Cooking up a storm

A dinner ladies’ equal pay case awaiting judgement in Europe could do
serious damage to local authorities’ ability to contract out services – and
could even lead to industry-wide bargaining. Lucie Carrington reports

The Government has just announced plans to streamline tribunals for equal
pay cases. But it has done so without considering the possible impact of a
vital case currently awaiting a ruling from the European Court of Justice. This
case could redefine our understanding of UK equal pay legislations and
tribunals could find themselves swamped with women claiming a right to equal
pay.

However, that is simply the tip of the iceberg when it comes to the possible
effects of Lawrence and others v Regent Office Care and others. It could blow a
hole in the contracting industry. It might even reintroduce the spectre of
industry-wide, national pay bargaining – something most of today’s personnel
managers have only read about in text books.

Lawrence and others are cleaners and dinner ladies who found themselves with
a new, private-sector employer when North Yorkshire County Council contracted
the service out to three catering companies. Two of the firms said Tupe
regulations did not apply and re-appointed former council workers on new
contracts and lower pay.

Does Euro law have direct effect?

With the support of local government union Unison, the workers brought an
equal value claim, arguing they were entitled to rely directly on article 141
of the Treaty of Amsterdam, which says there should be equal pay for work of
equal value. They compared themselves with current council employees whose work
was rated as being of equal value under a local government job evaluation
study.

An employment tribunal dismissed the case on the grounds that under the
Equal Pay Act 1970 (which is much narrower than article 141), if there is to be
a case of pay discrimination the employer who discriminates "has to be in
control of both the women’s wages and the comparator’s wage". The
Employment Appeal Tribunal also dismissed the appeal. However, the Court of
Appeal decided to refer the case to the ECJ stating that it was not clear
whether article 141 applied or not. "The contentions of the applicants
raised a novel and difficult question on the proper interpretation and scope of
article 141," the court said. It was not possible for the court to state
with complete confidence that it was clear in such circumstances "either
that article 141 was or was not directly applicable".

Unison was delighted at this about turn. Deputy head of local government
Heather Wakefield commented that if the ECJ ruled in their favour it would be
able to use the same argument elsewhere "to resist privatisation or
prevent contractors making cuts in pay and conditions of women staff".

But the CBI insists it is not just contracting out of public services that
will be affected. Head of employee relations Dominic Johnson says the case
could do serious damage to the whole of the contracting industry. "When
firms contract out services, new employers may find themselves bound to follow
any changes in terms and conditions introduced in their client
organisations," he says.

Johnson insists that the contracting industry is not just about low pay.
Contractors provide cheaper, more efficient services because they can do it in
bulk. Further, one of the major purposes behind contracting out in the public
and private sectors is to promote innovative staff management systems –
including reward and benefit packages.

"If [the case] succeeds we will be reviewing our options to ensure this
approach does not become a matter of government policy," Johnson said.

Modest view

However, both Unison and the CBI could be taking a modest view of the
potential impact of Lawrence and others. They could even be barking up the
wrong tree completely.

Steve Antcliff, head of personnel at North Yorkshire County Council, says
that Lawrence and others will not affect the council’s contracting-out plans.
The case has largely come about because the contractors insisted the Tupe
regulations did not apply.

But government guidance to local authorities issued in January last year
makes it quite clear that when local authorities contract out services, Tupe
regulations most definitely do apply. "However, there are huge, national,
implications for equal pay," Antcliff points out.

Malcolm Pike, partner with Addleshaw Booth agrees. He is not convinced that
Lawrence and others will blow the contracting industry out of the water. Like
Johnson he says that pay rates are not the only reason contractors are able to
deliver business and public services more efficiently than their clients. But
he does see more serious implications for pay bargaining nationally.

"On the face of it, it means that any employee in the country who is
doing equivalent work to someone else, whoever their employer, could be
entitled to equal pay with that person," Pike says. And this suggests
industry-wide bargaining.

The fact that such a case could have got this far highlights what personnel
managers and employers have long known – that both Tupe and equal pay
legislation desperately need to be made clearer and more precise.

As Dominic Johnson says, unions are using equal value claims as a way of
achieving the same results they would have expected from the application of
Tupe. So it is in part the fuzziness around Tupe that is leading to cases like
Lawrence.

True, the Government is trying to do something about Tupe to bring it into
line with the revised version of the EU Acquired Rights Directive adopted in
1998. But Johnson insists the Government has been too slow in bringing out the
proposals. "The CBI will work with the Government to see that its
proposals are right for business," he says. "But we would really like
to see some sort of consultation document fairly early on this year."

Lawrence and others also raises a number of questions about the workability
of current equal pay legislation. As far as Johnson is concerned, it simply
does not take enough account of the market-driven nature of pay, especially in
the private sector. For example, it does not recognise the regional nature of
pay markets. It is perfectly logical to pay people differently according to the
local cost of living, he says.

But it is not UK legislation that is at fault, Pike says. It is perfectly
clear under UK law that workers can only claim equal value if their case
involves the same employer. The real spanner is the EU treaty, which simply
espouses a general principle of equal pay for work of equal value but offers no
more detail than that. It could go either way, Pike says. "The ECJ could
decide that article 141 is simply too vague to be of direct effect in this
case. It could rule that the treaty is not sufficiently precise or
certain."

But there is no way of telling. Past judgements suggest the ECJ is likely to
take a more conservative view when it comes to Tupe-style cases. However, it
depends on the make-up of the ECJ at the time.

Meanwhile, unions and employers are preparing for a ruling sometime in the
next few months, and gathering their arguments ready to lobby Westminster.

UK law versus EC law

The Equal Pay Act 1970 says The applicant must identify a person of the
opposite sex (the "comparator") who is doing like-work or work rated
as equivalent or work of equal value in the ""same employment"
ie for the same or an associated employer at the same establishment, or at
another establishment at which common terms and conditions of employment are
observed, either generally or for employees of relevant classes.

Article 141 of theTreaty of Amsterdam (formerly article 119 of the Treaty of
Rome) says each member state shall "ensure and subsequently maintain the
principle that men and women shall receive equal pay for equal work."
Article 119 was first held to have direct effect – ie a person may rely on it
before a domestic court or tribunal – in the Belgian case Defrenne v Sabena
back in 1976.

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