Employment Cases Update: Fox Cross Claimants v Glasgow City Council & Ors UKEATS/0027/12/BI & Other conjoined appeals

Fox Cross Claimants v Glasgow City Council & Ors UKEATS/0027/12/BI & Other conjoined appeals

Appeal against a ruling that claimants who had been transferred from the respondent to two LLP’s were not entitled to compare their terms and conditions of employment with those still in the direct employment of the respondent. Separate appeal against the discharge of the respondent from proceedings. First appeal allowed, second appeal dismissed.

The EAT allowed the appeal. A "company" within the meaning of s.1(6) EqPA was not restricted to a limited company registered under the Companies Acts. It could mean a body persons, and since s.1(6) was to be seen as an anti-avoidance provision should purposively be construed to that effect, such that an LLP was within its meaning. Though obiter, in consequence of the decision on 1(6), the rejection of there being a "single source" was also in error. The second appeal was dismissed. Although the Tribunal had exercised its discretion upon the wrong basis, the EAT made the same determination.

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Appeal No. UKEATS/0027/12/BI

UKEATS/0028/12/BI

UKEATS/0029/12/BI

EMPLOYMENT APPEAL TRIBUNAL

52 MELVILLE STREET, EDINBURGH EH3 7HF

At the Tribunal

On 22-25 January 2013

Before

THE HONOURABLE MR JUSTICE LANGSTAFF (PRESIDENT), MISS J GASKELL, MRS A HIBBERD

UKEATS/0027/12/BI

FOX CROSS CLAIMANTS (APPELLANTS)

GLASGOW CITY COUNCIL & OTHERS (RESPONDENTS)

UKEATS/0028/12/BI

UNISON CLAIMANTS (APPELLANTS)

GLASGOW CITY COUNCIL & OTHERS (RESPONDENTS)

UKEATS/0029/12/BI

GMB CLAIMANTS (APPELLANTS)

GLASGOW CITY COUNCIL & OTHERS (RESPONDENT)

Transcript of Proceedings

JUDGMENT

**APPEARANCES**

For Fox Cross Claimants
MS DAPHNE ROMNEY (One of Her Majesty's Counsel)
Instructed by:
Fox & Partners
4th Floor, 44 York Place
Edinburgh
EH1 3hu

For Unison Claimants
MR SIMON GORTON (One of Her Majesty's Counsel)
Instructed by:
Thompsons Solicitors
Berkeley House
285 Bath Street
Glasgow
G2 4HQ

For GMB Claimants
MR CALUM MacNEILL (One of Her Majesty's Counsel)
Instructed by:
Digby Brown LLP
2 West Regent Street
Glasgow
G2 1RW

For the Respondents
MR J BOWERS (One of Her Majesty's Counsel)
Instructed by:
MacRoberts LLP
Capella
60 York Street
Glasgow
G2 8JX

**SUMMARY**

EQUAL PAY ACT

TRANSFER OF UNDERTAKINGS – Transfer

Glasgow Council decided it would no longer perform work of providing leisure and recreational services; of providing parking and parking enforcement services; and of providing care services by using directly employed labour. Its staff in each of the three areas were transferred to respectively a Community Interest company, Glasgow Life, and two LLPs – "Parking", and Cordia. The employees wished to be able to compare their terms and conditions of employment with those still in the direct employment of Glasgow Council in other departments for the purposes of equal pay claims. To do so, the CIC and the two LLPs both needed to be "associated employers" within the meaning of s.1(6) Equal Pay Act 1970, or their pay had to be attributable to a "single source". A Tribunal held that whereas the CIC was an associated employer, neither LLP was, since an LLP was not a "company" within the meaning of the statute. Nor, despite the extremely close control which Glasgow Council maintained over the personnel of the boards of each, and over their operations, which were subject to the power to require them to act as Glasgow Council directed, and to audit by Glasgow Council, was there a single source within the meaning the law attributed to that concept. Held A "company" within the meaning of s.1(6) EqPA was not restricted to a limited company registered under the Companies Acts. It could mean a body persons, and since s.1(6) was to be seen as an anti-avoidance provision should purposively be construed to that effect, such that an LLP was within its meaning. Though obiter, in consequence of the decision on 1(6), the rejection of there being a "single source" was also in error. The appeals by two of the groups of claimants was therefore allowed, but a separate appeal by GMB claimants on a different point (whether a Respondent should be discharged from the proceedings) was rejected.

Permission was granted to appeal to the Inner House of the Court of Session.

**THE HONOURABLE MR JUSTICE LANGSTAFF (PRESIDENT)****Introduction**

This case is about sex discrimination and pay. A claim for discrimination usually involves treating people in like situations in an unlike manner. Pay discrimination is no different. It involves a comparison, but that comparison must be between people in comparable situations. So a woman who works for employer A cannot normally expect to compare her wages with those of a man working for employer B; they are in different situations. Where, however, employer A hives off employees to company B of which it retains control, this could all too easily permit discrimination unless a comparison were permitted in that case too. A predominantly female workforce might be placed in one subsidiary company and a predominantly male one in another and, overall, disparity might flourish. This case concerns whether the law permits a woman working for B to compare herself with an employee still working for A where A and B are closely linked.

Glasgow City Council (Glasgow) decided to transfer three services to three separate bodies, each legally distinct from Glasgow which it set up for the purpose. In each case it transferred its employees from its direct employment to that of the new body. Its Culture and Leisure Community Services went to Culture and Sport (Glasgow Trading Community Interest Company) which has become known as Glasgow Life. Car parking and Parking, Fine and Enforcement Services involving 56 employees went to a limited liability partnership, City Parking (Glasgow) LLP. That began trading on 1 June 2007. The Direct and Care Services which Glasgow provided to its citizens, were from 1 April 2009 provided by another limited liability partnership, Cordia (Services) LLP. Glasgow Life, Parking and Cordia are known as Arms Length External Organisations (ALEOs).

Employees in each of the three services were thus in the same position as women working for employer A who had transferred to work for employer B. They argued as a preliminary point before an Employment Tribunal at Glasgow that they should be permitted to compare their pay with that of men still working for Glasgow. By its decision delivered on 20 December 2011 with an addendum in early January 2012, the Employment Tribunal held that the employees now working for Glasgow Life were entitled to compare their terms and conditions of employment, and in particular pay, with employees of the opposite gender still working in the direct employment of Glasgow, but that that those worked at the LLP's, Parking and Cordia, were not.

The central difference between them was that Glasgow Life was a community interest company whereas Parking and Cordia were limited liability partnerships. The central questions in these appeals brought by three groups of separately represented Claimants is whether that conclusion was correct. Each LLP is sufficiently controlled by Glasgow for it to consider that there was no need for it to comply with regulation in respect of public procurement requiring, for instance, open competition on a commercial basis, since each of the three ALEOs was for that purpose as if part of Glasgow's own organisation. It was common ground before us that the ALEOs and Glasgow were so intimately linked that Glasgow could, if it wished, control the operation of and decisions made by the ALEOs. The Appellants argue that it defies reason for Glasgow to accept that but to deny responsibility for inequalities of pay between ALEOs and Glasgow itself which it could not deny if all the employees were in its direct employment.

**The legal landscape**

The right to equal pay is actionable under either a United Kingdom statute (the Equal Pay Act 1970 was the applicable legislation at the time relevant to this case) or under Article 157 of the Treaty for the European Union. Those provisions are not mutually exclusive but operate in tandem. The Equal Pay Act provided that each contract of employment would include an equality clause. The equality clause operates only where a woman is employed on like work or work rated as equivalent with that of a man or work of equal value to a man who is "in the same employment" (see sections 1, 2 (a), (b) and (c)).

By section 1(6) it is provided that:

"…men shall be treated as in the same employment as a woman if they are men employed by her employer or any associated employer at the same establishment or establishments in Great Britain which include that one, and in which common terms and conditions of employment are observed either generally or for employees of the relevant classes."

