Court of Session upholds EAT decision that Limited Liability Partnerships qualify as associated employers under the Equal Pay Act 1970 (now the Equality Act 2010)


Glasgow City Council v Unison [2014] CSIH 27

The appellants in this case were the City Council and two Limited Liability Partnerships (LLPs) which were established to carry out functions (parking and care services) which were formerly carried out by Glasgow directly.  These were known as ALEOs.  The issue between the parties which was the subject of this appeal was whether the now respondents should be permitted to compare their pay with that of men still working for Glasgow.  The respondents’ contentions depended on the proposition that Glasgow and the LLPs were ‘associated employers’ in terms of the 1970 Act and/or the proposition that Glasgow is the ‘single source’ of the allegedly discriminatory differences in pay for the purposes of article 157 of the Treaty on the Functioning of the European Union.  

The Employment Tribunal held that the appellants were not associated employers and further that Glasgow was not the body responsible for any differences in pay and not therefore a ‘single source’.  Daphne Romney QC, representing the Fox Cross Claimants, and Simon Gorton QC for the Unison Claimants argued before the Employment Appeal Tribunal (Langstaff P presiding) that an LLP is a company for the purposes of the Equal Pay Act 1970 which included all bodies corporate and not simply limited liability companies under the Companies Acts. The section was an anti-avoidance provision and had to be construed purposively.  Further, they argued that if the EAT was required to decided the question of single source, pay could be attributed to a single source in circumstances where strategic control is maintained albeit day-to-day control is placed in the hands of another in a wholly owned subsidiary.  A third line of argument was run which was referred to as the ‘Teckal exemption’ – that the ET erred in not considering the incongruity between the Council’s assertion that there was no single source control and the fact that it claimed the Teckal exemption, i.e. under European law, various activities have to go out to tender except where the Council maintains control of the relevant department.

The EAT accepted the first and third arguments and held that had it been required to decide the second argument it would have remitted the case for redetermination.   The Court of Session agreed.  Construing section 1(6) of the Equal Pay Act by reference to the ordinary meaning of ‘company’ included LLPs and other bodies corporate – the Act did not refer to the Companies Acts.  Thus Glasgow was an associated employer of the LLPs and the appeal failed on that point.  On the second argument, the Court of Session said ‘the tribunal’s decision on single source is vitiated both by an error of law and failure adequately to demonstrate that a relevant factor has been taken into account.’  That factor was that Glasgow retained absolute control even though it had not exercised it directly.  The ET had also misunderstood the decision ofRobertson v DEFRA; in that case the Treasury had devolved the power to negotiate salary to individual departments by statutory instrument.   On the Teckal exemption, the Court held that ‘[w]hatever the merits of the argument based on theTeckal exemption, it raised factual questions as to the closeness of the relationship between Glasgow and the ALEOs and the degree of control that Glasgow exercised, which the tribunal, as finder of fact, required to address and evaluate.  In our opinion, looking at the judgment of the tribunal, one cannot be satisfied that it did so.’  Thus it did not engage with substance of the Teckal exemption argument.