Public sector union Unison has won a landmark victory against a local authority's decision to dismiss 2,500 staff and re-employ them on less favourable terms.
As a result of the tribunal decision, Leicestershire County Council said it might have to pay up to £8m in compensation to those staff, many of whom are women.
The case was brought by Unison because the authority had failed in its legal duty to consult over plans to dismiss hundreds of the union's members in March 2004. The council terminated contracts to impose a new pay system arising out of a job evaluation study.
Unison general secretary, Dave Prentis, said: "This decision tells every council in England, Wales and Northern Ireland who want to impose new pay systems without consent, and to cut our members pay in the name of equal value, to back off."
The law says an employer wishing to terminate the contracts of more than 20 employees has to inform their union representatives, and then consult them to try to reach agreement about ways of avoiding the terminations.
This rule applies even if the employer dismisses workers but intends to re-employ them on less favourable terms, as was the case with Leicestershire council.
Those employees who stood to lose out under the new pay system had their contracts terminated. The pay review also meant cutting payments for unsocial hours to low-paid staff, who should have gained from the exercise.
The council then failed to inform and consult properly with the union.