What then is an associated employer? Section 1(6) also provides that:

"… for the purposes of this section …(c) two employers are to be treated as associated if one is a company of which the other (directly or indirectly) has control or if both are companies of which a third person (directly or indirectly) has control…"

The wording of Article 157 contains no similar requirement. It is simplicity itself. It lays down the principle that equal work or work of equal value is to be remunerated in the same way whether it is performed by a man or a woman. By Council Directive 75/117 (The Equal Pay Directive) the principle of equal pay means:

"For the same work or for work for which equal value is attributed, the elimination of all discrimination on grounds of sex with regard to all aspects and conditions of remuneration."

In Lawrence v Regent Office Care Ltd case 320/00 [2003] ICR 1092, the Court of Justice of the European Communities recognised that there was nothing in the wording of Article 141(1), the then provision which is replicated now in Article 157, to suggest that the provision was limited to situations in which men and worked for the same employer. The Court had held that the principle could be invoked where discrimination arose directly from legislation or collective labour agreements and where work was carried out in the same establishment "or service", whether private or public. It went on to recognise that there was a limitation to the breadth of this principle:

"18. However, whereas in the main proceedings here, the difference as identified in the paid conditions of workers performing equal work or work of equal value cannot be attributed to a single source, there is no body which is responsible for the inequality and which could restore equal treatment. Such a situation does not come within the scope of Article 141(1) EEC. The work and pay of those workers cannot therefore be compared on the basis of that provision."

Lawrence was a case in which a local authority had transferred school catering and cleaning staff to an entirely separate commercial company after a process of compulsory competitive tendering. The claimants looked to compare their pay with men who were still employed by the local authority. There was plainly no single source which was responsible for and which could restore equal treatment.

Allonby v Accrington & Rossendale College & Ors [2004] IRLR 224 CA concerned a part-time lecturer who had been employed by the college. It decided no longer to employ her directly; instead she was told that if she wished to continue to work at the college she would have to provide her services as a self-employed worker through an agency with whom the college would contract (ELS). The Court considered, see paragraph 46, that a person in Ms Allonby's position was complaining of differences in pay which could not be attributed to a single source, and there was no body which was responsible for the inequality which could restore equal treatment. Such a situation did not come within the scope of Article 141(1)(EC). It went on to explain at paragraph 47 that the would-be male comparator was paid by the college, "under conditions determined by the college" whereas by contrast ELS agreed with the claimant on her pay and, see paragraph 48, the fact that the level of pay she received was influenced by the amount the college paid ELS in respect of her services, they then accounting to her for the sum which they agreed to pay her for the work, was not a sufficient basis for concluding that the college and ELS constituted a single source.

In Robertson v DEFRA [2005] ICR 750, the Court of Appeal considered whether male civil servants employed by DEFRA could compare their pay with female civil servants working in other government departments. The Crown was the employer of both the men and the women. However, under arrangements described in the Judgment of Mummery LJ at paragraphs 33 to 35, the Minister for the Civil Service had delegated the power to negotiate and set most aspects of pay to the department concerned. Pay and conditions of civil servants were no longer negotiated or agreed centrally on a civil service wide basis. This was a deliberate change in policy. Individual departments were free to negotiate and agree most terms and conditions of employment and actively use their discretion to introduce pay systems and negotiate pay settlements that best suited their particular needs. In those circumstances, the Court concluded that there was no singe source to which the differences identified in the pay and conditions of service of workers from different departments could be attributed and no single body which could remedy the discrepancy in pay.

There are two important passages for present purposes in the Judgment. At paragraph 29 Mummery LJ said this:

"The opinion of the Advocate General in Lawrence supports the view that Article 141 is addressed generally to those who may be held responsible for unauthorised differences in terms and conditions of employment and that it is not sufficient simply to look at who are the employers of the applicants and the comparators and to proceed to consider "single source" only and if they are not in common employment. It is necessary to consider in each case whether the terms and conditions are traceable to one source… I agree with the Appeal Tribunal … that the Court of Justice was setting out a justification in the form of a principled basis upon which responsibility for difference and discrimination can be pinned and that the justification is in the single source rather than in common employment. The Court of Justice made it clear that it is not necessarily the person with whom the workers have contacts of employment that determines comparability. The relevant body is the one, "which is responsible for the inequality and which could restore equal treatment". The body responsible for the state of affairs will often be the same employer of both the applicants and the comparators but that is not necessarily so. It depends on the circumstances of the particular case as to whether further enquiry may be necessary. If that there were not the case the submission of Counsel for the Appellants would tend to have the extravagant consequence that every civil servant would be entitled to compare himself or herself with any other civil servant of the opposite sex; subject only to objective justification by the employer of differences in pay. That does not seem to be a sensible or practical approach to the preliminary task of a identifying appropriate workers in circumstances comparable to the applicants. In my Judgment the Tribunals below were right to reject it. On my reading of Lawrence … the approach of EC law is to locate the single source with the body responsible for setting the relevant terms. This is not determined by only addressing the formal legal question of the identity of the employer."

At paragraph 41 he said this:

"Retention of power by the Crown after delegation to the department means that there is a theoretical legal possibility of the Crown exercising its power some time in the future but the retention of a legal power which has not in fact been exercised by the Crown over pay and conditions in the particular case does not make the Crown, "the body responsible" for the actual negotiations and decisions on pay by individual departments resulting in pay differences of which complaint is made."

Nor did the Court accept that the theoretical legal responsibility that the delegation of power might be revoked some time in the future was a basis for concluding that there was here a single source. The argument was based on theory, "rather than on recognition of the realities of the existing employment situation". That emphasis on the realities of the existing employment situation is in, our view, an important recognition.

In North Cumbria Acute Hospitals NHS Trust v Potter & Ors [2009] IRLR 176, the Appeal Tribunal, presided over by Nelson J, rejected an argument that an Employment Tribunal had erred in law in regarding an NHS Trust as a single source. The Trust was formed by the merger of two former Trusts. Before the merger the claimants worked for those Trusts or their predecessor health authorities, as had their comparators. The Tribunal said, importantly for our purposes at paragraph 107:

"… the Employment Tribunal set itself the correct task in law by asking who was the body "Responsible for the inequality and which could restore equal treatment" as set out in Lawrence paragraph 18. They rightly noted that it was not enough to show that the Claimants had the same employer as the comparators as was stated in both Armstrong [that was a reference to Armstrong & Ors v Newcastle on Tyne NHS Hospital Trust [2005] EWCA Civ 1608] and Robertson. They were also, in our judgement, correct in finding that when Mummery LJ in Robertson and Arden LJ in Armstrong referred to the "body responsible for setting the terms of both groups of employees" they did not mean responsible for creating the inequality. Were that to be so, no equal pay claim could be brought where a Trust had merged with another. Both Mummery and Arden LJJ were expressing the same concept as set out in Lawrence in slightly different terms.

108. Whether a particular body is responsible for the inequality and could restore equal treatment depends on an evaluation of all the evidence … it is therefore an issue of fact for an Employment Tribunal to determine."

Before us, Mr Bowers, QC for the Respondents argued that the determination of a single source was a matter of fact and degree. Mr Gorton QC for the Unison Claimants similarly accepted that every case must turn upon its own particular facts. We agree. The facts will sit in a spectrum at one end of which is the case where an employer transfers employees to a wholly distinct commercial organisation which had a separate existence prior to the transfer and which regulates its own pay and conditions. Lawrence was an example. At the other end is the employer which directly organises its own staff within its undertaking and regulates the pay and condition of all, such as, here, Glasgow before the transfers. In between, but toward the Lawrence end of the spectrum is a case when an employer has entirely divested itself of its powers to regulate wages to separate departments, such as Robertson. The employer of the Claimants' comparator may be one and the same, but the theoretical possibility in such a case that the employer could reverse its policy and take back the regulation of wages to itself cannot alter the reality that pay is now regulated by each department.

