college
would contract (ELS). The Court considered, see paragraph 46, that a person in
Ms Allonby’s position was complaining of differences in pay which could not be
attributed to a single source, and there was no body which was responsible for
the inequality which could restore equal treatment. Such a situation did not
come within the scope of Article 141(1)(EC). It went on to explain at
paragraph 47 that the would-be male comparator was paid by the college, “under
conditions determined by the college” whereas by contrast ELS agreed with the claimant
on her pay and, see paragraph 48, the fact that the level of pay she received
was influenced by the amount the college paid ELS in respect of her services,
they then accounting to her for the sum which they agreed to pay her for the
work, was not a sufficient basis for concluding that the college and ELS
constituted a single source.
12.
In Robertson v DEFRA [2005] ICR 750, the Court of Appeal
considered whether male civil servants employed by DEFRA could compare their pay
with female civil servants working in other government departments. The Crown
was the employer of both the men and the women. However, under arrangements
described in the Judgment of Mummery LJ at paragraphs 33 to 35, the Minister
for the Civil Service had delegated the power to negotiate and set most aspects
of pay to the department concerned. Pay and conditions of civil servants were
no longer negotiated or agreed centrally on a civil service wide basis. This
was a deliberate change in policy. Individual departments were free to
negotiate and agree most terms and conditions of employment and actively use
their discretion to introduce pay systems and negotiate pay settlements that
best suited their particular needs. In those circumstances, the Court
concluded that there was no singe source to which the differences identified in
the pay and conditions of service of workers from different departments could
be attributed and no single body which could remedy the discrepancy in pay.
13.
There are two important passages for present purposes in the Judgment.
At paragraph 29 Mummery LJ said this:
“The opinion of the Advocate General in Lawrence
supports the view that Article 141 is addressed generally to those who may be
held responsible for unauthorised differences in terms and conditions of
employment and that it is not sufficient simply to look at who are the
employers of the applicants and the comparators and to proceed to consider
“single source” only and if they are not in common employment. It is necessary
to consider in each case whether the terms and conditions are traceable to one
source… I agree with the Appeal Tribunal … that the Court of Justice was setting
out a justification in the form of a principled basis upon which responsibility
for difference and discrimination can be pinned and that the justification is
in the single source rather than in common employment. The Court of Justice
made it clear that it is not necessarily the person with whom the workers have
contacts of employment that determines comparability. The relevant body is the
one, “which is responsible for the inequality and which could restore equal
treatment”. The body responsible for the state of affairs will often be the
same employer of both the applicants and the comparators but that is not
necessarily so. It depends on the circumstances of the particular case as to
whether further enquiry may be necessary. If that there were not the case the
submission of Counsel for the Appellants would tend to have the extravagant
consequence that every civil servant would be entitled to compare himself or
herself with any other civil servant of the opposite sex; subject only to
objective justification by the employer of differences in pay. That does not
seem to be a sensible or practical approach to the preliminary task of a
identifying appropriate workers in circumstances comparable to the applicants.
In my Judgment the Tribunals below were right to reject it. On my reading of Lawrence … the approach of EC law is to locate the single source with the
body responsible for setting the relevant terms. This is not determined by
only addressing the formal legal question of the identity of the employer.”
14.
At paragraph 41 he said this:
“Retention of power by the Crown after delegation to the
department means that there is a theoretical legal possibility of the Crown
exercising its power some time in the future but the retention of a legal power
which has not in fact been exercised by the Crown over pay and conditions in
the particular case does not make the Crown, “the body responsible” for
the actual negotiations and decisions on pay by individual departments
resulting in pay differences of which complaint is made.”
15.
Nor did the Court accept that the theoretical legal responsibility that
the delegation of power might be revoked some time in the future was a basis
for concluding that there was here a single source. The argument was based on
theory, “rather than on recognition of the realities of the existing employment
situation”. That emphasis on the realities of the existing employment situation
is in, our view, an important recognition.
16.
In North Cumbria Acute Hospitals NHS Trust v Potter & Ors
[2009] IRLR 176, the Appeal Tribunal, presided over by Nelson J, rejected an
argument that an Employment Tribunal had erred in law in regarding an NHS Trust
as a single source. The Trust was formed by the merger of two former Trusts.
Before the merger the claimants worked for those Trusts or their predecessor
health authorities, as had their comparators. The Tribunal said, importantly
for our purposes at paragraph 107:
“… the Employment Tribunal set itself the correct task in law by
asking who was the body “Responsible for the inequality and which could
restore equal treatment” as set out in Lawrence paragraph
18. They rightly noted that it was not enough to show that the Claimants had
the same employer as the comparators as was stated in both Armstrong
[that was a reference to Armstrong & Ors v Newcastle on Tyne NHS Hospital Trust [2005] EWCA Civ 1608] and Robertson. They
were also, in our judgement, correct in finding that when Mummery LJ in Robertson
and Arden LJ in Armstrong referred to the “body responsible
for setting the terms of both groups of employees” they did not mean
responsible for creating the inequality. Were that to be so, no equal pay
claim could be brought where a Trust had merged with another. Both Mummery and
Arden LJJ were expressing the same concept as set out in Lawrence
in slightly different terms.
108. Whether a particular body is responsible for the inequality
and could restore equal treatment depends on an evaluation of all the evidence
… it is therefore an issue of fact for an Employment Tribunal to determine.”
17.
Before us, Mr Bowers, QC for the Respondents argued that the
determination of a single source was a matter of fact and degree. Mr Gorton QC
for the Unison Claimants similarly accepted that every case must turn upon its
own particular facts. We agree. The facts will sit in a spectrum at one end of
which is the case where an employer transfers employees to a wholly distinct
commercial organisation which had a separate existence prior to the transfer
and which regulates its own pay and conditions. Lawrence was an
example. At the other end is the employer which directly organises its own
staff within its undertaking and regulates the pay and condition of all, such
as, here, Glasgow before the transfers. In between, but toward the Lawrence end of the spectrum is a case when an employer has entirely divested
itself of its powers to regulate wages to separate departments, such as Robertson.
The employer of the Claimants’ comparator may be one and the same, but the
theoretical possibility in such a case that the employer could reverse its
policy and take back the regulation of wages to itself cannot alter the reality
that pay is now regulated by each department.
18.
When an employer has separate plants, each of which bargains separately,
it was accepted by the advocates before us that whether an employer in plant A
could compare his pay with an employee in plant B would depend on whether in
all the circumstances the employer has sufficiently retained responsibility for
pay, and had power to remedy disparity, such as to preserve it as the single
source: but there could be no single answer. This case is obviously further
from the Lawrence end of the spectrum than is Robertson
and is plainly not as obvious as Lawrence or Allonby
to resolve but is, of course, distinct from the pure Glasgow end of the
spectrum.
The central issues
19.
The decision of the Tribunal raised these three central issues for our
resolution. First was the question whether the Claimants and Appellants could
be regarded as being in the same employment as their chosen comparators. That
depends upon domestic statute, the Equal Pay Act section 1(6), and is in
essence an argument about the scope of the word, “company” used in that
subsection. Secondly, whether there was a single source. Here since the
parties are rightly agreed or accept that it is a question of fact and degree,
the legal question for our determination must be one of the correctness of the approach
which the Tribunal took, though on occasions the Claimants arguments seemed to
invite us to find the facts for ourselves, which we cannot do, or to hold the
conclusion perverse, which would be a very high hurdle indeed. The third and
separate issue raised by all, but with a separate argument raised by Mr MacNeill
QC for the GMB Claimants, was whether the case management decision taken by the
Tribunal to dismiss Glasgow from the proceedings was in error.
