The Employment Appeal Tribunal has ruled that failing to upgrade the terms and conditions of TUPE transferred staff was indirect race discrimination. The employer should have acted more quickly to put them on the same terms as those of its other staff working at an equivalent level.
This situation arose when Great Ormond Street NHS Trust took a cleaning contract back in house, meaning that contracts of cleaners who were originally employed by OCS were transferred to the Trust under the Transfer of Undertakings (Protection of Employment) Regulations (TUPE). Under their contract with OCS, the cleaners had been entitled to the London Living Wage, but other staff working at the same level in the Trust were entitled to a higher hourly rate under Agenda for Change, the NHS-wide collective agreement.
The former OCS cleaners argued that the Equality Act was engaged because there was a significantly higher proportion of minority ethnic staff in their group (78%) compared to the other staff employed by the Trust on the same Agenda for Change band (51%). The EAT accepted that the policy of retaining this differential (pending negotiations about harmonisation of terms) amounted to indirect discrimination. That was because the pay differential put minority ethnic staff at a particular disadvantage and this policy could not be justified as a proportionate means of achieving a legitimate aim.
The Trust argued that TUPE precluded it from aligning the insourced cleaners’ terms with Agenda for Change, since the normal rule was that any changes to their contractual terms for a reason related to the transfer - even to their benefit - would have been void. However they had overlooked a variation clause in their contracts with OCS, which allowed the employer to make “reasonable changes” to their contracts unilaterally. Under TUPE, using such a variation clause to make changes is permitted, even if they are transfer related.
This case is a warning for employers taking contracts back in house, where the group of staff transferring from the outsourced contract have a different profile in terms of protected characteristics to their other staff working in equivalent jobs. This is likely be a particular issue for organisations like the NHS which have organisation-wide job evaluation regimes into which the incoming workers need to be slotted. However, even where such a risk is identified, employers will need to tread cautiously, in view of the strict rules in TUPE about post-transfer variations.
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