When an employer has separate plants, each of which bargains separately, it was accepted by the advocates before us that whether an employer in plant A could compare his pay with an employee in plant B would depend on whether in all the circumstances the employer has sufficiently retained responsibility for pay, and had power to remedy disparity, such as to preserve it as the single source: but there could be no single answer. This case is obviously further from the Lawrence end of the spectrum than is Robertson and is plainly not as obvious as Lawrence or Allonby to resolve but is, of course, distinct from the pure Glasgow end of the spectrum.

**The central issues**

The decision of the Tribunal raised these three central issues for our resolution. First was the question whether the Claimants and Appellants could be regarded as being in the same employment as their chosen comparators. That depends upon domestic statute, the Equal Pay Act section 1(6), and is in essence an argument about the scope of the word, "company" used in that subsection. Secondly, whether there was a single source. Here since the parties are rightly agreed or accept that it is a question of fact and degree, the legal question for our determination must be one of the correctness of the approach which the Tribunal took, though on occasions the Claimants arguments seemed to invite us to find the facts for ourselves, which we cannot do, or to hold the conclusion perverse, which would be a very high hurdle indeed. The third and separate issue raised by all, but with a separate argument raised by Mr MacNeill QC for the GMB Claimants, was whether the case management decision taken by the Tribunal to dismiss Glasgow from the proceedings was in error.

**The procedural landscape**

The claims were brought by three groups who were and are separately represented. Before us the Fox Cross Claimants have been represented by Ms Romney of Queen's Counsel together with Miss Carol Fox. The Unison Claimants have been represented by Mr Simon Gorton of Queen's Counsel, together with Mr Peter O'Donnell. The GMB Claimants have been represented by Mr MacNeill of Queen's Counsel together with Mr Douglas Japp. The Respondents have been represented, all of them, by Mr Bowers of Queen's Counsel who has appeared before us together with Ms Clare Elliott, Gordon Barlett and Mark Wallace.

The GMB Claimants do not here depend for their argument upon either section 1(6) or single source. The only question for them is whether the Tribunal was right to dismiss Glasgow from the proceedings.

**The facts**

Given that the argument before us has been refined by the submissions of counsel and since the parties have the advantage of a full, carefully reasoned and well expressed and comprehensive judgment from the Tribunal, to which we would pay special tribute, it is unnecessary to set out all the facts here in detail. We shall deal only with some of the salient features of the evidence.

As to City Parking that was incorporated on 1 June 2007 as a limited liability partnership under the Limited Liability Partnerships Act 2000. At paragraph 20 of its decision the Tribunal recorded that Glasgow was entitled to 99.999% percent of the profits and Glasgow City Council LLP Investments Ltd to the remainder of the full 100%, such as it was. It noted that Glasgow exercised agreed business controls which included amending policies for employees' remuneration and pension schemes. The board was to consist of three elected members of Glasgow, plus Glasgow's director of Land and Environmental Services and one other who would, if appointed, be appointed as the managing director of Parking.

The approval of the business plan of Parking was reserved to the members of the Council of Glasgow and not the board. By clause 13.12 the board was required to implement any determination made by Glasgow. Glasgow was entitled from time to time to appoint to or remove from office any member of the board. Councillors were appointed as directors of Parking without any consultation with the managing director of Parking or with the board.

In paragraph 22 the Tribunal noted that Parking leased car parks from the Glasgow at market rates, and that Parking had obtained a bank loan to fund those leases. Glasgow acted as a guarantor in relation to the bank loans.

By paragraph 24 it was noted that the agreement between Glasgow and Parking was varied on 16 October 2008 to delete a restriction which had existed on the ability of Parking to vary employees' terms and conditions of employment without Glasgow's prior consent. Employee terms and conditions were no longer to be included as an agreed business control. Parking was not a member of COSLA (the Council of Scottish Legal Authorities). It is not bound by collective bargaining between the trade unions and COSLA. Parking had agreed pay deals which mirrored those reached between COSLA and trade unions to avoid industrial unrest. Parking was responsible for setting the terms and conditions of its employees. Variations to the terms and conditions of employment by Parking did not require the approval of Glasgow.

So far as Cordia is concerned, the Tribunal set out its essential facts from paragraphs 26 through to 35. It too was a limited liability partnership. Before setting it up Glasgow obtained legal advice that creating an LLP wholly owned by Glasgow, carrying out the essential part of its activities for Glasgow and over which Glasgow exerted control though its Strategic Board and Corporate Governance Structure, would meet the requirements of European and UK procurement rules.

At paragraph 28 the Tribunal noted that Glasgow was entitled to 99.999% of any profit made by Cordia, and Glasgow City Council LLP Investments to the remainder of the 100%, such as it was.

The board was to comprise a maximum of eight members which would include one elected member of Glasgow as its Chair, two executive directors of Glasgow drawn from the senior management team, three further elected members of Glasgow and one senior officer of Glasgow as nominated from time to time by Glasgow's Chief Executive. There would also be the managing director of Cordia, whom so far as we can see on these findings of fact would be the only person not in the employment of nor a Councillor of Glasgow.

Glasgow, in its capacity as a member of Cordia, was entitled to issue directions to Cordia's board from time to time and the board was bound to comply promptly with any such direction. The powers of the Cordia board to take independent action were restricted such that Glasgow's prior written consent was required before Cordia could do any of a number of steps which included the appointment and removal of the chair person or managing director and the settlement of any litigation over £5,000 or in the case of employment claims £25,000.

At paragraph 29 the Tribunal found that Cordia's board was obliged to prepare a business plan containing its core business not less than 16 weeks before the start of each financial year. That had to be approved by Glasgow. Cordia could not carry on any business which, if it carried out, would be ultra vires or any business outside the plan without Glasgow's prior written consent. The task of Cordia was to carry out most of the services formerly carried out by Glasgow's Direct Care Services. It is, however, allowed to and does trade on the open market; see paragraph 31.

City Councillors were appointed by Glasgow as directors of Cordia without consultation with Cordia's managing director or its board; they could be removed by Glasgow at any time. As in the case of Parking, Cordia too was not a member of COSLA. It attended a separate trade union forum. It was not bound by collective bargaining between the trade unions and COSLA. Cordia's employees had a separate pay award to Glasgow's employees as a result of negotiations between the trade unions and Cordia. Cordia was responsible for setting the terms and conditions of its employees. Variations to the terms and conditions of employment by Cordia did not require the approval of Glasgow.

In making comments general to the position of each of the three ALEOs the Tribunal noted these particular features. Glasgow's external governance and asset management unit held quarterly meetings with the ALEOs. The performance of the ALEOs was subject to the scrutiny of Glasgow's External Governance Scrutiny Committee (which sat every six weeks) and of the City Treasurer and Deputy Leader. The ALEOs made annual presentations to the committee of Glasgow and were subject to quarterly performance reporting to the Scrutiny Committee. They made a six-monthly report on the ALEO risk register. The Scrutiny Committee considered the ALEOs' financial performance and corporate policy on issues such as absence management arrangements.

The Tribunal noted that elected board members of Parking and Cordia had originally been remunerated by Glasgow; that had ceased.

**The Tribunal's Decision**

The Tribunal dealt with associated employment from paragraph 93 onward. It noted that in the legislation there was no definition of the word, "company" but it set out in its discussion a description of the sorts of company which the Companies Act 2006 would identify; see paragraph 94.

That assisted it to a conclusion that the Community Interest Company which Glasgow Life constituted was within the definition of, "company" in section 1(6) of the Equal Pay Act 1970. Its reason for concluding that neither Parking nor Cordia were within that definition is contained essentially at paragraphs 96 and 97:

"96. The third and fourth Respondents are not companies. They are Limited Liability Partnerships ("LLPs"). They are not a legal entity identified as a type of company under the Companies Act 2006. They are a body corporate regulated by the Limited Liability Partnerships Act 2000. The Tribunal considered whether the meaning of "company" in the Act can be extended to cover LLPs. There was no such legal entity when Lord Griffiths in Gardiner v London Borough of Merton [1980] IRLR 472 (at paragraph 13) read "company" as meaning "limited companies" under the employment protection legislation. LLPs have similar characteristics to companies. They are a corporate body with a separate legal identity. The Tribunal is required to interpret the provisions of the Act, so far as possible, to conform to the rights conferred by Article 157 of TFEU and with the purpose of the Directive. To exclude the LLPs from the meaning of "company" in these circumstances would, according to the claimants, frustrate that purpose and unduly limit the concept of comparability.