The procedural landscape
20.
The claims were brought by three groups who were and are separately
represented. Before us the Fox Cross Claimants have been represented by Ms
Romney of Queen’s Counsel together with Miss Carol Fox. The Unison Claimants
have been represented by Mr Simon Gorton of Queen’s Counsel, together with Mr
Peter O’Donnell. The GMB Claimants have been represented by Mr MacNeill of
Queen’s Counsel together with Mr Douglas Japp. The Respondents have been
represented, all of them, by Mr Bowers of Queen’s Counsel who has appeared
before us together with Ms Clare Elliott, Gordon Barlett and Mark Wallace.
21.
The GMB Claimants do not here depend for their argument upon either
section 1(6) or single source. The only question for them is whether the
Tribunal was right to dismiss Glasgow from the proceedings.
The facts
22.
Given that the argument before us has been refined by the submissions of
counsel and since the parties have the advantage of a full, carefully reasoned
and well expressed and comprehensive judgment from the Tribunal, to which we
would pay special tribute, it is unnecessary to set out all the facts here in
detail. We shall deal only with some of the salient features of the evidence.
23.
As to City Parking that was incorporated on 1 June 2007 as a limited
liability partnership under the Limited Liability Partnerships Act 2000.
At paragraph 20 of its decision the Tribunal recorded that Glasgow was entitled
to 99.999% percent of the profits and Glasgow City Council LLP Investments Ltd
to the remainder of the full 100%, such as it was. It noted that Glasgow exercised agreed business controls which included amending policies for employees’
remuneration and pension schemes. The board was to consist of three elected
members of Glasgow, plus Glasgow’s director of Land and Environmental Services
and one other who would, if appointed, be appointed as the managing director of
Parking.
24.
The approval of the business plan of Parking was reserved to the members
of the Council of Glasgow and not the board. By clause 13.12 the board was
required to implement any determination made by Glasgow. Glasgow was entitled
from time to time to appoint to or remove from office any member of the board.
Councillors were appointed as directors of Parking without any consultation
with the managing director of Parking or with the board.
25.
In paragraph 22 the Tribunal noted that Parking leased car parks from
the Glasgow at market rates, and that Parking had obtained a bank loan to fund
those leases. Glasgow acted as a guarantor in relation to the bank loans.
26.
By paragraph 24 it was noted that the agreement between Glasgow and
Parking was varied on 16 October 2008 to delete a restriction which had existed
on the ability of Parking to vary employees’ terms and conditions of employment
without Glasgow’s prior consent. Employee terms and conditions were no longer to
be included as an agreed business control. Parking was not a member of COSLA
(the Council of Scottish Legal Authorities). It is not bound by collective
bargaining between the trade unions and COSLA. Parking had agreed pay deals
which mirrored those reached between COSLA and trade unions to avoid industrial
unrest. Parking was responsible for setting the terms and conditions of its
employees. Variations to the terms and conditions of employment by Parking did
not require the approval of Glasgow.
27.
So far as Cordia is concerned, the Tribunal set out its essential facts
from paragraphs 26 through to 35. It too was a limited liability partnership.
Before setting it up Glasgow obtained legal advice that creating an LLP wholly
owned by Glasgow, carrying out the essential part of its activities for Glasgow
and over which Glasgow exerted control though its Strategic Board and Corporate
Governance Structure, would meet the requirements of European and UK
procurement rules.
28.
At paragraph 28 the Tribunal noted that Glasgow was entitled to 99.999%
of any profit made by Cordia, and Glasgow City Council LLP Investments to the
remainder of the 100%, such as it was.
29.
The board was to comprise a maximum of eight members which would include
one elected member of Glasgow as its Chair, two executive directors of Glasgow
drawn from the senior management team, three further elected members of Glasgow
and one senior officer of Glasgow as nominated from time to time by Glasgow’s
Chief Executive. There would also be the managing director of Cordia, whom so
far as we can see on these findings of fact would be the only person not in the
employment of nor a Councillor of Glasgow.
30.
Glasgow, in its capacity as a member of Cordia, was entitled to issue
directions to Cordia’s board from time to time and the board was bound to
comply promptly with any such direction. The powers of the Cordia board to
take independent action were restricted such that Glasgow’s prior written
consent was required before Cordia could do any of a number of steps which
included the appointment and removal of the chair person or managing director
and the settlement of any litigation over £5,000 or in the case of employment
claims £25,000.
31.
At paragraph 29 the Tribunal found that Cordia’s board was obliged to
prepare a business plan containing its core business not less than 16 weeks
before the start of each financial year. That had to be approved by Glasgow. Cordia could not carry on any business which, if it carried out, would be ultra
vires or any business outside the plan without Glasgow’s prior written
consent. The task of Cordia was to carry out most of the services formerly
carried out by Glasgow’s Direct Care Services. It is, however, allowed to and
does trade on the open market; see paragraph 31.
32.
City Councillors were appointed by Glasgow as directors of Cordia
without consultation with Cordia’s managing director or its board; they could
be removed by Glasgow at any time. As in the case of Parking, Cordia too was
not a member of COSLA. It attended a separate trade union forum. It was not
bound by collective bargaining between the trade unions and COSLA. Cordia’s
employees had a separate pay award to Glasgow’s employees as a result of
negotiations between the trade unions and Cordia. Cordia was responsible for
setting the terms and conditions of its employees. Variations to the terms and
conditions of employment by Cordia did not require the approval of Glasgow.
33.
In making comments general to the position of each of the three ALEOs
the Tribunal noted these particular features. Glasgow’s external governance
and asset management unit held quarterly meetings with the ALEOs. The
performance of the ALEOs was subject to the scrutiny of Glasgow’s External
Governance Scrutiny Committee (which sat every six weeks) and of the City
Treasurer and Deputy Leader. The ALEOs made annual presentations to the
committee of Glasgow and were subject to quarterly performance reporting to the
Scrutiny Committee. They made a six-monthly report on the ALEO risk register.
The Scrutiny Committee considered the ALEOs’ financial performance and
corporate policy on issues such as absence management arrangements.
34.
The Tribunal noted that elected board members of Parking and Cordia had
originally been remunerated by Glasgow; that had ceased.
The Tribunal’s Decision
35.
The Tribunal dealt with associated employment from paragraph 93 onward.
It noted that in the legislation there was no definition of the word, “company”
but it set out in its discussion a description of the sorts of company which
the Companies Act 2006 would identify; see paragraph 94.
36.
