The EU’s last breath? domestic national minimum wage provision declared to be discriminatory against women
Written by Imogen Brown
Introduction
On 5 April 2023, the Employment Appeal Tribunal (‘EAT’) handed down judgment in Thukalil and anor v Puthenveettil and anor [2023] EAT 47, holding that a domestic provision exempting ‘family workers’ from receiving the national minimum wage amounted to sex discrimination under directly effective EU legal rights. Akua Reindorf KC, instructed by the Anti Trafficking and Labour Exploitation Unit, appeared successfully for the Claimant.
In this blog, Cloisters Pupil Imogen Brown discusses the judgment and its implications.
Background
The facts of the case are simple. Ms Puthenveettil, the Claimant, travelled to the UK from India in July 2005. Upon arrival, she was employed by a husband and wife as a live-in domestic worker in their London home. Her salary ranged from £110-£120 per week. She resigned in 2013 and brought, inter alia, an unauthorised deduction from wages claim against the couple in the employment tribunal. She sought to be paid the level owed to workers under the National Minimum Wage Act 1998, which would be far more than she in fact received.
In most circumstances this would be a straightforward claim. However, at the time Ms Puthenveettil was working, Regulation 2(2) of the National Minimum Wage Regulations 1999 imposed what is often termed the ‘family worker exemption’. The exemption dictates that family and domestic workers are not entitled to the national minimum wage where they live in their employer’s family home; are provided with accommodation, meals, and leisure activities; and perform tasks that would otherwise be domestic chores carried out by family members. A similar exemption provision remains in force today[1].
This brings us to the parties’ dispute. Employment lawyers are familiar with indirect discrimination claims under Section 19 of the Equality Act 2010. They revolve around a ‘provision, criterion or practice’ (‘PCP’) which appears neutral but in fact has a discriminatory effect on a particular group of people. Unusually, in this case, Ms Puthenveettil argued that the discriminatory PCP was the law itself. She contended that the family worker exemption was indirectly discriminatory against a group of workers who were predominantly women, preventing them from receiving the national minimum wage. Specifically, the provision contravened Article 157 of the Treaty on the Functioning of the European Union (‘TFEU’), which states that “Each Member State shall ensure that the principle of equal pay for male and female workers for equal work or work of equal value is applied”. Alternatively, she argued that even if Article 157 TFEU was not relevant, the family worker exemption contravened a general principle of non-discrimination that was enshrined in EU law and had horizontal direct effect.
Employment Tribunal’s Judgment
The case has a long procedural history. An original employment tribunal hearing in 2016 found that Ms Puthenveettil was not entitled to the minimum wage under the exemption and that there was no scope to rule on the provision’s legality. Reconsideration of the Tribunal’s decision was refused. The decision was then successfully appealed to the EAT, who remitted the case back to a fresh tribunal to consider the legality of the exemption. By the time the remitted case was heard, it had been over 7 years since Ms Puthenveettil resigned.
The Tribunal’s reserved judgment, handed down on 14 December 2020, agreed with Ms Puthenveettil’s arguments. The family worker exemption was disapplied and a declaration was granted that Ms Puthenveettil was entitled to the national minimum wage for her period of service. The Tribunal’s findings can be summarised as follows:
· The majority of domestic workers caught by the family worker exemption are female: on considering Ms Puthenveettil’s substantial evidence, the Tribunal concluded that women were disproportionately affected by the provision when compared to men[2].
· The family worker exemption could not be justified as a proportionate means achieving a legitimate aim: the Secretary of State for Business, Energy and Industrial Strategy was joined to the claim as a respondent to justify the family worker exemption, although he withdrew from proceedings before the hearing took place. The Tribunal found that the UK Government had not sufficiently demonstrated that the family worker exemption was a proportionate means of achieving the aims of (i) accommodating the unique circumstances of domestic workers; or (ii) helping parents return to work[3]. This was particularly so where the Government had numerous opportunities to revisit and record the rationale for the family worker exemption but had not done so previously[4].
· Direct effect was still in force: at all relevant times, the events predated the end of the UK’s transition period with the EU on 31 December 2020. Ms Puthenveettil could therefore rely on her directly effective EU rights under Article 157 TFEU when arguing that the family worker exemption was unlawful.
The Tribunal also agreed with the alternative argument, that the principle of non-discrimination is a general principle of European Community law and therefore has horizontal direct effect in all cases that fall within the scope of EU law[5].
· There was no way to read the family worker exemption as compatible with EU rights: before disapplying a domestic provision and declaring it unlawful, domestic courts should try to interpret the law in a way that is compatible with directly effective EU rights. The Tribunal found it was not possible to do so without ‘redesigning’ the family worker exemption[6].
· Therefore, the Tribunal was bound by Section 2(1) of the European Communities Act 1972 to disapply the ‘family worker’ exemption: upon finding that the family worker exemption was discriminatory and in contravention of Ms Puthenveettil’s directly effective rights, the Tribunal was bound to disapply the provision[7]. This is in accordance with the principle of EU legal supremacy, to which all member states yield when they join the European Union.
