The recent Employment Appeal Tribunal (EAT) decision in Mr Alpha Anne & Others v Great Ormond Street Hospital for Children NHS Foundation Trust raises important practical issues for organisations who have staff transfer to them under TUPE.
The Claimants in this case were all cleaners who worked at Great Ormond Street Hospital, which was operated by the Trust. They are all from BAME backgrounds. They were initially employed by a contractor (OCS) which provided cleaning services to the Trust, but their employment later transferred to the Trust under TUPE when the Trust brought its cleaning services back in-house. The Claimants alleged that the Trust indirectly discriminated against them on the grounds of their race by failing to ensure that they were paid the same as comparable NHS staff, a higher percentage of whom were white, both before and for a period after the transfer.
Claims relating to the period before the transfer
Before the transfer (when employed by OCS) the Claimants were paid the London Living Wage. Staff directly employed by the Trust in comparable roles were paid at a higher rate under the NHS Agenda for Change (AfC). The Claimants argued that the Trust indirectly discriminated against them in the period prior to the transfer by not insisting that OCS match AfC rates of pay.
The EAT rejected this aspect of the claim. It was bound by the Court of Appeal’s decision in Royal Parks v Boohene, which says that individuals who are employed by a contractor to provide services to one of its clients cannot bring claims against that client in relation to their pay where the pay is set by the contractor itself. This is the case even if the client does have some influence on pay. The position would have been different had the Trust positively prohibited OCS from paying higher rates, but there was no evidence that this was the case. As a result, the pre‑transfer claims failed.
Claims relating to the period after the transfer
The Claimants continued to be paid at a lower rate than comparable staff who had been directly recruited by the Trust for a period following the transfer, although they were eventually put onto AfC rates of pay. The EAT found that this difference in pay over the relevant period constituted indirect discrimination on the grounds of race. Staff who had been directly recruited by the Trust were more likely to be white, whereas staff who had transferred from OCS were more likely to be from BAME backgrounds. The EAT said that the Claimant’s pay should have been increased on or shortly after the transfer and that the Trust had failed to justify the delay. The Trust was responsible for the discriminatory disparity in pay from the date of the transfer as at that point it became the Claimants’ employer, and so directly responsible for their terms of employment. Accordingly, the claims relating to the period after the transfer succeeded.
Although any attempt to harmonise terms and conditions of employment following a TUPE transfer is generally void, in this case the Claimants’ contracts contained a clause allowing their employer to make reasonable changes to their terms. As changes made in accordance with a valid variation clause are permitted under TUPE, harmonisation was possible in this case.
Practical implications
The implications of this case are striking and have the potential to create significant practical difficulties for employers. Where an organisation has employees transferring to it under TUPE, it will be necessary to consider any disparity in terms between existing employees and those transferring in. It will then be necessary to identify any demographic differences between the two groups to see if any sub-set of employees with a particular protected characteristics is disproportionately affected by the disparity in terms. If so, it may be necessary to harmonise terms between the two groups to remove the disparity unless not doing so (or not doing so straight away) can be justified as a proportionate means of achieving a legitimate aim. It is important to note that this could also be the case where it is your existing work force that is lower paid or has less favourable terms. Employers should also seek advice on the relevant employees’ contracts of employment to see to what extent the changes proposed are permitted.
The particular challenge presented by this case is that employers often do not hold detailed information about the demographic make-up of their workforce that can be used to identify whether any disparities in terms are (or could be) indirectly discriminatory. It can also be difficult to obtain this information from employees.
We therefore recommend that employers seek further advice on this point where disparities in terms are identified as part of any pre or post transfer due diligence.
Changes under the Employment Rights Act 2025
Further changes on this issue are afoot under the Employment Rights Act 2025. The Act gives the government power to make regulations specifying provisions to be included in public sector outsourcing contracts with the aim of ensuring that, where public services are outsourced, the contractor's direct hires are not treated less favourably than the incoming public sector workers, and vice versa (preventing a "two-tier workforce").
Alongside the regulation making power, there will be a duty for Ministers to publish a code of practice to which contracting authorities will have to "have regard" when taking on the provision of public services.