That assisted it to a conclusion that the Community Interest Company
which Glasgow Life constituted was within the definition of, “company” in
section 1(6) of the Equal Pay Act 1970. Its reason for concluding that
neither Parking nor Cordia were within that definition is contained essentially
at paragraphs 96 and 97:
“96. The third and fourth Respondents are not companies. They
are Limited Liability Partnerships (“LLPs”). They are not a legal entity
identified as a type of company under the Companies Act 2006. They are a body
corporate regulated by the Limited Liability Partnerships Act 2000. The
Tribunal considered whether the meaning of “company” in the Act can be
extended to cover LLPs. There was no such legal entity when Lord Griffiths in Gardiner
v London Borough of Merton [1980] IRLR 472 (at paragraph 13) read “company”
as meaning “limited companies” under the employment protection
legislation. LLPs have similar characteristics to companies. They are a
corporate body with a separate legal identity. The Tribunal is required to
interpret the provisions of the Act, so far as possible, to conform to the
rights conferred by Article 157 of TFEU and with the purpose of the Directive.
To exclude the LLPs from the meaning of “company” in these circumstances
would, according to the claimants, frustrate that purpose and unduly limit the
concept of comparability.
97. The Tribunal was not persuaded that to achieve the rights
conferred by Article 157 of TFEU and to implement the Directive it is necessary
for the meaning of “company” in Section 1(6) of the Act to include
LLPs. Section 1(6) of the Act sets out the circumstances in which comparators
are to be treated as in the same employment. Employment by the claimant with a
company controlled by the comparator’s employer is an exception to the
requirement to have the same employer for the purposes of comparability. The
description of such an employer as a “company” is not ambiguous. It
does not lack clarity. LLPs and companies, while they share similar
characteristics, are separate types of legal entity. It would be inappropriate
in these circumstances for the Tribunal to insert words into domestic
legislation to include LLPs into the definition of “associated employer”
at Section 1 6(c) of the Act. The Tribunal was not persuaded that Parliament
intended to include other legal entities such as LLPs within the meaning of “company”,
notwithstanding any anomaly that might arise as in the present case. It must
follow therefore that the third and fourth respondents are not “associated
employers” of the first respondent.”
37.
As to single source, the Tribunal dealt with that from paragraphs 98
onward. In paragraph 98 it directed itself that the single source must be the
body responsible for setting the terms and conditions of both the Claimants and
their comparators and it must be the body, “responsible for the inequality and
which could restore equal treatment” referring to paragraph 18 of Lawrence,
adding “It is enough that retention of the legal power to remedy disparity and
pay remains with that body if that power is not in fact exercised” referring to
paragraph 41 of Robertson.
38.
Applying those principles to this case, the Tribunal declared itself at
paragraph 99 not satisfied that the first Respondent was a single source for
the terms and conditions of the Claimants and the first Respondents employees.
39.
In paragraph 101, the Tribunal centrally dealt with its conclusions
against the background of fact which we have described. That reads as follows:
“101. It was not in dispute that the first respondent [Glasgow] retains
control of the ALEOs. This was described by the respondents as strategic
control and control and implementation. The first respondent exercises this
control through ownership; the appointment of Directors; funding and scrutiny
of performance through the acquisition of services. This is consistent with
the relationship of the first respondent with the ALEOs as their service
providers. The Tribunal was satisfied that this was consistent with the type
of control described by Mr Melvin in his evidence. The respondents have
satisfied themselves that it is a sufficient level of control to comply with EU
procurement regulations. It has resulted in the first respondent exercising
control over the ALEOs in connection with such matters as their presence at
political events and the behaviour of elected Board members. It is the
claimants’ position that this is also sufficient control to establish that the
first respondent is a “single source”. In the context of control for the
purposes of establishing a “single source” and the facts of this case however,
the Tribunal was not persuaded that the level of control exercised by the first
respondent over setting the claimant’s terms and conditions is sufficient to
make them a “single source”. The Tribunal was not persuaded that such control
has in fact been exercised by the first respondent to set or vary the
claimants’ terms and conditions. As in the case of Robertson
(supra), in which the Crown was the common employer and retained the power to
vary terms and conditions set by individual departments, the first respondent
has not exercised any such power. It is a power that is exercised by the ALEOs
and over which the first respondent plays no direct part. The first respondent
is not the body responsible for any differences in the pay of their employees
and the claimants. Such differences are attributable to the ALEOs and their
responsibility. In the above circumstances, the Tribunal was unable to
conclude that the first respondent is a “single source”.
40.
It drew the strands of its conclusions together, having dealt with a
separate issue which does not arise for determination on appeal, at paragraph
104; there it said this:
“104. For the reasons given above, the Tribunal concluded that
(i) the second respondents (that is Glasgow Life) are “associated employers”
of the first respondent for the purposes of Section 1(6) of the Act and the third
and fourth respondents (that is Parking and Cordia) are not; (ii) the first
respondent is not a “single source” for the claimant’s terms and
conditions of employment and (iii) the claimants employed by (Glasgow Life) are
accordingly entitled (subject to the existence of common terms and conditions)
to rely upon employees in the first respondent’s employment as comparators for
the period following their transfer to (Glasgow Life’s) employment, the
claimants employed by (Parking and Cordia) are not.”
41.
On 5 January 2012 the Tribunal added to this paragraph:
“The Tribunal did not accept the argument advanced by the
Claimants, in particular the GMB claimants, that they should be entitled to
proceed against the first respondent for the period of claim prior to the date
of transfer to an AELO. Notwithstanding that the claims were presented within
six months of the date of transfer, liability under the claimants’ contracts of
employment has transferred to the AELOs. Liability for a breach of the Act now
lies with the ALEO as transferee. Accordingly, it is the relevant ALEO and not
the first respondent who is the appropriate respondent for the current
proceedings.”
42.
It went on at paragraph 105 to say this:
“In the above circumstances, the Tribunal was satisfied that the
first respondent’s application to have the equal pay claims against them
dismissed should be granted. The Tribunal was not persuaded that their
association with the second respondent is sufficient to require the first
respondent to remain in the proceedings as a party. Their association with the
second respondent does not make them potentially liable for any remedy
claimed. Liability remains with the claimants’ employer, the second
respondent. The granting of an indemnity in connection with the proceedings is
not grounds to make the first respondent a party to the proceedings. They do
not have a direct interest in the claim as a respondent. While they have an
interest in the outcome of the proceedings, they do not seek to be joined as a
party to the proceedings in terms of Rule (10)(2) (r) of the Rules of Procedure
2004. Accordingly, the application is granted and the equal pay claims against
the first respondent are dismissed.”
Associated employer
43.
The wording of section 1(6) does not contain the same provision as did a
very similar phrase considered in the case of Gardiner v London Borough of Merton [1980] IRLR 472. Gardiner was a case
brought as to the proper construction of section 153(4) of the Employment
Protection and Consolidation Act 1978. The issue was continuity of
employment. In the Act, at the end of words which are replicated entirely in
section 1(60(c) of the Equal Pay Act these words are added which are not
so replicated: “…and the expression “associated employer” shall be construed
accordingly”.
44.
In paragraph 16, Griffiths LJ adopted the views which had been expressed
by Lord Parker in the Divisional Court case of Southern Electricity Board
v Collins [1971] QB 83. He thought that the language of section 153(4)
conveyed an exhaustive description adding:
“If the definition was not intended to be exhaustive and apply
only to a situation in which one employer had been a company as the Appellant
submits, I can see no purpose in the concluding words of the definition which
read “and the expression ‘associated employer’ shall be construed
accordingly’”
45.