97. The Tribunal was not persuaded that to achieve the rights conferred by Article 157 of TFEU and to implement the Directive it is necessary for the meaning of "company" in Section 1(6) of the Act to include LLPs. Section 1(6) of the Act sets out the circumstances in which comparators are to be treated as in the same employment. Employment by the claimant with a company controlled by the comparator's employer is an exception to the requirement to have the same employer for the purposes of comparability. The description of such an employer as a "company" is not ambiguous. It does not lack clarity. LLPs and companies, while they share similar characteristics, are separate types of legal entity. It would be inappropriate in these circumstances for the Tribunal to insert words into domestic legislation to include LLPs into the definition of "associated employer" at Section 1 6(c) of the Act. The Tribunal was not persuaded that Parliament intended to include other legal entities such as LLPs within the meaning of "company", notwithstanding any anomaly that might arise as in the present case. It must follow therefore that the third and fourth respondents are not "associated employers" of the first respondent."

As to single source, the Tribunal dealt with that from paragraphs 98 onward. In paragraph 98 it directed itself that the single source must be the body responsible for setting the terms and conditions of both the Claimants and their comparators and it must be the body, "responsible for the inequality and which could restore equal treatment" referring to paragraph 18 of Lawrence, adding "It is enough that retention of the legal power to remedy disparity and pay remains with that body if that power is not in fact exercised" referring to paragraph 41 of Robertson.

Applying those principles to this case, the Tribunal declared itself at paragraph 99 not satisfied that the first Respondent was a single source for the terms and conditions of the Claimants and the first Respondents employees.

In paragraph 101, the Tribunal centrally dealt with its conclusions against the background of fact which we have described. That reads as follows:

"101. It was not in dispute that the first respondent [Glasgow] retains control of the ALEOs. This was described by the respondents as strategic control and control and implementation. The first respondent exercises this control through ownership; the appointment of Directors; funding and scrutiny of performance through the acquisition of services. This is consistent with the relationship of the first respondent with the ALEOs as their service providers. The Tribunal was satisfied that this was consistent with the type of control described by Mr Melvin in his evidence. The respondents have satisfied themselves that it is a sufficient level of control to comply with EU procurement regulations. It has resulted in the first respondent exercising control over the ALEOs in connection with such matters as their presence at political events and the behaviour of elected Board members. It is the claimants' position that this is also sufficient control to establish that the first respondent is a "single source". In the context of control for the purposes of establishing a "single source" and the facts of this case however, the Tribunal was not persuaded that the level of control exercised by the first respondent over setting the claimant's terms and conditions is sufficient to make them a "single source". The Tribunal was not persuaded that such control has in fact been exercised by the first respondent to set or vary the claimants' terms and conditions. As in the case of Robertson (supra), in which the Crown was the common employer and retained the power to vary terms and conditions set by individual departments, the first respondent has not exercised any such power. It is a power that is exercised by the ALEOs and over which the first respondent plays no direct part. The first respondent is not the body responsible for any differences in the pay of their employees and the claimants. Such differences are attributable to the ALEOs and their responsibility. In the above circumstances, the Tribunal was unable to conclude that the first respondent is a "single source".

It drew the strands of its conclusions together, having dealt with a separate issue which does not arise for determination on appeal, at paragraph 104; there it said this:

"104. For the reasons given above, the Tribunal concluded that (i) the second respondents (that is Glasgow Life) are "associated employers" of the first respondent for the purposes of Section 1(6) of the Act and the third and fourth respondents (that is Parking and Cordia) are not; (ii) the first respondent is not a "single source" for the claimant's terms and conditions of employment and (iii) the claimants employed by (Glasgow Life) are accordingly entitled (subject to the existence of common terms and conditions) to rely upon employees in the first respondent's employment as comparators for the period following their transfer to (Glasgow Life's) employment, the claimants employed by (Parking and Cordia) are not."

On 5 January 2012 the Tribunal added to this paragraph:

"The Tribunal did not accept the argument advanced by the Claimants, in particular the GMB claimants, that they should be entitled to proceed against the first respondent for the period of claim prior to the date of transfer to an AELO. Notwithstanding that the claims were presented within six months of the date of transfer, liability under the claimants' contracts of employment has transferred to the AELOs. Liability for a breach of the Act now lies with the ALEO as transferee. Accordingly, it is the relevant ALEO and not the first respondent who is the appropriate respondent for the current proceedings."

It went on at paragraph 105 to say this:

"In the above circumstances, the Tribunal was satisfied that the first respondent's application to have the equal pay claims against them dismissed should be granted. The Tribunal was not persuaded that their association with the second respondent is sufficient to require the first respondent to remain in the proceedings as a party. Their association with the second respondent does not make them potentially liable for any remedy claimed. Liability remains with the claimants' employer, the second respondent. The granting of an indemnity in connection with the proceedings is not grounds to make the first respondent a party to the proceedings. They do not have a direct interest in the claim as a respondent. While they have an interest in the outcome of the proceedings, they do not seek to be joined as a party to the proceedings in terms of Rule (10)(2) (r) of the Rules of Procedure 2004. Accordingly, the application is granted and the equal pay claims against the first respondent are dismissed."

**Associated employer**

The wording of section 1(6) does not contain the same provision as did a very similar phrase considered in the case of Gardiner v London Borough of Merton [1980] IRLR 472. Gardiner was a case brought as to the proper construction of section 153(4) of the Employment Protection and Consolidation Act 1978. The issue was continuity of employment. In the Act, at the end of words which are replicated entirely in section 1(60(c) of the Equal Pay Act these words are added which are not so replicated: "…and the expression "associated employer" shall be construed accordingly".

In paragraph 16, Griffiths LJ adopted the views which had been expressed by Lord Parker in the Divisional Court case of Southern Electricity Board v Collins [1971] QB 83. He thought that the language of section 153(4) conveyed an exhaustive description adding:

"If the definition was not intended to be exhaustive and apply only to a situation in which one employer had been a company as the Appellant submits, I can see no purpose in the concluding words of the definition which read "and the expression 'associated employer' shall be construed accordingly'"

Those words plainly were the primary reason why Griffith LJ in the Court of Appeal concluded that the definition was to be read exclusively, but it was not the only reason. It was supported by what he said at paragraph 18:

"Apart from what I consider to be the plain meaning of the language, other factors appear to me to point strongly towards the view that Parliament must have intended to provide an exhaustive definition of the phrase "associated employer". The phrase itself is so loose as to be capable of a great many different interpretations. Does it mean associated for a common purpose or associated through a common element of control of associated through a common interest or associated through common membership of some trade organisation or associated through common negotiation with a trade union? The questions that can be asked are almost endless."

The context there was continuity of employment. It might be thought markedly distinct from the context in which the equal pay claims fall to be determined. That may be why in Hasley v Fair Employment Agency [1989] IRLR 106 the Northern Ireland Court of Appeal, when considering the equivalent statutory provision applying to Northern Ireland as contained for mainland UK in section 1(6) of the Equal Pay Act 1970, did not give any sense of regarding itself as bound to adopt the interpretation which Griffiths LJ had accepted.

In a case, which one notes from the representation was argued by senior counsel and had the advantage of an amicus, Lord Lowry CJ for the Court of Appeal had to consider whether two statutory corporations, the Fair Employment Agency and the Equal Opportunities Commission were to be regarded as companies within the meaning of the 1970 Act. In setting out the Court's approach to the meaning of 'company' he did not assume that for 'company' should be read the words 'limited company'. He referred at paragraph 11 to the broader, more general meaning which 'company' has. He did so by reference to what was then in the fourth edition of "Halsbury's Laws". There these words appear:

"The word 'company' imports an association of a number of individuals formed for some common purpose. Such an association may be incorporated, that is a body corporate with perpetual succession under common seal or it may be unincorporated. An incorporated company is a legal person separate and distinct from the individual members of the company whereas an unincorporated company has no such separate existence and it is not in law distinguishable from its members. There are many other bodies corporate which although they may largely or partially engage in trading or comparable activities are not commonly described as companies."

