Case study: Beware indirect discrimination risks following TUPE transfers

Employers who outsource services, or bring services back in house, subject to the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE), need to be mindful of inadvertently creating indirect discrimination risks.

The recent Employment Appeal Tribunal case of Alpha Anne and others v Great Ormond Street Hospital for Children NHS Foundation Trust serves as an important reminder to employers to consider whether there are discrimination risks arising from contractual terms post-TUPE transfer.

Outsourced workers transferred into the NHS

A contractor, OCS, employed cleaners to carry out cleaning services at Great Ormond Street Hospital (GOSH) until 1 August 2021, when Great Ormond Street Hospital for Children NHS Foundation Trust (the Trust) decided to bring the work in-house. Around 80 cleaners transferred under TUPE to the Trust.

Key facts:

• 78% of the cleaners were from BAME backgrounds.
• Before the transfer, the cleaners were paid the London Living Wage (£10.75 per hour), rather than the higher Agenda for Change (AfC) Band one to two rate (£11.50 per hour).
• Following the transfer, the Trust did not immediately place these workers onto AfC terms, instead implementing changes in phases.

The claimants issued claims for indirect race discrimination, alleging that the Trust failed to require OCS to pay AfC-equivalent terms prior to the transfer and that the Trust failed to move the cleaners onto AfC terms immediately following the transfer.

Post-transfer indirect race discrimination claim upheld

The Employment Appeal Tribunal (EAT):

• Rejected the pre-transfer claim
• Upheld the post-transfer claim

The Trust made access to AfC pay dependent on not having been TUPE-transferred. This was a Provision, Criterion or Practice (PCP).

The PCP put BAME workers at a particular disadvantage:

• 78% of cleaners were BAME
• Only 51% of AfC Band two staff were BAME

The Trust attempted to justify its actions by relying upon the fact that TUPE prevented them from making contractual changes linked to the transfer. However, the EAT found that:

• A unilateral variation clause existed in the inherited contracts
• The Trust had the contractual ability to vary terms from day one under this clause
• The Trust was slow to act in harmonising terms, offering no compelling reason for the long delay.

The inability to justify the delay meant the indirect discrimination claim succeeded.

Post-transfer harmonisation vs indirect discrimination risk

The decision in this case is very fact-specific, and it remains to be seen whether it will be appealed by the Trust. In the majority of cases, harmonising terms of employment (bringing them into line with the terms of the transferee’s existing staff), after a TUPE transfer, will be void. This includes changes that are overall more favourable to transferring employees.

In cases where protected groups may be disadvantaged post-transfer, the transferee will need to weigh up the risks associated with making post-transfer changes to terms and conditions with the risk of claims for indirect discrimination, considering whether a decision not to make post-transfer changes can be objectively justified.

Assessing risk prior to the TUPE transfer

Prior to taking on employees via a TUPE transfer, it’s advisable for employers to:

1.     Conduct an equality impact assessment

Carry out an equality impact assessment to determine whether any protected groups may be disproportionately disadvantaged following the TUPE transfer.

2.     Review workforce demographics

If transferred staff are predominantly from one protected group, and may be disproportionately disadvantaged, consider whether there is objective justification for not making changes to terms and conditions.

3.     Review contractual variation terms

Review contractual terms to see whether there is a variation clause which may permit changes to terms and conditions, considering how that variation clause has been exercised in the past.

4.     Document decision-making

Ensure that any considerations around this are well documented.

5.     Take specialist legal advice

Even where a variation clause is in existence, take legal advice before making any changes to terms and conditions post-transfer.

How AfterAthena Can Support

At AfterAthena, we advise on TUPE requirements through our specialist employment law team, providing clear, commercially focused guidance before, during and after a transfer. As part of the Napthens Group, we work closely with colleagues across the wider business, including our Corporate team on business and asset sales, to deliver coordinated, end-to-end legal support where TUPE issues arise as part of a wider transaction.

Conclusion

Whilst harmonising terms after a TUPE transfer is usually prohibited, this judgment confirms that the existence of a contractual variation clause can alter the position. Employers should therefore carefully assess whether the transfer could expose them to indirect discrimination claims.

To mitigate these risks, employers should proactively evaluate the equality impact of post‑transfer arrangements, taking early legal advice if concerns regarding a potential disadvantage to a protected group arise. By doing so, organisations can better navigate the tension between TUPE compliance and equality obligations, avoiding the pitfalls that arose in this case.

FAQs

What is a TUPE transfer?

A TUPE transfer happens when a business or service transfers to a new employer and employees automatically move across on existing terms, preserving continuity of employment.

Can employers harmonise terms after a TUPE transfer?

Usually not. Changes to terms solely because of the transfer are void, unless there’s an economic, technical, or organisational reason entailing changes in the workforce, provided the employer and employee agree that variation.

What is indirect discrimination?

Indirect discrimination occurs when a provision, criterion or practice disproportionately disadvantages employees with a protected characteristic, such as race, gender, or age.

Does TUPE override discrimination law?

No. Employers must comply with both TUPE and equality law. Failing to address disparities can still lead to indirect discrimination claims.

Should employers carry out an equality impact assessment before TUPE?

Yes. Assess whether transferring staff could be disproportionately affected due to protected characteristics to reduce indirect discrimination risk.