Those words plainly were the primary reason why Griffith LJ in the Court
of Appeal concluded that the definition was to be read exclusively, but it was
not the only reason. It was supported by what he said at paragraph 18:
“Apart from what I consider to be the plain meaning of the
language, other factors appear to me to point strongly towards the view that
Parliament must have intended to provide an exhaustive definition of the phrase
“associated employer”. The phrase itself is so loose as to be capable
of a great many different interpretations. Does it mean associated for a
common purpose or associated through a common element of control of associated
through a common interest or associated through common membership of some trade
organisation or associated through common negotiation with a trade union? The
questions that can be asked are almost endless.”
46.
The context there was continuity of employment. It might be thought
markedly distinct from the context in which the equal pay claims fall to be
determined. That may be why in Hasley v Fair Employment Agency [1989]
IRLR 106 the Northern Ireland Court of Appeal, when considering the equivalent
statutory provision applying to Northern Ireland as contained for mainland UK
in section 1(6) of the Equal Pay Act 1970, did not give any sense of regarding
itself as bound to adopt the interpretation which Griffiths LJ had accepted.
47.
In a case, which one notes from the representation was argued by senior counsel
and had the advantage of an amicus, Lord Lowry CJ for the Court of Appeal had
to consider whether two statutory corporations, the Fair Employment Agency and
the Equal Opportunities Commission were to be regarded as companies within the
meaning of the 1970 Act. In setting out the Court’s approach to the meaning of
‘company’ he did not assume that for ‘company’ should be read the words
‘limited company’. He referred at paragraph 11 to the broader, more general
meaning which ‘company’ has. He did so by reference to what was then in the
fourth edition of “Halsbury’s Laws”. There these words appear:
“The word ‘company’ imports an association of a number of
individuals formed for some common purpose. Such an association may be incorporated,
that is a body corporate with perpetual succession under common seal or it may
be unincorporated. An incorporated company is a legal person separate and
distinct from the individual members of the company whereas an unincorporated
company has no such separate existence and it is not in law distinguishable
from its members. There are many other bodies corporate which although they
may largely or partially engage in trading or comparable activities are not
commonly described as companies.”
It then set out three categories of such bodies corporate
which would not normally be regarded as companies.
48.
It is plain from
what follows at paragraph 12 that the Court of Appeal adopted what had been
said in Halsbury as describing the proper compass of the word ‘company’. Since
the bodies which fell for consideration before the Court of Appeal at Northern
Ireland were not commonly described as companies, as Halsbury had pointed out, Lord
Lowry did not consider that they were within the scope of the word ‘company’ as
used in section 1(7) (c). It was only then that he referred to Gardiner
v Merton and drew from it that in that case Griffiths LJ had supported
the proposition that the word ‘company’, unless specially defined, did not
normally extend to cover all bodies corporate.
49.
Before us Mr
Bowers, Queen’s Counsel, argues that four points show that ‘company’ does not
have the wide scope which Lord Lowery
appeared prepared to give it, even if it did not extend to statutory bodies
corporate.
50.
First, he argued that the absence in section 1(6) of the additional
words considered in Gardiner v Merton was not of any relevance.
It had been floated before us, especially by Ms Romney of Queen’s Counsel that
this difference was of significance in helping us to know what was meant by the
word ‘company’.
51.
But this, it seemed to us, missed the particular point which we had to
determine. The relevance of those words was in assisting the court in Gardiner
to determine that the only situation
in which one employer was to be associated with another was if one was a
company of which the other employer had control. That was the particular
relevance drawn from the concluding words. “Associated employer” in the
context of that statute could have no wider definition because it was excluded
by those closing words.
52.
The omission of those additional words might have been relevant if the
argument before us had been that “association” was a general matter of fact as
to which section 1(6)(c) merely identified one particular situation in which as
a matter of law a Tribunal would be bound to conclude that two employers were
associated, but without in any sense limiting the scope of the enquiry which
they might otherwise make as to association: in other words a replication of
the argument which plainly was put before the court in Gardiner.
Since no counsel before us and no party before us argued before the Employment
Tribunal that “associated employer” could be approached in that way in this
context it seems to us that the presence or absence of words which confined the
consideration of associated employer to the circumstances described in section
1(6)(c) was irrelevant.
53.
Accordingly, we derive no help from Mr Bowers’ submission on his first
point as to what the word “company” means. Indeed, we cannot see logically how
it could be of any assistance to argue that because the only situation in which
two employers were to be associated was where one was a company gave any help
as to what “company” meant.
54.
The second point he took was that a consistent interpretation should be
adopted across employment legislation. The words considered in Gardiner it must be accepted, are
remarkably similar to those set out in section 1(6) save for the concluding
words. Here Mr Gorton of Queen’s Counsel has shown us the respective
legislative histories of each provision. He points out the different contexts.
In particular he has pointed out that the origin of that which appeared in the continuity
of employment provisions may be traced back to the Companies Act 1948
which referred to companies covered by that Act, the Redundancy Payments Act
where “company” meant any body corporate, and the Contracts of
Employment Act 1963 in which associated companies were described in terms
in which first and second employers had both to be companies, with one a
subsidiary of the other or where both were subsidiaries of a third.
55.
It is not difficult to see how the wording adopted for continuity of
employment in that context and for the purpose of determining the entitlement
of an employee against his employer to such matters as redundancy pay, notice
and qualification for rights which depended upon length of service is rather
different from the context addressed in the Equal Pay Act.
56.
Thirdly, Mr Bowers argues that the principle of reiteration, as he terms
it, applies here. There have been a number of legislative opportunities to
alter the wording of section 1(6)(c) of the Equal Pay Act to make it
clear that, for instance, the word “company” might comprehend an association of
persons in respect of which a Limited Liability Partnership might also be a
description. He argues that in particular the legislators would be well aware
of the judgments in Gardiner and in Hasley and must
therefore be taken to have reiterated legislation or not to have amended
legislation because they considered that that those judgments accurately set
out the law.
57.
He rejected, fourthly, the suggestion that his approach was reading
words into section 1(6)(c) by adding the word “limited” in front of “company”
or the words “under the Companies Act” after it. Rather, he argued, it was the
Appellants who were inserting words such as “including Limited Liability
Partnerships” into the clause.
58.
Finally, he argued that the appropriate place to look for the definition
of a company was in the Companies Act. We note simply that this was not
the approach which was taken by the Northern Ireland Court of Appeal in Hasley
to which we, in our position, must pay respect.
Discussion
59.
The word “company” is not defined by the Equal Pay Act. It is
potentially a broad word. Therefore, its ordinary meaning must be identified,
but with particular regard to context. The context is emphasised by the fact
that section 1(6) and the definitions it contains are specifically “for the
purposes of this section”.
60.
The only way of determining the ordinary meaning seems to us to be the
starting point which Lord Lowry adopted in his discussion in Hasley.
Despite the quality of the representation and the Court’s reference to Gardiner
it does not seem to have been suggested there and, if suggested, was not
adopted that the expression “company” was restricted in meaning to limited
companies.
61.