Employment Appeal Tribunal’s Judgment
The Respondents appealed the Tribunal’s decision, arguing inter alia that Article 157 TFEU should only apply to equal pay claims where men and women are employed by the same employer and receive unequal amounts from a ‘single source’ of payment. Mr Justice Kerr disagreed with this analysis: “the source of the pay inequality is statutory, not contractual. […] It could be said that the ‘single source’ […] is the legislature itself”[8]. He reasoned that the family worker exemption was caught by Article 157 TFEU because it was the law itself that was causing gender pay inequality, not a single employer paying men and women differently.
Accordingly, the appeal was dismissed: the Tribunal below was correct to find that the family worker exemption was unlawful under Article 157 TFEU[9] and should be disapplied. The EAT declined to rule on the alternative argument that Ms Puthenveettil had horizontally directly effective rights under general principles of European Community law, although it was suggested that there were “strong arguments” for supporting this proposition as the Tribunal did below[10].
The case will now proceed to a remedy hearing to decide how much money Ms Puthenveettil is owed.
Comment
Significance
Many will be relieved to have a binding judgment declaring that the family worker exemption is unlawful, particularly when one considers the circumstances of many women caught by the provision, including Ms Puthenveettil herself. Women are recruited abroad by families to work as nannies in the UK, and migrate from their home countries to do so. Upon arrival, these women work for minimal pay to support their families back home. Domestic working environments are difficult to regulate. Most women in these circumstances are unaware of their employment rights, and the circumstances in which they’re brought here often amount to trafficking[11]. The family worker exemption accommodates the continued exploitation of these women under the cloak of legality: a loophole for modern slavery. Why should workers be paid less than minimum wage simply because they work in a family home?
One would hope the EAT’s judgment will incentivise legislative change for domestic worker protections, particularly given the Low Pay Commission’s recommendation in 2021 that the family worker exemption should be removed. On 10 March 2022, Paul Scully MP, the then Parliamentary Under Secretary of State for Business, Energy and Industrial Strategy, announced the exemption would be removed “when parliamentary time allows”. It has been over a year since that announcement and the exemption remains in place. Vulnerable migrant women are still being exploited.
When parliamentary time eventually allows the removal of the family worker exemption, Parliament should also consider altering Regulation 19 of the Working Time Regulations 1998 , which excludes “domestic servant[s] in a private household” from the maximum cap of a 48-hour working week. “Domestic servants” are also excluded from labour inspections under s.51 of the Health and Safety at Work Act 1974.
The EU’s last breath?
Due to the UK leaving the EU, this case may be one of the last of its kind to find its way to employment tribunal. The principle of direct effect expired after the UK’s transition period ended on 31 December 2020[12]. In its judgment, the EAT expressly said that if Ms Puthenveettil were to bring her claim now, a tribunal would not be able to disapply the family worker exemption in the way that they did[13]. This analysis is technically correct in that Ms Puthenveettil’s rights would no longer be EU-derived, but the European Union (Withdrawal) Act 2018 ‘converts’ many EU rights into domestic ones: a legal right under Article 157 TFEU is preserved by s.4(1); and the supremacy of EU law still applies to the interpretation of laws made before exit day (see s.5(2)). It would therefore still be possible for a tribunal to disapply the family worker exemption should another claim be brought today, albeit through domestic legal mechanisms rather than a supreme EU legal right.
The effects of reform
Perhaps the more interesting question comes in considering what will happen if Parliament chooses to enact a new law rather than to simply repeal the family worker exemption. Said law will not be caught by principles of direct effect or case law from the Court of Justice of the European Union (‘CJEU’) because it will be enacted after exit day[14]. How will this law be interpreted in the absence of binding CJEU case law or EU provisions? How will Parliament forge our legislative landscape regarding protections against discrimination and modern slavery? These questions are particularly important because any recourse to the CJEU has been removed. Our laws need to be watertight.
Time will tell what the future brings. But the EAT’s judgment in Puthenveettil makes abundantly clear that the family worker exemption is not fit for purpose.
[1] Regulation 57 of the National Minimum Wage Regulations 2015
[2] Tribunal judgment at [33]-[119]
[3] Tribunal judgment at [90]-[103]
[4] Tribunal judgment at [100]
[5] Tribunal judgment at [108]-[112]
[6] Tribunal judgment at [113]
[7] Tribunal judgment at [108]
[8] EAT judgment at [64]
[9] EAT judgment at [54]-[65]
[10] EAT judgment at [70]
[11] See the discussion in Taiwo v Olaigbe & anor and Onu v Akwiwu & anor [2016] UKSC 31 at [25]
[12] EU(W)A 2018, s.3
[13] EAT judgment at [74]
[14] EU(W)A 2018, s.5(1)