It then set out three categories of such bodies corporate which would not normally be regarded as companies.

It is plain from what follows at paragraph 12 that the Court of Appeal adopted what had been said in Halsbury as describing the proper compass of the word 'company'. Since the bodies which fell for consideration before the Court of Appeal at Northern Ireland were not commonly described as companies, as Halsbury had pointed out, Lord Lowry did not consider that they were within the scope of the word 'company' as used in section 1(7) (c). It was only then that he referred to Gardiner v Merton and drew from it that in that case Griffiths LJ had supported the proposition that the word 'company', unless specially defined, did not normally extend to cover all bodies corporate.

Before us Mr Bowers, Queen's Counsel, argues that four points show that 'company' does not have the wide scope which Lord Lowery appeared prepared to give it, even if it did not extend to statutory bodies corporate.

First, he argued that the absence in section 1(6) of the additional words considered in Gardiner v Merton was not of any relevance. It had been floated before us, especially by Ms Romney of Queen's Counsel that this difference was of significance in helping us to know what was meant by the word 'company'.

But this, it seemed to us, missed the particular point which we had to determine. The relevance of those words was in assisting the court in Gardiner to determine that the only **situation in which one employer was to be associated with another was if one was a company of which the other employer had control. That was the particular relevance drawn from the concluding words. "Associated employer" in the context of that statute could have no wider definition because it was excluded by those closing words.

The omission of those additional words might have been relevant if the argument before us had been that "association" was a general matter of fact as to which section 1(6)(c) merely identified one particular situation in which as a matter of law a Tribunal would be bound to conclude that two employers were associated, but without in any sense limiting the scope of the enquiry which they might otherwise make as to association: in other words a replication of the argument which plainly was put before the court in Gardiner. Since no counsel before us and no party before us argued before the Employment Tribunal that "associated employer" could be approached in that way in this context it seems to us that the presence or absence of words which confined the consideration of associated employer to the circumstances described in section 1(6)(c) was irrelevant.

Accordingly, we derive no help from Mr Bowers' submission on his first point as to what the word "company" means. Indeed, we cannot see logically how it could be of any assistance to argue that because the only situation in which two employers were to be associated was where one was a company gave any help as to what "company" meant.

The second point he took was that a consistent interpretation should be adopted across employment legislation. The words considered in Gardiner it must be accepted, are remarkably similar to those set out in section 1(6) save for the concluding words. Here Mr Gorton of Queen's Counsel has shown us the respective legislative histories of each provision. He points out the different contexts. In particular he has pointed out that the origin of that which appeared in the continuity of employment provisions may be traced back to the Companies Act 1948 which referred to companies covered by that Act, the Redundancy Payments Act where "company" meant any body corporate, and the Contracts of Employment Act 1963 in which associated companies were described in terms in which first and second employers had both to be companies, with one a subsidiary of the other or where both were subsidiaries of a third.

It is not difficult to see how the wording adopted for continuity of employment in that context and for the purpose of determining the entitlement of an employee against his employer to such matters as redundancy pay, notice and qualification for rights which depended upon length of service is rather different from the context addressed in the Equal Pay Act.

Thirdly, Mr Bowers argues that the principle of reiteration, as he terms it, applies here. There have been a number of legislative opportunities to alter the wording of section 1(6)(c) of the Equal Pay Act to make it clear that, for instance, the word "company" might comprehend an association of persons in respect of which a Limited Liability Partnership might also be a description. He argues that in particular the legislators would be well aware of the judgments in Gardiner and in Hasley and must therefore be taken to have reiterated legislation or not to have amended legislation because they considered that that those judgments accurately set out the law.

He rejected, fourthly, the suggestion that his approach was reading words into section 1(6)(c) by adding the word "limited" in front of "company" or the words "under the Companies Act" after it. Rather, he argued, it was the Appellants who were inserting words such as "including Limited Liability Partnerships" into the clause.

Finally, he argued that the appropriate place to look for the definition of a company was in the Companies Act. We note simply that this was not the approach which was taken by the Northern Ireland Court of Appeal in Hasley to which we, in our position, must pay respect.

**Discussion**

The word "company" is not defined by the Equal Pay Act. It is potentially a broad word. Therefore, its ordinary meaning must be identified, but with particular regard to context. The context is emphasised by the fact that section 1(6) and the definitions it contains are specifically "for the purposes of this section".

The only way of determining the ordinary meaning seems to us to be the starting point which Lord Lowry adopted in his discussion in Hasley. Despite the quality of the representation and the Court's reference to Gardiner it does not seem to have been suggested there and, if suggested, was not adopted that the expression "company" was restricted in meaning to limited companies.

The current edition of Halsbury's Laws, the 5th Edition, Volume 14 sets out the general meaning of "company" in these terms:

"The general sense of the word, "company" notes an association of individuals formed together for some common purpose"

Halsbury goes on to add in a footnote to that sentence:

"For present needs, there is an implication in the word "company" that the purpose for which the individuals have joined together is of a more or less permanent character. Companies, particularly those formed under the Companies Act typically provide for investment in trade with a view to generating profits in order to benefit their proprietors …"

The footnote refers to O'Neill v Phillips [1999] 1 WLR 1092 HL, where at 1098 Lord Hoffman described a company in these terms which in our view give powerful support to the approach which Halsbury takes:

"A company is an association of persons for an economic purpose usually entered into with legal advice and some degree of formality"

This is contrasted with the legal definition of a club as a society of persons associated together not for the principal purposes of trade but for social reasons, etc.

We note that companies existed long before the Companies Acts were enacted. It cannot be assumed that Parliament in using the word, "company" meant "limited company" unless it said so, and it does not. What then does the context have to say which might colour the description of company? It is submitted by Ms Romney of Queen's Counsel and Mr Gorton of Queen's Counsel and not, we note, disputed by Mr Bowers of Queen's Counsel, that the purpose of the "associated employer" provision in section 1(6) might be described as an anti-avoidance measure. Without it, it might be all too easy for an employer to set up a body distinct from it as a legal personality to which it could transfer employees of one gender within its employment and thereby evade its equal pay responsibilities.

We accept that the provision may broadly and properly be described as an anti-avoidance measure. If we have, as we believe, correctly identified the purpose of the subsection then it is to be construed purposively to that effect. This is supported further by the fact that the section is part of an anti-discrimination statute. Such a statute should in general be construed purposively to remedy the mischief at which it aims.

It is unnecessary for these conclusions to go to the Marleasing principle (Marleasing SA v La Comercial Internacional de Alimentacion SA [1990] EUECJ C-106/89 (13 November 1990)) in which the European Court of Justice spelt out the need for domestic courts to construe domestic provisions enacted to implement European provisions so far as possible to accord with the purpose of that European provision: even though in that regard it can be said that ever since the decision of Defrenne v SABENA (No2) (equal pay) [1976] EUECJ C-43/75 [1976] 2 CMLR 98, equal pay and the elimination of discrimination in sex in that context has been regarded as one of the foundations of the European Union, and references were made in that case as they have been since to the need to eliminate pay discrimination throughout broad swathes of employment, in particular focusing upon those in the same establishment or service.

The general purpose of the statute is sufficient for us to pay regard to. We do not consider that there is any further advantage to be gained in interpreting the scope of "company" by applying the Marleasing principle.

Of the arguments which stand against the need to construe a word which is capable of having a wide scope and should be construed in the light of its purpose as an anti-avoidance measure in a statute which seeks to remedy discrimination, the only point of those which Mr Bowers of Queen's Counsel raised which had any resonance was his reasoning that although a Limited Liability Partnership might be registered at Companies House and have more in common with a limited company than it does with a partnership, the natural reading of the word, "company" might not cover it.