The current edition of Halsbury’s Laws, the 5th Edition,
Volume 14 sets out the general meaning of “company” in these terms:
“The general sense of the word, “company” notes an association
of individuals formed together for some common purpose”
Halsbury goes on to add in a footnote to that sentence:
“For present needs, there is an implication in the word
“company” that the purpose for which the individuals have joined together is of
a more or less permanent character. Companies, particularly those formed under
the Companies Act typically provide for investment in trade with a view to
generating profits in order to benefit their proprietors …”
62.
The footnote refers to O’Neill v Phillips [1999] 1 WLR 1092 HL, where at 1098 Lord Hoffman described a company in these terms which in
our view give powerful support to the approach which Halsbury takes:
“A company is an association of persons for an economic purpose
usually entered into with legal advice and some degree of formality”
This is contrasted with the legal definition of a club as a
society of persons associated together not for the principal purposes of trade
but for social reasons, etc.
63.
We note that companies existed long before the Companies Acts
were enacted. It cannot be assumed that Parliament in using the word,
“company” meant “limited company” unless it said so, and it does not. What then
does the context have to say which might colour the description of company? It
is submitted by Ms Romney of Queen’s Counsel and Mr Gorton of Queen’s Counsel
and not, we note, disputed by Mr Bowers of Queen’s Counsel, that the purpose of
the “associated employer” provision in section 1(6) might be described as an
anti-avoidance measure. Without it, it might be all too easy for an employer
to set up a body distinct from it as a legal personality to which it could
transfer employees of one gender within its employment and thereby evade its
equal pay responsibilities.
64.
We accept that the provision may broadly and properly be described as an
anti-avoidance measure. If we have, as we believe, correctly identified the
purpose of the subsection then it is to be construed purposively to that
effect. This is supported further by the fact that the section is part of an
anti-discrimination statute. Such a statute should in general be construed
purposively to remedy the mischief at which it aims.
65.
It is unnecessary for these conclusions to go to the Marleasing
principle (Marleasing SA v La Comercial
Internacional de Alimentacion SA [1990] EUECJ C-106/89 (13
November 1990)) in which the European Court of Justice spelt out the need for
domestic courts to construe domestic provisions enacted to implement European
provisions so far as possible to accord with the purpose of that European
provision: even though in that regard it can be said that ever since the
decision of Defrenne v SABENA (No2)
(equal pay) [1976] EUECJ C-43/75 [1976] 2 CMLR 98, equal pay and the
elimination of discrimination in sex in that context has been regarded as one
of the foundations of the European Union, and references were made in that case
as they have been since to the need to eliminate pay discrimination throughout
broad swathes of employment, in particular focusing upon those in the same
establishment or service.
66.
The general purpose of the statute is sufficient for us to pay regard
to. We do not consider that there is any further advantage to be gained in
interpreting the scope of “company” by applying the Marleasing
principle.
67.
Of the arguments which stand against the need to construe a word which
is capable of having a wide scope and should be construed in the light of its
purpose as an anti-avoidance measure in a statute which seeks to remedy
discrimination, the only point of those which Mr Bowers of Queen’s Counsel
raised which had any resonance was his reasoning that although a Limited
Liability Partnership might be registered at Companies House and have more in
common with a limited company than it does with a partnership, the natural
reading of the word, “company” might not cover it.
68.
In considering that argument, we have to bear in mind the considerations
we have already expressed. We consider the word “company” is capable of
including a body and association of persons as Halsbury would put it, formed
together for purposes which might be recognised as a Limited Liability
Partnership but which would not mean that it would cease to be a company. We
conclude that it does, because otherwise the purpose of the measure as an
anti-avoidance device would be defeated and with it the purpose of the Equal
Pay Act in this context.
69.
We are happy that this conclusion means that in the case of Parking and
Cordia the same result will apply as does to the employees in Glasgow Life. To
have decided otherwise would have left the law in the uncomfortable state that
an anti-avoidance provision had had the consequence that those employers who
were transferred from employer A to employer B would be able to maintain a
comparison vis-à-vis those still in employer A’s employment where employer B
was a community interest company but would not if B was an LLP when the
material relationships between A and B in the first example and A and B in the
second were exactly the same.
70.
Since we have come to the conclusion that read in context section 1(6)
of the Equal Pay Act 1970 is to be construed such that a Limited
Liability Partnership registered under the Limited Liability Partnership Act
as such is within the definition of “company” we do not need to determine
the interesting and complex arguments which we have heard on the single source
points. However, the matter has been fully argued and Mr Bowers of Queen’s
Counsel invited us to give our views on this point too if we were minded to
allow the appeal under the statutory construction point. Accordingly, we shall
do so although they will necessarily be obiter, and we shall state them rather
more than shortly than would otherwise have been the case.
71.
Ms Romney of Queen’s Counsel, whose submissions Mr Gorton of Queen’s
Counsel adopted, came close to alleging perversity by emphasising particular
factual features which argued for a conclusion favourable to the appeal. Thus
she drew attention to the need for the business plan to be approved, the sheer
unlikelihood of members of the board taking any step other than fully in accord
with the City Council, since they were City Councillors themselves, that if a
Councillor did not toe the line he might be removed from appointment, that it
was easy for the Council to exercise the power of control and that the scheme
of government was designed to ensure that control would be exercised such as
that Glasgow took profits, and could not sensibly be heard to say that the
ALEOs were under the control of Glasgow for the purposes of procurement law
whilst in the next breath arguing that the power was too remote to constitute
Glasgow a single source for the purposes of equal pay legislation.
72.
Mr Gorton, though adopting those submissions, contextualised them. From
him the central feature of evidence was the nature of the relationship which it
disclosed between Glasgow and the ALEOs; it was close. There was a distinction
to be drawn between the services offered to the public by Glasgow being
provided by a third party body and being performed by an in-house
organisation. The nature of the relationship was effectively such that the
ALEOs were in the position of an in-house service, different in formal
structure but not in practical substance from the “Significant Trading
Organisations” which the ALEOs had been labelled prior to the transfer.
Centrally, he submitted that there was on the facts an intimacy of control and
that if the nature of the relationship conferred control, it conferred the
ability to remedy an inequality between the wages of a man and a woman
providing services to the public for, or on behalf of, Glasgow Corporation in
the direct employment of Glasgow or that of the ALEOs. This was in complete
contrast to the factual position in Lawrence and Robertson.
The Tribunal’s decision ignored the legal and factual realities.
73.
Despite her emphasis on the overall factual picture, Ms Romney did argue
that there had been errors of approach. The approach which she submitted was
to be taken derived from the judgment of the Appeal Tribunal in Potter.
Responsibility for pay, in the sense in which that word had been used in Lawrence,
Robertson and Armstrong, did not mean that the body
concerned must have created the inequality. Setting terms and conditions was
only part of the picture. The principle required a focus upon the ability to
remedy any disparity in terms and conditions. Also, critically, she complained
that the Tribunal had failed to give reasons for accepting that the Council
could take the view that the degree of control it exercised over the ALEOs was
sufficient such that it did not have to enter into a public procurement
process, yet it was insufficient for Glasgow to be regarded as a single source
when it came to pay and conditions. Glasgow had structured its relationship
with the ALEOs deliberately in order to take advantage of what was known as the
Teckal exemption, by ensuring it had such a sufficiency of
control as effectively to render the ALEOs the equivalent of in-house
organisations.
