Time of transfer

The Court of Appeal has decided yet another case arising out of the equal pay claims made by thousands of women (some more than a decade ago) that they had been unlawfully excluded from membership of their occupational pension scheme, because they worked part-time.

In Powerhouse Retail Ltd & ors v Burroughs & ors, the Court of Appeal has said that when employees are transferred from one employer to another under the TUPE regulations, their pension rights are removed from the contract that the transferee inherits. Time therefore runs from the date of the transfer.

What is the history to this appeal?

The women concerned with this appeal had originally been employed part-time in the nationalised electricity industry. They were allowed to join the pension scheme in 1988 and subsequently accrued pension benefits.

Following privatisation in 1992, there were two successive transfers under the TUPE regulations (see box below) and the women were transferred to a new employer.

During the course of this protracted litigation, the European Court of Justice said that the six-month limitation period under the Equal Pay Act 1970 for bringing proceedings was not incompatible with EC law.

This specific case dealt with one aspect of that decision - in a TUPE transfer, does time begin to run against the transferor from the date of transfer? Or from the end of the employee's employment with the transferee?

The effect of regulation 5 of the TUPE Regulations is to transfer the employees' terms and conditions to the transferee, as though the contract had originally been made between them. Regulation 7, however, says that this principle does not apply to occupational pension schemes.

What was the view of the courts?

The employment tribunal had held that time starts running against the TUPE transferor from the date of the TUPE transfer. The EAT, on the other hand, said that the six month time limit for bringing a claim against the transferor did not start running until the worker left the employment of the transferee or, if there was more than one TUPE transfer, from the termination of the employee's employment with the last transferee.

The Court of Appeal, however, has now reversed that decision and said that although the contract of employment is deemed always to have been with the transferee, the pension rights have been removed from it. The women's claim, it said, was therefore based on the previous contract and terminated when the transfer took place. This is when time began to run.

Comment

This is a very harsh interpretation of the time limits in the Equal Pay Act. It will mean that many part-timers' pension claims will now fail. However, the decision will only apply to pension-related claims and not to other equal pay claims after a TUPE transfer.

The position is also different for public sector reorganisations where the transfer from one employer to another takes place under sector-specific legislation. Pension rights may be transferred, and time may not start to run until the employment comes to an end.