In considering that argument, we have to bear in mind the considerations we have already expressed. We consider the word "company" is capable of including a body and association of persons as Halsbury would put it, formed together for purposes which might be recognised as a Limited Liability Partnership but which would not mean that it would cease to be a company. We conclude that it does, because otherwise the purpose of the measure as an anti-avoidance device would be defeated and with it the purpose of the Equal Pay Act in this context.

We are happy that this conclusion means that in the case of Parking and Cordia the same result will apply as does to the employees in Glasgow Life. To have decided otherwise would have left the law in the uncomfortable state that an anti-avoidance provision had had the consequence that those employers who were transferred from employer A to employer B would be able to maintain a comparison vis-à-vis those still in employer A's employment where employer B was a community interest company but would not if B was an LLP when the material relationships between A and B in the first example and A and B in the second were exactly the same.

Since we have come to the conclusion that read in context section 1(6) of the Equal Pay Act 1970 is to be construed such that a Limited Liability Partnership registered under the Limited Liability Partnership Act as such is within the definition of "company" we do not need to determine the interesting and complex arguments which we have heard on the single source points. However, the matter has been fully argued and Mr Bowers of Queen's Counsel invited us to give our views on this point too if we were minded to allow the appeal under the statutory construction point. Accordingly, we shall do so although they will necessarily be obiter, and we shall state them rather more than shortly than would otherwise have been the case.

Ms Romney of Queen's Counsel, whose submissions Mr Gorton of Queen's Counsel adopted, came close to alleging perversity by emphasising particular factual features which argued for a conclusion favourable to the appeal. Thus she drew attention to the need for the business plan to be approved, the sheer unlikelihood of members of the board taking any step other than fully in accord with the City Council, since they were City Councillors themselves, that if a Councillor did not toe the line he might be removed from appointment, that it was easy for the Council to exercise the power of control and that the scheme of government was designed to ensure that control would be exercised such as that Glasgow took profits, and could not sensibly be heard to say that the ALEOs were under the control of Glasgow for the purposes of procurement law whilst in the next breath arguing that the power was too remote to constitute Glasgow a single source for the purposes of equal pay legislation.

Mr Gorton, though adopting those submissions, contextualised them. From him the central feature of evidence was the nature of the relationship which it disclosed between Glasgow and the ALEOs; it was close. There was a distinction to be drawn between the services offered to the public by Glasgow being provided by a third party body and being performed by an in-house organisation. The nature of the relationship was effectively such that the ALEOs were in the position of an in-house service, different in formal structure but not in practical substance from the "Significant Trading Organisations" which the ALEOs had been labelled prior to the transfer. Centrally, he submitted that there was on the facts an intimacy of control and that if the nature of the relationship conferred control, it conferred the ability to remedy an inequality between the wages of a man and a woman providing services to the public for, or on behalf of, Glasgow Corporation in the direct employment of Glasgow or that of the ALEOs. This was in complete contrast to the factual position in Lawrence and Robertson. The Tribunal's decision ignored the legal and factual realities.

Despite her emphasis on the overall factual picture, Ms Romney did argue that there had been errors of approach. The approach which she submitted was to be taken derived from the judgment of the Appeal Tribunal in Potter. Responsibility for pay, in the sense in which that word had been used in Lawrence, Robertson and Armstrong, did not mean that the body concerned must have created the inequality. Setting terms and conditions was only part of the picture. The principle required a focus upon the ability to remedy any disparity in terms and conditions. Also, critically, she complained that the Tribunal had failed to give reasons for accepting that the Council could take the view that the degree of control it exercised over the ALEOs was sufficient such that it did not have to enter into a public procurement process, yet it was insufficient for Glasgow to be regarded as a single source when it came to pay and conditions. Glasgow had structured its relationship with the ALEOs deliberately in order to take advantage of what was known as the Teckal exemption, by ensuring it had such a sufficiency of control as effectively to render the ALEOs the equivalent of in-house organisations.

Lord Hope concisely identified the scope of the Teckal exemption in Risk Management Partners Ltd v Brent London Borough Council [2011] UKSC 7, [2011] 2 AC 34 at paragraph 156. There he noted that the European Court of Justice had in Teckal [1999] ECR 8121 considered the meaning of public supply contract or public service contract. In paragraph 49 it had held that the national court had to determine whether there had been agreement between two separate persons. In paragraph 50 it then gave guidance as to how the service contract was to be determined:

"… it is in principal sufficient if the contract was concluded between, on the one hand, a local authority and, on the other, a person legally distinct from that local authority. The position can be otherwise only in the case where the local authority exercises over the person concerned a control which is similar to that which it exercises over its own departments and at the same that person carries out the essential part of its activities with the controlling local authority or authorities."

Lord Hope concisely identified the scope of the Teckal exemption in Risk Management Partners Ltd v Brent London Borough Council [2011] UKSC 7, [2011] 2 AC 34 at paragraph 156. There he noted that the European Court of Justice had in Teckal [1999] ECR 8121 considered the meaning of public supply contract or public service contract. In paragraph 49 it had held that the national court had to determine whether there had been agreement between two separate persons. In paragraph 50 it then gave guidance as to how the service contract was to be determined:

Lord Hope commented at paragraph 16 of Risk Management:

"Two conditions must therefore be satisfied if a contract between a public authority and a legally distinct entity is to be taken out of the scope of the Directive. First the public authority must exercise control over the entity with which it contracts, but it may wish to cooperate with other public authorities in the procurement of services … Secondly, the contract must carry out the essential part of its activities with the controlling local authority or authorities …"

In submissions before the Tribunal, a substantial part of the argument had addressed Glasgow "having it both ways" claiming to satisfy the Teckal exemption on the one hand whilst having insufficient control to remedy equal pay disparity on the other.

Further errors which Ms Romney identified in the approach of the Tribunal were, in her submission, 1) in deciding who set pay. The Tribunal took Glasgow as not having been involved; 2) it did not consider to what extent consent for the business plan of either Parking or Cordia was needed; 3) it did not take into account that the board of each ALEO was effectively subject to the control of Glasgow; 4) it wrongly adopted Robertson as properly analogous: this case was very different. The Government there had said in effect to the Departments of State to whom it formally delegated pay powers that they were on their own. That was very different from the inter-relationship here of Glasgow and the ALEOs; 5) finally, she said that the ALEOs were set up and designed so that they afforded strict control to the Council. The Tribunal had left out of account the power under clause 13.10; see paragraph 2(v) of the Tribunal decision in respect of Parking and the analogous finding in respect of Cordia, which made the approval of the business plans of each a matter for Glasgow and not for the ALEOs themselves.

Mr Bowers argued centrally that the decisions were matters of fact to which the Tribunal was entitled to come. He argued that the Tribunal had not misdirected itself; it had properly identified from Robertson matters of principle and had not attempted to argue from the facts of Robertson to the situation between Glasgow, Parking and Cordia. He argued that particularly at paragraph 101 the Tribunal had reached a factual evaluation which was not said to be perverse and could not be shown to have been reached on some wrong basis or approach.

**Discussion**

When identifying whether there is a single source, the decision the Tribunal must make is one of fact and degree. It must therefore be respected unless the Tribunal has erred in its approach or its conclusion is perverse.

Perversity is not alleged here (in terms), however surprising the Appellant's claim the decision to be.

It is important to place in context what is contemplated by a single source. Where the comparison which a Claimant working for A seeks to make is with an employee in the employment of B, the issue is not whether employer A has power to control the wages of the Claimant. Plainly, he is always like to have, since by definition a contract of employment is one in which the employer has control of the employee and centrally a contract of employment will concern wages. Control by employer A of wages in employment A has nothing to say about the wages of B in employment B. What must be explored is the position of the body which it is said has responsibility for and power to alter the wages in both A and B. This is the party or institution or collective agreement which is said to be the single source.

To focus on the powers of the immediate employer of a Claimant is therefore potentially to look in the wrong direction. It is not irrelevant, for those powers may be such as effectively to exclude any superior or distinct body having responsibility and power: but that the central investigation must be as to the powers and responsibilities of the person, institution or agreement alleged to be the single source must not be in doubt.

