Preston and others v. Wolverhampton Healthcare NHS Trust and others (No 3) (formerly Powerhouse Retail Limited and others (Respondents) v. Burroughs and others (Appellants)

A claim under section 2(4) of the Equal Pay Act 1970 must be brought within six months after the employment to which the equality claim relates ends. Where a transfer of an undertaking occurs, pension liabilities excluded from transfer by the Transfer of Undertakings (Protection of Employment) Regulations 1981 remain with the transferor.

A claim concerning the transferor’s occupational pension scheme therefore relates to the claimant’s employment with the transferor. Time runs from the transfer date, rather than from the eventual termination of employment with the transferee. The statutory continuation of the remaining employment contract does not extend the limitation period for the excluded pension claim.

About 60,000 part-time workers brought equal pay claims arising from their exclusion from occupational pension schemes. The appellants had worked part-time in the electricity industry and sought retrospective membership for periods preceding April 1988. Their employment was subsequently transferred to Powerhouse Retail Ltd under the Transfer of Undertakings (Protection of Employment) Regulations 1981.

The appellants accepted that regulation 7 left liability for the pre-transfer pension claims with the transferor. Their applications were nevertheless presented more than six months after the transfers. The employment tribunal held that they were out of time. The Employment Appeal Tribunal reversed that decision, reported at [2004] ICR 993. The Court of Appeal restored the tribunal’s conclusion in [2004] EWCA Civ 1281, reported at [2005] ICR 222.

The issue before the House was whether the six-month period under section 2(4) of the Equal Pay Act 1970 began on the transfer date or only when employment with the transferee ended.

1. Appeal dismissed unanimously. Lord Hope of Craighead delivered the leading speech. Lord Scott of Foscote, Lord Rodger of Earlsferry, Lord Carswell and Lord Brown of Eaton-under-Heywood agreed with his reasons and conclusion.

2. Per Lord Hope, section 2(4) of the Equal Pay Act 1970 uses “employment”, rather than “contract”, to identify the event from which time runs. Read as a whole, it requires a claim to be brought within six months after the employment to which the claim relates ends. Earlier reasoning about successive contracts with the same employer did not answer the different question arising upon a transfer of an undertaking.

3. Per Lord Hope, regulation 5 of the Transfer of Undertakings (Protection of Employment) Regulations 1981 ordinarily preserves the employment contract and transfers the transferor’s contractual rights and liabilities to the transferee. Regulation 7 creates an exception for rights and liabilities relating to occupational pension schemes. The transferee therefore does not inherit the transferor’s pension obligations.

4. Where an equality claim concerns the operation of the transferor’s occupational pension scheme before the transfer, the relevant employment is the claimant’s employment with the transferor. That employment ends for the purposes of the claim upon the transfer. The continuation of the remaining contract with the transferee does not postpone the limitation period attached to a liability which remains exclusively with the transferor.

5. Per Lord Hope, legislation may apply flexibly to circumstances not foreseen when it was enacted where its language permits. It cannot, however, carry inconsistent meanings at the same time. Section 2(4) applies the same rule following a transfer as in other cases: the court must identify the employment to which the particular equality claim relates.

6. Linking time to employment with the transferor also promotes legal certainty and connects the limitation period with the employer whose pension liability is in issue. The appellants’ claims, brought more than six months after their transfers, were out of time. They were ordered to pay the respondents’ costs in the House; no costs order was made in favour of the intervener.

1. House of Lords: The appeal was dismissed unanimously in [2006] UKHL 13. The Court of Appeal’s decision that the claims were out of time was affirmed.

2. Court of Appeal: The respondents’ appeal was allowed in [2004] EWCA Civ 1281, reported at [2005] ICR 222. The court held that the relevant employment with the transferor ended on the transfer date and that time then began to run.

3. Employment Appeal Tribunal: The claimants’ appeal was allowed in the decision reported at [2004] ICR 993. It held that time did not begin to run until employment with the transferee ended.

4. Employment tribunal: The tribunal held that time began to run on the transfer date and that the proceedings against the transferor had to be commenced within six months of that date.