UK: Employment Bulletin - December 1998

Last Updated: 1 December 1998
Equal Pay: Look Back In Anguish?

The Equal Pay Act 1970 holds little by way of Christmas cheer for employers. Its scope has gradually been widened by successive Tribunal decisions to include not just current colleagues but also those who preceded or indeed followed the claimant in the service of the employer. There have, however, always been two sources of comfort (using the word in a strictly relative sense!) in the Act.

First, if an employee has not brought his or her equal pay claim within six months after the end of his employment (or within six months after the inequality is removed, if earlier) then by Section 2(4) the right to do so is lost. Second, even if the claim is brought in time and is won, the employer's liability to rectify the inequality in pay reaches backwards for only two years from the date of the claim (Section 2(5)). The Act contains no discretion to extend either period. If an equal pay claim is lodged towards the end of the six month window permitted by Section 2(4) of the Act, therefore, the employer may find itself owing compensation for little more than 18 months.

Both provisions have provided particular solace to employers facing pension access claims from people who have been excluded from pension benefits by reason of their having worked part-time. In many such cases the employment (or at least the inequality) is long past. Employers facing claims which are not time-barred in this way have known that Section 2(5) would protect them in most cases from the potentially terrifying prospect of compensating for the loss of many years' lost pension rights.

In the UK's main pension access test case, Preston & Others -v- Wolverhampton Health Care NHS Trust & Others [1998] ICR 277 the House of Lords earlier this year asked the European Court of Justice ("ECJ") to help it determine whether either or both provisions may be impugned as contrary to EU law.

In fact the ECJ has already been struggling with the two-year limit issue in another English case, Levez -v- T H Jennings (Harlow Pools) Limited. The ECJ's decision was released on 1 December 1998. It has been widely reported as invalidating the Section 2(5) two-year limitation period altogether, but a close examination of the judgment shows that this may be a case very much on its own facts. In brief, the employer deliberately misled Mrs Levez as to the extent of the disparity between her pay and that of her comparator. In consequence she did not lodge an Equal Pay claim until she found out the true position. The effect of the delay and Section 2(5) combined was to leave her without a remedy for the first seven months of the period of inequality.

The ECJ was asked to consider whether the fixed Section 2(5) limit was contrary to EU law (requiring an effective remedy for unlawful discrimination) on two main grounds: (i) that the limit on compensation was not a factor in other non-gender employment claims, e.g. breach of contract, race discrimination and unlawful deductions (general issues); and (ii) that the reason for the late claim was the employer's default in misleading the employee (a point specific to the case).

On the general point, the ECJ recognised that the interests of legal certainty meant that a fixed compensation period could be justifiable - indeed, it said "a rule under which entitlement to remuneration is restricted to the two years preceding the date on which proceedings were instituted is not in itself open to criticism".

On the case-specific point, however, the ECJ took the view that the absence of a discretion to extend Section 2(5) in the Act was contrary to EU equality law. This was on the basis that to find otherwise would allow or encourage employers to mislead staff about earnings gaps in order to delay or deter the institution of equal pay proceedings. That would deny claimants an effective remedy. In those particular circumstances, the ECJ was prepared in effect to remove the Section 2(5) limitation.

Although Levez did not consider the point, it would perhaps be surprising if a similar view were not taken by the ECJ in Preston in relation to the Section 2(4) time limit on bringing proceedings. Again, the Equal Pay Act gives a Tribunal no discretion to increase this period. One could imagine that if an employee or ex-employee missed the six month window as a result of a misrepresentation by the employer, the ECJ would be astute to rule that lack of discretion unlawful. Certainly it is well accepted that the conduct of the employer, even if short of actual deceit, can be a proper ground for the exercise of a Tribunal's discretion to extend time limits in other categories of claim.

It remains to be seen whether the ECJ in Preston will take a similar view of Section 2(5). It is probable that instead of removing the two year limitation altogether, it will seek to lay down circumstances in which a Tribunal would be justified in exercising a discretion to extend the period under the principles above. The issue for most pension access claims would be the extent to which ignorance of the law or of the relevant facts not caused by any deliberate act or omission on the employer's part would constitute such justification. Our view is that while ignorance of the law will probably not do so, ignorance of the facts on which to base a claim may well amount to a reason for extending the two year period.

In conclusion Levez does not directly have the effect on Equal Pay Act claims which has been attributed to it. That said, it is certainly possible that in inserting a discretion into the two year time limit where strict compliance would make it difficult for the claimant to obtain a proper remedy, the ECJ has opened the door to the gradual broadening of that discretion to include circumstances where the employer is not at fault in any way. Sadly we must wait for their decision in Preston for a definitive view. The latest indications from the Tribunals are that this may not be issued until the second half of next year.

For further information please contact Susan Nickson, e-mail: Click Contact Link , Trinity Court, 16 John Dalton Street, Manchester M60 8HS, UK, Tel: +44 161 830 5000

This article was first published as the December 1998 Hammond Suddards Employment Bulletin

The information and opinions contained in this article are provided by Hammond Suddards. They should not be applied to any particular set of facts without appropriate legal or other professional advice.

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