Here, the Tribunal focused correctly at its paragraph 101 on the position of Glasgow. But we are persuaded by the submissions of Ms Romney and Mr Gorton that in two respects the reasoning is deficient. First, the factual inquiry was not simply into who had set the terms in respect of pay. The question per Lawrence is, "Whether there is a body which is responsible for the inequality and which could restore equal treatment." Potter is Appeal Tribunal authority on the meaning of the first part of that phrase: responsibility for inequality. The sense it adopts is one of ongoing rather than of causative responsibility for the disparity. It is to be followed unless we are persuaded it is in error, and no submission has been made to that effect before us. We adopt it. But the second part of the phrase is crucial and it goes together with responsibility in this sense. It is, "which could restore equal treatment".

The Tribunal, in concentrating on the setting of wages in practice, did not address this second part. Whether it approached responsibility in the Potter sense rather than simply addressing the question of who caused the wage inequality of which complaint was made may also be uncertain, though we are less persuaded of this. The Tribunal did refer to "varying" pay but that is not in the context of whether of Glasgow, upon whom, see above, the focus had to be, could remedy or vary any difference in pay between an employee in its employment and one in the service of Parking or Cordia, but whether in practice alterations to the pay of those working for Parking were made by Parking and for those working for Cordia by Cordia.

The Tribunal did not ask whether Glasgow could remedy pay inequalities in practical terms. It was right to conclude that a theoretical right to do so would not suffice unless exercised, but the elimination of a theoretical power, such as that in Robertson, to be regained by revoking the delegations made by statutory instrument to the separate departments, unless there was evidence that it had actually been exercised, is different territory from an enquiry into the practical realities of the employment and governance relationships in a situation such as that before us.

The lay members and, in particular, Ms Gaskell, have significant experience in the government of large organisations. They point out that control is rarely exercised directly. A board will run its operations by putting in place systems of governance and audit. The presence of audit enables the board exercising an overall responsibility to step in if decisions are not to its liking. The governance arrangements will normally be such that it should not need to do so. The fact that it does not demonstrate its powers by intervening on a day-to-day basis is not at all surprising, but that it retains overall responsibility and power to remedy any errors is undoubted. If somewhat forensically, the point can be demonstrated by considering the sense in which the Minister for Health has responsibility for the treatment of a named patient in a particular ward in a named hospital: he does not himself intervene in the treatment, yet it is generally accepted that he has such a responsibility. It is exercised through systems and governance and, critically, audit. The lay members point out that both were in operation as a matter of practice here. Thus they accept the points made by the Appellants that it is unsurprising that in the short time the ALEOs had been in operation there has been no demonstrable interference with pay bargaining with their employees, and that there is undoubtedly scope for the Tribunal to have found that Glasgow had responsibility and could remedy inequality had it asked the latter question, and not been distracted by its focus on the question of the initial setting of wage rates.

Further, the use of the words "plays no direct part" in paragraph 101 suggest an unnatural separation between direct and indirect control, as their familiar understanding of management systems shows is inappropriate. Operational management was bound to be with the ALEO. The question is whether the strategic management and powers were such that Glasgow was responsible for and could remedy the pay disparity. The distinction between direct and indirect control could not answer the factual issues on its own and suggested an erroneous approach which equated operational responsibility with what was being referred to in the last two sentences of paragraph 101, rather than the central issue as posed by Lawrence.

Secondly, much time was devoted by the parties to considering the alleged inconsistency between the assertion of close control for Teckal purposes on the one hand against the assertion of absence of control when considering pay and conditions of employment. At paragraphs 57 under the heading, "Teckal", and at paragraph 75, under the same heading, the Tribunal had set out the submissions of respectively Ms Romney and Mr Gorton, and under paragraphs 46 to 48 those of Mr Bowers QC in response, again under the same heading. Yet though plainly regarding the submissions important enough to record them under dedicated headings nothing is said to indicate to the parties in the Tribunal's conclusions what it made of this important plank of their submissions. It is not required that an Employment Tribunal decision should dot every 'i' nor cross every 't'. Mr Bowers is right to say that what matters is whether the parties understand why they win or lose. Nonetheless, where an argument is regarded as central by the parties, rightly or wrongly, and where time and detail is devoted during the hearing to it, it might have justified more than that which the Tribunal said at 101, "The respondents have satisfied themselves that it is a sufficient level of control to comply with EU procurement regulations".

For our part, we would agree with Mr Bowers that the resolution of the case did not turn upon it in any direct sense. But the contrast between the position under Teckal and that adopted here raised factual questions as to the closeness of the relationship and control which on balance, and with some hesitation, we consider would require further detail and discussion; even if briefly.

We do not find any similar complaint which can be properly raised against the Tribunal decision in any of the other specific matters to which Ms Romney drew our attention. Had we had single source as our sole issue to determine upon this appeal, we would not have felt in any sense able to have determined the factual issues for ourselves. As we have pointed out, there is a spectrum. As counsel have submitted the issue is one of fact and degree. The proper Tribunal to determine such matters is the fact finding body, the Employment Tribunal. Had this been the sole head of decision, we would have therefore remitted this question to the Tribunal for re-determination. That would have been to the same Tribunal. All parties were agreed that should be so and we have already, and again, pay tribute to the way in which the Employment Judge discharged the Tribunal's responsibilities.

**The case for the GMB Claimants**

Mr MacNeill made it clear that those whom he represented took no stance on the associated employer or single source points. He was concerned to be able to compare the pay of members of the GMB who had been transferred to Cordia with those who remained in the employment of Glasgow. Those claims are potentially subject to time limits. The claims were submitted against Glasgow and not against the transferee, Cordia. At a case management conference some time later Cordia was added as a Respondent without objection from Glasgow. No time bar point was then raised but there has never been a formal waiver of any right to take a time point. He resisted the application by Glasgow to have the proceedings dismissed because, he urged upon us, it was not sufficient for him to be assured that the position of the Claimants would be free of any argument as to time-bar for what he described as "soothing noises" to be made by counsel for Glasgow. The Tribunal had gone wrong in exercising its discretion to discharge Glasgow from the proceedings because:

(a) it might possibly be the case that Glasgow might in some way (dependent perhaps on doctrines of estoppel or the like) retain a liability. He argued that there were some seven factors which were relevant to the discretion; that the claims had been raised against Glasgow and that Cordia had been joined late;

(b) neither Glasgow nor Cordia had raised any question of the time bar;

(d) Glasgow remained before the Tribunal in respect of arguments about a pay scheme;

(e) Glasgow had agreed to indemnify any liability of Cordia,

(f) the representation of Cordia and Glasgow was in the same hands, so it would follow that no additional expense would be incurred by Glasgow remaining a party and

(g) finally, the actions of Glasgow were to be associated with the merits of the claim.

In near conclusion, he put it this way:

"What must not happen is that Glasgow is released and that Cordia then argue the claim should be dismissed against them."

It is necessary to put this argument in its proper legal context. Under the Transfer of Undertakings, Protection of Employment Regulations 2006 regulation 4 sets out the effect of a relevant transfer on contracts of employment. So far is as material it provides by paragraph (2) as follows:

"… on the completion of a relevant transfer:

(a) all the transferors rights, powers, duties and liabilities under or in connection with any such contract shall be transferred by virtue of this regulation to the transferee;

(b) any act or remission before the transfer is completed, of or in relation to the transferor in respect of that contract or a person assigned to that organised grouping of resources of employees, shall be deemed to have been an act or omission of or in relation to the transferee."

