Levez v T H Jennings (Harlow Pools) Limited  IRLR 36 ECJ
In the eagerly awaited decision in Levez v T H Jennings (Harlow Pools) the European Court of Justice has failed to answer the fundamental question as to whether or not the two year limit on arrears of back pay in an equal pay claim is, in principle, compatible with EU law.
That is a question which may be determined by the Employment Appeal Tribunal when the Levez case returns to it. However, the European Court of Justice has sunk the Government's main defence to the two year limit, as deployed in the part-timer pensions cases. We are cautiously optimistic that the two year limit will now be thrown out.
Mrs Levez began employment with Jennings as a manager in February 1991. She transferred to a new site in December 1991, but it was not until April 1992 that her pay was raised to the same level of her male predecessor, with whom she performed work of equal value. It was only when Mrs Levez left Jennings in March 1993 that she discovered that she had been paid less than her male predecessor until April 1992. She therefore presented a claim for equal pay, relying upon Article 119 of the EU Treaty, in September 1993.
Section 2(5) of the Equal Pay Act 1970 provides that a successful Applicant can only obtain back pay for the two years immediately preceding the date he or she submitted the claim. To recoup the entire difference in pay, Mrs Levez needed to extend her arrears of back pay beyond the two year limit.
The relevant legal principles are well settled. It is their application which causes the problems. It is up to Member States to decide the procedural rules governing the enforcement of rights based on Community law, but such procedural rules must:
- (i) Not make it impossible or excessively difficult for applicants to exercise their Community law rights (the "effectiveness" principle); and
- (ii) Not be less favourable than procedural rules applying to 'similar domestic actions'(the "equivalence" principle) - such as a claim relating to discrimination in pay on the grounds of race.
The Employment Appeal Tribunal referred two questions to the European Court of Justice:
- (i) Is the two year limit on back pay compatible with Community Law where the limit does not apply to any other claim, is not capable of extension and there are rules more favourable to applicants in other areas of employment law such as claims of breach for contract, race discrimination in pay, unlawful deductions from wages and sex discrimination in matters other than pay?
- (ii) What is meant by a 'similar domestic action' for the purpose of the "equivalence principle"? - i.e. which types of claim are comparible and which are not.
In answering the first question, the European Court of Justice focuses on the fact that Mrs Levez had been deliberately misled by her employer about the rate of pay of her male predecessor. To allow Jennings to rely upon the two year limit would have made it impossible, or virtually impossible, for Mrs Levez to exercise her Community law rights - a breach of the "effectiveness" principle. Accordingly, because there was no possibility of extending the two year limit and the delay in bringing the claim was attributable to the fact that the employer deliberately misrepresented to Mrs Levez the level of remuneration received by her predecessor, the two year limit was to be dis-applied in her case.
That was enough to decide the Levez case. Because of the argument advanced by the UK Government, however the European Court of Justice went on to make observations on the second question. To an extent, the European Court of Justice's observations are unfounded - the suggestion is that the UK Government sought to argue that the 'similar domestic action' (for the purpose of the "equivalence" principle) was an equal pay claim brought in the County Court coupled with an action for deceit on the part of the employer. This is inaccurate.
The UK Government was simply attempting to suggest an alternative mechanism by which Mrs Levez could have secured full compensation before the domestic courts.
Nonetheless, the ECJ's observations as to how to identify "similar domestic actions" are very helpful, not least to the many thousands of part-timers claiming retrospective access to pension schemes who await the outcome of the reference in Preston & Others v Wolverhampton Healthcare NHS Trust & Others.
The ECJ finds that the purpose and essential characteristics of potentially similar domestic action must be considered. Furthermore, national courts must take into account the role played by any particular provision in the procedure as a whole, and take into account special features of that procedure. It will plainly be relevant, in the context of the Equal Pay Act, that the time limit for presentation of a claim does not expire until six months after the date of leaving employment. Although again not subject to discretionary extension, this is likely to be seen as more favourable than, for example, the time limit for a sex discrimination claim not related to pay.
Most importantly, the ECJ finds that the "similar domestic action" to a claim based on Article 119 cannot be a purely domestic equal pay claim. This is the argument which found favor with the Court of Appeal in Preston and defeated the part-timers (for the time being) in their pensions access claims. The ECJ said that this argument is flawed because, although the Equal Pay Act predates the UK's accession to the Treaty of Rome, the Equal Pay Act is still the UK's mechanism for implementing rights contemplated by Article 119. This is plainly correct and avoids the circular logic which found favour with the Court of Appeal in Preston.
This means that another 'similar domestic action' must be chosen. The European Court of Justice has left that choice, in Mrs Levez's case, to the Employment Appeal Tribunal.
Unfortunately, the EAT may well be able to duck that question - the answer is not strictly necessary for the determination of Mrs Levez's case. However, certainly for the purposes of Preston, the "similar domestic action" will have to be identified. A breach of contract action has a six year limit on back pay. However, claims for unlawful deductions from wages, and for arrears of pay arising out of race discrimination have no limit on arrears recoverable. There are therefore grounds for optimism that the two year limit on back pay will fall altogether, or at least be extended to six years.