In brief
The Employment Appeal Tribunal (EAT) has held that cleaners who transferred from an outsourced provider to a National Health Service (NHS) foundation trust had been indirectly discriminated against because of race when their new employer did not end post-transfer pay disparities with existing employees.
Key takeaways
- Post-transfer pay disparities can give rise to unlawful indirect race discrimination claims.
- In this case, the claimants had all worked for an external cleaning contractor, which paid the London Living Wage. Directly employed cleaners received more favourable Agenda for Change terms.
- The Trust was not responsible for the lower pay decision in the pre-transfer period, as this was the responsibility of the contractor. However, once the claimants had transferred to the Trust, they were entitled to compare themselves to other employees who were paid at the higher rate. The contracts allowed the employer to align their pay.
- Transferees should consider whether employees who are transferring may have potential discrimination claims when comparing themselves against existing employees, where possible identifying potential issues in pre-transfer due diligence and taking steps to resolve this.
- While the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) can sometimes prevent easy post-transfer harmonisation of terms, in this case, the express variation clause in the contract would have made it possible.
- For more information on what this development means for you, please get in touch with your usual Baker McKenzie contact.
In more detail
Eighty cleaners were employed to work at Great Ormond Street Hospital for Children (GOSH). Until 31 July 2011, they were employed by Outsourced Client Solutions (OCS) and paid the London Living Wage of GBP 10.75 per hour. The cleaning services were brought in-house on 1 August 2011 and the cleaners transferred under the TUPE to employment with the Great Ormond Street Hospital for Children NHS Foundation Trust (Trust). Their employment contracts with OCS contained an express variation clause which allowed the Trust to put them on to the NHS Agenda for Change pay rates after the transfer. However, the Trust continued to pay the cleaners the London Living Wage for a period, and not the NHS Agenda for Change rates of GBP 11.50 per hour which other employees received.
In 2021, statistics showed that 78% of the claimants identified as being of a Black or minority ethnic background, compared to 51% of NHS Band 2 staff.
The claimants brought claims in January 2022, claiming pre- and post-transfer indirect race discrimination.
The Employment Tribunal dismissed their claims, relying on the Employment Appeal Tribunal's (EAT) decision in Royal Parks Ltd v. Boohene [2024] IRLR 18.
The claimants appealed to the EAT, while the Trust cross-appealed, relying on the Court of Appeal’s subsequent judgment in Boohene v. Royal Parks Ltd [2024] ICR 1036.
The EAT decision
The EAT dismissed the claimant’s appeal regarding the pre-transfer period, and allowed most of those relating to the post-transfer period.
The EAT held that it was bound by the Court of Appeal’s decision in Boohene regarding the pre-transfer period. Section 41 of the Equality Act 2010 (which provides that a principal must not discriminate against contract workers) does not apply to claims brought by contract workers relating to pay under their contracts of employment.
There was no single source of terms, and there was no finding that the Trust had prohibited OCS from paying the claimants at Agenda for Change rates pre-transfer.
The post-transfer period was then considered. Boohene did not apply to the claimants, as they were employees, not contract workers.
The tribunal had made an error of law in treating the pre- and post-transfer periods in the same way. Applying the law correctly to the tribunal’s own findings of fact, it would have concluded there was a prima facie case of indirect race discrimination. It had also failed to address the requirement in the Transfer of Undertakings (Protection of Employment) Regulations that any economic, technical or organisational reason for measures must entail changes in the workforce.
However, despite both errors of law, the outcome would have been the same. On the objective justification question, the claimants’ contracts already contained an express contractual variation which would have allowed the Trust to vary (increase) their pay.