Glasgow was the transferor. Cordia was the transferee. It follows that as a matter of law all Glasgow's liabilities in respect of the contracts of employment of any person transferred to Cordia also transferred to Cordia, and that by regulation 4(2)(b) anything which Glasgow had done in respect of that person, or their contract, which was an act or omission upon which that person might found a claim was likewise assigned to Cordia. Though the matter has been determined in the case of Stirling District Council v Allan & Ors [1995] IRLR 301, on the similar wording of the 1981 Regulations, we also think there is no conceivable argument that those provisions leave any scope for Glasgow to retain any residual liability in respect of the transferred contracts. Whatever the general merits of the points made by Mr MacNeill may be we therefore think that it was entirely appropriate for the Tribunal to begin to exercise discretion upon the basis that Glasgow were not liable to any of the employees represented by Mr MacNeill. Nor, for similar reasons, would Glasgow be liable for any employee represented by Ms Romney or Mr Gorton; they too, but for slightly different reasons, sought to challenge the exercise of the discretion by the Tribunal.

The central concern which each expressed was that if Glasgow remained a party disclosure for the purposes of this complex and detailed claim might be rendered thereby more difficult. Glasgow had set up some of the arrangements which potentially would be subject to challenge before the Tribunal. To be required to undergo the process of third party disclosure, rather than disclosure from a party, could place hurdles and obstacles of a practical sort in the way of the resolution of the claim which would make not in the interests of justice for the discretion to be exercised in favour of releasing Glasgow.

**Discussion of the GMB appeal**

The central reasoning of the Tribunal is set out at paragraph 105. That begins with the words, "In the above circumstances". If those words refer to the conclusions expressed at paragraph 104 they expressly take into account a conclusion which the Tribunal reached in respect of the associated employer point and the single source point, both of which it would follow in our judgment were wrong. Mr Bowers argued that words did not refer to those matters but referred specifically to the discussion which the Tribunal set out at paragraphs 102 and 103 under the heading, "Lifting the Veil", an argument in respect of which there had been no appeal. We reject that submission. The words are not restricted in any obvious way to that argument. They are general words: they follow immediately upon paragraph 104, they plainly relate to paragraph 104 and indeed to the whole of the judgment.

The Tribunal having set that out as the basis for the exercise of its discretion were exercising their discretion upon a wrong basis. Mr Gorton made the argument that the error of approach was to be identified in paragraph 105 where the Tribunal had regarded it as important, that "They [i.e. Glasgow] do not have a direct interest in the claim as a respondent". This, he said, was the test applied by the Tribunal. That was not the appropriate test. We reject that submission. It is plain that what the Tribunal was doing was setting out a number of factors. That was one of the factors; it is relevant as one of the factors; it is not conclusive; it was not expressed to be conclusive.

Had it not been for the opening four words of paragraph 105 there would have been no possible complaint about the exercise of the Tribunal's discretion; it is a discretion. Such discretions, particularly where they relate to case management and the like, cannot easily be subject to appeal. An appeal lies only if the Tribunal has wrongly taken into account something it should not have done or has left out of account something it should have done or has reached a manifestly perverse decision; but perversity is not in question here.

Because we are bound by our reading of the first four words of paragraph 105 to hold that the Tribunal exercised its discretion upon a wrong basis by taking into account that which it should not have done, we must consider what we in exercise of our powers should do. We have the power to take any decision which the Tribunal could take; we propose to exercise that power.

Treating it then as our decision to make we have to consider - and we shall do so briefly - what should be the factors which we should take into account. We consider that a primary factor is whether a party has any liability. In the case of Beresford v Sovereign House Estates Ltd a decision of 29 November 2011, Underhill J as President of the Appeal Tribunal considered a case in which the power to join someone as an additional respondent fell for consideration. The person who sought to have the power exercised was not the party who sought to be joined. A similar matter came before the President of this current Tribunal sitting on his own in the case of [Welsh v Bendel ]()(29 June 2012) UKEATS 0014/12. In that case the Tribunal adopted and echoed the reasoning which had appealed to Underhill J. It was considering the case of a party without his knowing it at the time had been joined as a party to proceedings by a Tribunal, but had not wished to be. It might be said that he had an interest in the proceedings - but this Tribunal considered that the general exercise of the power to join a party or to sist them is to be exercised upon the basis that that party has himself an interest in the outcome. It added that if a party says that he does not wish to be joined, then the exercise of the power to require him to become a party would not only be paternalistic but it would be contrary to his own interests as to which he must be the best judge; see paragraph 15.

For the reasons we have expressed by reference to the TUPE Regulations at paragraph 4, there is no prospect here of Glasgow being liable for any of the claims made at the suit of the Claimants. They retain a financial interest in the sense that they may be required to indemnify Glasgow Life, Parking or Cordia. We in general consider that no person should be compulsively brought to court against their will unless there is potentially a liability against him or her and that where that party may be said to have an interest, whether financial or otherwise, in the outcome of the proceedings. Other than where there is direct liability, the best person to determine whether that interest extends to being required to defend proceedings against him or her and incur the expense, time, trouble, stress and difficulty of doing so, is that person or party, him or herself.

The powers, Mr Gorton rightly reminds us, which the Tribunal may exercise are contained at rule 10 of the Employment Tribunal Rules of Procedure. That rule gives a general power to manage proceedings. It includes a power, as exemplified in 10.2(l), of dismissing a claim against a Respondent who is no longer directly interested in the claim. We accept that considering whether a party who is presently in proceedings should be dismissed is a different question from that directly considered in Beresford and Welsh which was effectively whether a party should be joined or sisted.

The powers must be exercised in accordance with the overriding objective as set out in rule 3. That involves dealing with the case in a way which ensures the parties are on equal footing and that it is dealt with expeditiously and fairly and saves expense. The principal concern expressed to us by Ms Romney and Mr Gorton was a concern about the need to engage in a process of third party disclosure. Mr Bowers, in the course of his response, whilst saying nothing in respect of Mr MacNeill's point as to whether a time issue would be raised or not, said specifically in respect of disclosure that if the true claims are against the ALEOs then no point would be taken by Glasgow that any order would have to be made on a third party basis because Glasgow was not party to the proceedings. That is a significant assurance. Having been given by senior counsel, to this Tribunal, it is obviously an assurance upon which the parties are entitled to rely: but more than that it is a matter which we specifically take into account in exercising our discretion as we shall indicate. We see no other significant reason advanced to us (and certainly none in the interesting submissions made by Mr MacNeill) as to why Glasgow should otherwise be retained against its will as an involuntary litigant in proceedings in which the liabilities are entirely elsewhere.

Accordingly, as we have indicated upon the basis of the assurance being given on behalf of Glasgow, we exercise our discretion in precisely the same way as did the Tribunal. By that process of reasoning, we record that the decision though made in error was itself correct, and we make the same determination.

**Summary**

In summary:

(1) We hold that the word, "company" in section 1(6) of the Equal Pay Act 1970 is capable of including the modern creation of a Limited Liability Partnership;

(2) If we had had to decide the question of single source, we would have had held that the Tribunal was in error essentially in failing to deal or to find facts with respect of the second part of the Lawrence formula, and both for that reason, and separately because we identified what might be thought to be a failure to deal with a significant argument which required to be dealt with more fully than it was, we would have remitted that to the same Tribunal for re-determination;

(3) We dismiss the appeal against the decision of the Tribunal to release Glasgow from the proceedings, upon the basis that though the decision in the circumstances was reached on a wrong footing, in substance it was right and we have exercised our own discretion to the same effect.

Finally, we could not leave this judgment without paying formal tribute, as we have done informally in the course of the hearing, to the quality of the submissions which we have had from all parties. We suspect that those who will reap the glory for that are centrally the leading counsel who have presented the argument, but we also suspect that the work of those we have identified as juniors has substantially contributed to the effectiveness of those arguments. We are grateful to all, not least for their succinctness, which has enabled this judgment to be given almost immediately following the argument and within the time span which had originally been allotted for the hearing.

Finally, we indicated toward the conclusion of the argument that whatever way we determined the appeals before us, we considered that they give rise to issues of law which are important, that the case is one of substance and significance and that we thought, therefore, that liberty to appeal should be granted to the losing party. Accordingly, we give permission to appeal to the Inner House of the Court of Session to Glasgow. We do not encourage its exercise, but that is a matter for Glasgow itself.

Published: 15/03/2013 11:31

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