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Background: Section 41 of the Equality Act 2010 protects contract workers from discrimination carried out by the end-user of their services by way of:
Facts: The contract workers were employed by Vinci Construction UK Ltd (Vinci) to provide services to Royal Parks which is a charity responsible for the management of royal parks and other open spaces. Royal Parks has about 160 employees (largely in office roles).
Royal Parks pays its employees (as a matter of policy) the Real Living Wage at the London rates. This is known as the London Living Wage (LLW) and is higher than the National Minimum Wage. However, Royal Parks does not require its contractors (including Vinci) to pay their employees the London Living Wage.
Several Vinci contract workers brought claims for indirect race discrimination against Royal Parks. They alleged that as contract workers they were treated less favourably in terms of pay and that this disproportionately affected workers from a black or minority ethnic background who were more likely to work in outsourced jobs.
Tribunal and EAT decisions
The Tribunal upheld the Vinci contract workers’ claims (as the different pay levels disproportionately disadvantaged black and minority ethnic workers) but the EAT dismissed the claims. It said that although the Vinci contract workers’ claims did fall within s41 Equality Act (because Vinci dictated the contract terms by choosing a contractor that paid less than LLW) in fact the Tribunal had chosen an incorrect pool for comparison. It should have compared Royal Parks employees level of pay to that of all Royal Parks contract workers (not just Vinci’s workers).
Court of Appeal decision
The Court of Appeal disagreed with the EAT.
It said that the Vinci workers’ claims did not fall within s41 Equality Act. Claims about contractual matters (such as pay) can only be brought against a worker’s employer (the contractor) not the client (or end-user) in an outsourcing relationship. In this case the workers’ complaints related to pay under their contract with Vinci (their direct employer) and not to their relationship with the end user client.
The Court said that it did not agree with the EAT that Royal Parks had dictated the terms of the outsourcing contracts. There was no finding that it positively prohibited the contractor from paying the LLW. It was normal in an outsourcing scenario for the overall contract price to determine what a supplier can afford to pay its workers.
Implications: This is a positive result for employers as it means that outsourced workers cannot compare themselves with client (or end-user’s) employees for the purposes of discrimination claims which relate to the terms of their employment contract with the outsourced contractor.
However, this is subject to any changes in legislation. The Labour party has said that it will take steps to ensure that ‘outsourcing of services can no longer be used by employers to avoid paying equal pay’. Although this commitment appears to apply to sex-based pay discrimination, it has been suggested that this might also be extended to other protected characteristics.
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