74.
Lord Hope concisely identified the scope of the Teckal
exemption in Risk Management Partners Ltd v Brent London Borough Council
[2011] UKSC 7, [2011] 2 AC 34 at paragraph 156. There he noted that the
European Court of Justice had in Teckal [1999] ECR 8121
considered the meaning of public supply contract or public service contract.
In paragraph 49 it had held that the national court had to determine whether
there had been agreement between two separate persons. In paragraph 50 it then
gave guidance as to how the service contract was to be determined:
“… it is in principal sufficient if the contract was concluded
between, on the one hand, a local authority and, on the other, a person legally
distinct from that local authority. The position can be otherwise only in the
case where the local authority exercises over the person concerned a control
which is similar to that which it exercises over its own departments and at the
same that person carries out the essential part of its activities with the
controlling local authority or authorities.”
75.
Lord Hope concisely identified the scope of the Teckal
exemption in Risk Management Partners Ltd v Brent London Borough Council
[2011] UKSC 7, [2011] 2 AC 34 at paragraph 156. There he noted that the
European Court of Justice had in Teckal [1999] ECR 8121
considered the meaning of public supply contract or public service contract.
In paragraph 49 it had held that the national court had to determine whether
there had been agreement between two separate persons. In paragraph 50 it then
gave guidance as to how the service contract was to be determined:
“… it is in principal sufficient if the contract was concluded
between, on the one hand, a local authority and, on the other, a person legally
distinct from that local authority. The position can be otherwise only in the
case where the local authority exercises over the person concerned a control
which is similar to that which it exercises over its own departments and at the
same that person carries out the essential part of its activities with the
controlling local authority or authorities.”
76.
Lord Hope commented at paragraph 16 of Risk Management:
“Two conditions must therefore be satisfied if a contract
between a public authority and a legally distinct entity is to be taken out of
the scope of the Directive. First the public authority must exercise control
over the entity with which it contracts, but it may wish to cooperate with
other public authorities in the procurement of services … Secondly, the
contract must carry out the essential part of its activities with the
controlling local authority or authorities …”
77.
In submissions before the Tribunal, a substantial part of the argument
had addressed Glasgow “having it both ways” claiming to satisfy the Teckal
exemption on the one hand whilst having insufficient control to remedy equal
pay disparity on the other.
78.
Further errors which Ms Romney identified in the approach of the
Tribunal were, in her submission, 1) in deciding who set pay. The Tribunal
took Glasgow as not having been involved; 2) it did not consider to what extent
consent for the business plan of either Parking or Cordia was needed; 3) it did
not take into account that the board of each ALEO was effectively subject to
the control of Glasgow; 4) it wrongly adopted Robertson as
properly analogous: this case was very different. The Government there had
said in effect to the Departments of State to whom it formally delegated pay
powers that they were on their own. That was very different from the
inter-relationship here of Glasgow and the ALEOs; 5) finally, she said that the
ALEOs were set up and designed so that they afforded strict control to the
Council. The Tribunal had left out of account the power under clause 13.10;
see paragraph 2(v) of the Tribunal decision in respect of Parking and the
analogous finding in respect of Cordia, which made the approval of the business
plans of each a matter for Glasgow and not for the ALEOs themselves.
79.
Mr Bowers argued centrally that the decisions were matters of fact to
which the Tribunal was entitled to come. He argued that the Tribunal had not
misdirected itself; it had properly identified from Robertson
matters of principle and had not attempted to argue from the facts of Robertson
to the situation between Glasgow, Parking and Cordia. He argued that
particularly at paragraph 101 the Tribunal had reached a factual evaluation
which was not said to be perverse and could not be shown to have been reached
on some wrong basis or approach.
Discussion
80.
When identifying whether there is a single source, the decision the
Tribunal must make is one of fact and degree. It must therefore be respected
unless the Tribunal has erred in its approach or its conclusion is perverse.
81.
Perversity is not alleged here (in terms), however surprising the
Appellant’s claim the decision to be.
82.
It is important to place in context what is contemplated by a single
source. Where the comparison which a Claimant working for A seeks to make is
with an employee in the employment of B, the issue is not whether employer A
has power to control the wages of the Claimant. Plainly, he is always like to
have, since by definition a contract of employment is one in which the employer
has control of the employee and centrally a contract of employment will concern
wages. Control by employer A of wages in employment A has nothing to say about
the wages of B in employment B. What must be explored is the position of the
body which it is said has responsibility for and power to alter the wages in
both A and B. This is the party or institution or collective agreement which
is said to be the single source.
83.
To focus on the powers of the immediate employer of a Claimant is
therefore potentially to look in the wrong direction. It is not irrelevant,
for those powers may be such as effectively to exclude any superior or distinct
body having responsibility and power: but that the central investigation must
be as to the powers and responsibilities of the person, institution or
agreement alleged to be the single source must not be in doubt.
84.
Here, the Tribunal focused correctly at its paragraph 101 on the
position of Glasgow. But we are persuaded by the submissions of Ms Romney and
Mr Gorton that in two respects the reasoning is deficient. First, the factual
inquiry was not simply into who had set the terms in respect of pay. The
question per Lawrence is, “Whether there is a body which is
responsible for the inequality and which
could restore equal treatment.” Potter is Appeal
Tribunal authority on the meaning of the first part of that phrase:
responsibility for inequality. The sense it adopts is one of ongoing rather
than of causative responsibility for the disparity. It is to be followed unless
we are persuaded it is in error, and no submission has been made to that effect
before us. We adopt it. But the second part of the phrase is crucial and it
goes together with responsibility in this sense. It is, “which could restore
equal treatment”.
85.
The Tribunal, in concentrating on the setting of wages in practice, did
not address this second part. Whether it approached responsibility in the Potter
sense rather than simply addressing the question of who caused the wage
inequality of which complaint was made may also be uncertain, though we are
less persuaded of this. The Tribunal did refer to “varying” pay but that is
not in the context of whether of Glasgow, upon whom, see above, the focus had
to be, could remedy or vary any difference in pay between an employee in its
employment and one in the service of Parking or Cordia, but whether in practice
alterations to the pay of those working for Parking were made by Parking and
for those working for Cordia by Cordia.
86.
The Tribunal did not ask whether Glasgow could remedy pay inequalities
in practical terms. It was right to conclude that a theoretical right to do so
would not suffice unless exercised, but the elimination of a theoretical power,
such as that in Robertson, to be regained by revoking the delegations
made by statutory instrument to the separate departments, unless there was
evidence that it had actually been exercised, is different territory from an
enquiry into the practical realities of the employment and governance
relationships in a situation such as that before us.
87.
