Powerhouse Retail Ltd & Ors v Burroughs & Ors

Where a transfer under the Transfer of Undertakings (Protection of Employment) Regulations 1981 excludes occupational-pension terms, an equal-pay claim concerning those terms remains a claim on the pre-transfer contract with the transferor. For section 2(4) of the Equal Pay Act 1970, that is the specific contract of employment in respect of which the claim is made.

The statutory continuation of the employee's general contract with the transferee does not preserve the pension terms excluded from transfer. The transfer therefore ends the relevant employment for limitation purposes, and the six-month period for a claim against the transferor begins on the date of transfer.

The respondents were part-time employees in the electricity industry who had been denied access to an occupational pension scheme. Their employment transferred, through two successive transfers, under the Transfer of Undertakings (Protection of Employment) Regulations 1981. Their claims concerned only their pre-transfer employment and were brought against the transferors more than six months after the first transfer, while they remained employed by the transferee.

The Employment Tribunal held that time under section 2(4) of the Equal Pay Act 1970 began on transfer. The Employment Appeal Tribunal reversed that decision, holding that time began only when employment with the last transferee ended. The employers appealed on the question whether the excluded pension terms meant that the relevant employment with the transferor ended at transfer.

1. Appeal allowed unanimously. Lord Justice Pill held, with whom Lord Justice Jonathan Parker and Mr Justice Laddie agreed, that the Employment Appeal Tribunal had erred. The claims against the transferors were out of time because the relevant six-month period began when the transfer occurred.

2. Regulation 5 of the Transfer of Undertakings (Protection of Employment) Regulations 1981 preserves the employment contract on a relevant transfer by statutory fiction. It deems the continuing contract to have been made between the employee and transferee. It does not deem the pre-transfer contract with the transferor never to have existed.

3. Regulation 7 excludes occupational-pension terms from that statutory continuation. Accordingly, the post-transfer contract was shorn of the pension rights on which the equal-pay claims were founded. It could not be treated as the specific contract of employment giving rise to those claims merely because both contracts contained an equality clause.

4. For section 2(4) of the Equal Pay Act 1970, the relevant employment was the pre-transfer contract between employee and transferor, including its pension-related equality clause. Insofar as those terms did not transfer, that contract ended on transfer and time then began to run against the transferor.

5. National Power plc v Young [2001] ICR 328 and HQ Services Children’s Education (MOD) v Davitt [1999] ICR 978 were single-employer cases turning on the particular contracts. They did not assist on a transfer excluding pension terms. The construction issue could be resolved without relying on concerns about legal certainty.

• Court of Appeal (Civil Division) — allowed the employers' appeal in [2004] EWCA Civ 1281 and restored the Employment Tribunal's limitation conclusion.
• Employment Appeal Tribunal — allowed the employees' appeal from the Employment Tribunal and held that time against the transferor ran from termination of employment with the transferee.
• Employment Tribunal — held that time for claims against the TUPE transferors began on the date of transfer.