The lay members and, in particular, Ms Gaskell, have significant
experience in the government of large organisations. They point out that
control is rarely exercised directly. A board will run its operations by
putting in place systems of governance and audit. The presence of audit
enables the board exercising an overall responsibility to step in if decisions
are not to its liking. The governance arrangements will normally be such that
it should not need to do so. The fact that it does not demonstrate its powers
by intervening on a day-to-day basis is not at all surprising, but that it
retains overall responsibility and power to remedy any errors is undoubted. If
somewhat forensically, the point can be demonstrated by considering the sense
in which the Minister for Health has responsibility for the treatment of a
named patient in a particular ward in a named hospital: he does not himself
intervene in the treatment, yet it is generally accepted that he has such a
responsibility. It is exercised through systems and governance and,
critically, audit. The lay members point out that both were in operation as a
matter of practice here. Thus they accept the points made by the Appellants
that it is unsurprising that in the short time the ALEOs had been in operation
there has been no demonstrable interference with pay bargaining with their
employees, and that there is undoubtedly scope for the Tribunal to have found
that Glasgow had responsibility and could remedy inequality had it asked the
latter question, and not been distracted by its focus on the question of the
initial setting of wage rates.
88.
Further, the use of the words “plays no direct part” in paragraph 101
suggest an unnatural separation between direct and indirect control, as their
familiar understanding of management systems shows is inappropriate. Operational
management was bound to be with the ALEO. The question is whether the
strategic management and powers were such that Glasgow was responsible for and
could remedy the pay disparity. The distinction between direct and indirect
control could not answer the factual issues on its own and suggested an
erroneous approach which equated operational responsibility with what was being
referred to in the last two sentences of paragraph 101, rather than the central
issue as posed by Lawrence.
89.
Secondly, much time was devoted by the parties to considering the
alleged inconsistency between the assertion of close control for Teckal
purposes on the one hand against the assertion of absence of control when
considering pay and conditions of employment. At paragraphs 57 under the
heading, “Teckal”, and at paragraph 75, under the same heading, the Tribunal
had set out the submissions of respectively Ms Romney and Mr Gorton, and under
paragraphs 46 to 48 those of Mr Bowers QC in response, again under the same
heading. Yet though plainly regarding the submissions important enough to
record them under dedicated headings nothing is said to indicate to the parties
in the Tribunal’s conclusions what it made of this important plank of their
submissions. It is not required that an Employment Tribunal decision should
dot every ‘i’ nor cross every ‘t’. Mr Bowers is right to say that what matters
is whether the parties understand why they win or lose. Nonetheless, where an
argument is regarded as central by the parties, rightly or wrongly, and where
time and detail is devoted during the hearing to it, it might have justified
more than that which the Tribunal said at 101, “The respondents have satisfied
themselves that it is a sufficient level of control to comply with EU
procurement regulations”.
90.
For our part, we would agree with Mr Bowers that the resolution of the
case did not turn upon it in any direct sense. But the contrast between the position
under Teckal and that adopted here raised factual questions as to
the closeness of the relationship and control which on balance, and with some
hesitation, we consider would require further detail and discussion; even if
briefly.
91.
We do not find any similar complaint which can be properly raised
against the Tribunal decision in any of the other specific matters to which Ms
Romney drew our attention. Had we had single source as our sole issue to
determine upon this appeal, we would not have felt in any sense able to have
determined the factual issues for ourselves. As we have pointed out, there is
a spectrum. As counsel have submitted the issue is one of fact and degree.
The proper Tribunal to determine such matters is the fact finding body, the Employment
Tribunal. Had this been the sole head of decision, we would have therefore
remitted this question to the Tribunal for re-determination. That would have
been to the same Tribunal. All parties were agreed that should be so and we
have already, and again, pay tribute to the way in which the Employment Judge
discharged the Tribunal’s responsibilities.
The case for the GMB Claimants
92.
Mr MacNeill made it clear that those whom he represented took no stance
on the associated employer or single source points. He was concerned to be
able to compare the pay of members of the GMB who had been transferred to
Cordia with those who remained in the employment of Glasgow. Those claims are
potentially subject to time limits. The claims were submitted against Glasgow and not against the transferee, Cordia. At a case management conference some time
later Cordia was added as a Respondent without objection from Glasgow. No time
bar point was then raised but there has never been a formal waiver of any right
to take a time point. He resisted the application by Glasgow to have the
proceedings dismissed because, he urged upon us, it was not sufficient for him
to be assured that the position of the Claimants would be free of any argument
as to time-bar for what he described as “soothing noises” to be made by counsel
for Glasgow. The Tribunal had gone wrong in exercising its discretion to
discharge Glasgow from the proceedings because:
(a) it might
possibly be the case that Glasgow might in some way (dependent perhaps on
doctrines of estoppel or the like) retain a liability. He argued that there
were some seven factors which were relevant to the discretion; that the claims
had been raised against Glasgow and that Cordia had been joined late;
(b) neither Glasgow nor Cordia had raised any question of the
time bar;
(c) Glasgow had introduced a policy of pay protection which was in dispute in the proceedings;
(d) Glasgow remained before the Tribunal in respect of arguments about a pay scheme;
(e) Glasgow had agreed to indemnify any liability of Cordia,
(f) the
representation of Cordia and Glasgow was in the same hands, so it would follow
that no additional expense would be incurred by Glasgow remaining a party and
(g) finally, the actions of Glasgow were to be associated
with the merits of the claim.
In near conclusion, he put it this way:
“What must not happen is that Glasgow is released and that
Cordia then argue the claim should be dismissed against them.”
93.
It is necessary to put this argument in its proper legal context. Under
the Transfer of Undertakings, Protection of Employment Regulations 2006
regulation 4 sets out the effect of a relevant transfer on contracts of
employment. So far is as material it provides by paragraph (2) as follows:
“… on the completion of a relevant transfer:
(a) all the transferors rights, powers, duties and liabilities
under or in connection with any such contract shall be transferred by virtue of
this regulation to the transferee;
(b) any act or remission before the transfer is completed, of
or in relation to the transferor in respect of that contract or a person
assigned to that organised grouping of resources of employees, shall be deemed
to have been an act or omission of or in relation to the transferee.”
94.
Glasgow was the transferor. Cordia was the transferee. It follows that
as a matter of law all Glasgow’s liabilities in respect of the contracts of
employment of any person transferred to Cordia also transferred to Cordia, and
that by regulation 4(2)(b) anything which Glasgow had done in respect of that
person, or their contract, which was an act or omission upon which that person
might found a claim was likewise assigned to Cordia. Though the matter has
been determined in the case of Stirling District Council v Allan & Ors
[1995] IRLR 301, on the similar wording of the 1981 Regulations, we also think
there is no conceivable argument that those provisions leave any scope for Glasgow to retain any residual liability in respect of the transferred contracts.
Whatever the general merits of the points made by Mr MacNeill may be we
therefore think that it was entirely appropriate for the Tribunal to begin to
exercise discretion upon the basis that Glasgow were not liable to any of the
employees represented by Mr MacNeill. Nor, for similar reasons, would Glasgow be liable for any employee represented by Ms Romney or Mr Gorton; they too, but
for slightly different reasons, sought to challenge the exercise of the
discretion by the Tribunal.
95.
The central concern which each expressed was that if Glasgow remained a
party disclosure for the purposes of this complex and detailed claim might be
rendered thereby more difficult. Glasgow had set up some of the arrangements
which potentially would be subject to challenge before the Tribunal. To be
required to undergo the process of third party disclosure, rather than
disclosure from a party, could place hurdles and obstacles of a practical sort
in the way of the resolution of the claim which would make not in the interests
of justice for the discretion to be exercised in favour of releasing Glasgow.
Discussion of the GMB appeal
96.
The central reasoning of the Tribunal is set out at paragraph 105. That
begins with the words, “In the above circumstances”. If those words refer to
the conclusions expressed at paragraph 104 they expressly take into account a
conclusion which the Tribunal reached in respect of the associated employer
point and the single source point, both of which it would follow in our
judgment were wrong. Mr Bowers argued that words did not refer to those
matters but referred specifically to the discussion which the Tribunal set out
at paragraphs 102 and 103 under the heading, “Lifting the Veil”, an argument in
respect of which there had been no appeal. We reject that submission. The
words are not restricted in any obvious way to that argument. They are general
words: they follow immediately upon paragraph 104, they plainly relate to
paragraph 104 and indeed to the whole of the judgment.
97.
The Tribunal having set that out as the basis for the
exercise of its discretion were exercising their discretion upon a wrong
basis. Mr Gorton made the argument that the error of approach was to be
identified in paragraph 105 where the Tribunal had regarded it as important,
that “They [i.e. Glasgow] do not have a direct interest in the claim as a
respondent”. This, he said, was the test applied by the Tribunal. That was
not the appropriate test. We reject that submission. It is plain that what
the Tribunal was doing was setting out a number of factors. That was one of the
factors; it is relevant as one of the factors; it is not conclusive; it was not
expressed to be conclusive.
98.
Had it not been for the opening four words of paragraph 105 there would
have been no possible complaint about the exercise of the Tribunal’s
discretion; it is a discretion. Such discretions, particularly where they
relate to case management and the like, cannot easily be subject to appeal. An
appeal lies only if the Tribunal has wrongly taken into account something it
should not have done or has left out of account something it should have done
or has reached a manifestly perverse decision; but perversity is not in
question here.
99.
Because we are bound by our reading of the first four words of paragraph
105 to hold that the Tribunal exercised its discretion upon a wrong basis by
taking into account that which it should not have done, we must consider what
we in exercise of our powers should do. We have the power to take any decision
which the Tribunal could take; we propose to exercise that power.
100.
Treating it then as our decision to make we have to consider - and we
shall do so briefly - what should be the factors which we should take into
account. We consider that a primary factor is whether a party has any liability.
In the case of Beresford v Sovereign House Estates Ltd a decision
of 29 November 2011, Underhill J as President of the Appeal Tribunal considered
a case in which the power to join someone as an additional respondent fell for
consideration. The person who sought to have the power exercised was not the
party who sought to be joined. A similar matter came before the President of
this current Tribunal sitting on his own in the case of Welsh v Bendel
(29 June 2012) UKEATS 0014/12. In that case the Tribunal adopted and echoed
the reasoning which had appealed to Underhill J. It was considering the case
of a party without his knowing it at the time had been joined as a party to
proceedings by a Tribunal, but had not wished to be. It might be said that he
had an interest in the proceedings - but this Tribunal considered that the
general exercise of the power to join a party or to sist them is to be
exercised upon the basis that that party has himself an interest in the
outcome. It added that if a party says that he does not wish to be joined,
then the exercise of the power to require him to become a party would not only
be paternalistic but it would be contrary to his own interests as to which he
must be the best judge; see paragraph 15.
101.
For the reasons we have expressed by reference to the TUPE Regulations
at paragraph 4, there is no prospect here of Glasgow being liable for any of
the claims made at the suit of the Claimants. They retain a financial interest
in the sense that they may be required to indemnify Glasgow Life, Parking or
Cordia. We in general consider that no person should be compulsively brought
to court against their will unless there is potentially a liability against him
or her and that where that party may be said to have an interest, whether
financial or otherwise, in the outcome of the proceedings. Other than where
there is direct liability, the best person to determine whether that interest
extends to being required to defend proceedings against him or her and incur
the expense, time, trouble, stress and difficulty of doing so, is that person
or party, him or herself.
102.
The powers, Mr Gorton rightly reminds us, which the Tribunal may
exercise are contained at rule 10 of the Employment Tribunal Rules of Procedure.
That rule gives a general power to manage proceedings. It includes a power, as
exemplified in 10.2(l), of dismissing a claim against a Respondent who is no
longer directly interested in the claim. We accept that considering whether a
party who is presently in proceedings should be dismissed is a different
question from that directly considered in Beresford and Welsh
which was effectively whether a party should be joined or sisted.
103.
The powers must be exercised in accordance with the overriding objective
as set out in rule 3. That involves dealing with the case in a way which
ensures the parties are on equal footing and that it is dealt with
expeditiously and fairly and saves expense. The principal concern expressed to
us by Ms Romney and Mr Gorton was a concern about the need to engage in a
process of third party disclosure. Mr Bowers, in the course of his response, whilst
saying nothing in respect of Mr MacNeill’s point as to whether a time issue
would be raised or not, said specifically in respect of disclosure that if the
true claims are against the ALEOs then no point would be taken by Glasgow that
any order would have to be made on a third party basis because Glasgow was not party to the proceedings. That is a significant assurance. Having been
given by senior counsel, to this Tribunal, it is obviously an assurance upon
which the parties are entitled to rely: but more than that it is a matter which
we specifically take into account in exercising our discretion as we shall
indicate. We see no other significant reason advanced to us (and certainly
none in the interesting submissions made by Mr MacNeill) as to why Glasgow should otherwise be retained against its will as an involuntary litigant in
proceedings in which the liabilities are entirely elsewhere.
104.
Accordingly, as we have indicated upon the basis of the assurance being
given on behalf of Glasgow, we exercise our discretion in precisely the same
way as did the Tribunal. By that process of reasoning, we record that the
decision though made in error was itself correct, and we make the same
determination.
Summary
105.
In summary:
(1) We hold that the word, “company” in section 1(6) of the Equal
Pay Act 1970 is capable of including the modern creation of a Limited
Liability Partnership;
(2) If we had had to decide the question of single source, we
would have had held that the Tribunal was in error essentially in failing to
deal or to find facts with respect of the second part of the Lawrence
formula, and both for that reason, and separately because we identified what might
be thought to be a failure to deal with a significant argument which required
to be dealt with more fully than it was, we would have remitted that to the
same Tribunal for re-determination;
(3) We dismiss the appeal against the decision of the Tribunal to
release Glasgow from the proceedings, upon the basis that though the decision
in the circumstances was reached on a wrong footing, in substance it was right
and we have exercised our own discretion to the same effect.
106.
Finally, we could not leave this judgment without paying formal tribute,
as we have done informally in the course of the hearing, to the quality of the
submissions which we have had from all parties. We suspect that those who will
reap the glory for that are centrally the leading counsel who have presented
the argument, but we also suspect that the work of those we have identified as
juniors has substantially contributed to the effectiveness of those arguments.
We are grateful to all, not least for their succinctness, which has enabled this
judgment to be given almost immediately following the argument and within the
time span which had originally been allotted for the hearing.
107.
Finally, we indicated toward the conclusion of the argument that
whatever way we determined the appeals before us, we considered that they give
rise to issues of law which are important, that the case is one of substance
and significance and that we thought, therefore, that liberty to appeal should
be granted to the losing party. Accordingly, we give permission to appeal to the
Inner House of the Court of Session to Glasgow. We do not encourage its
exercise, but that is a matter for Glasgow itself.
