In Alpha Anne & Others v Great Ormond Street Hospital for Children NHS Foundation Trust, the Employment Appeal Tribunal (EAT) held that an employer’s failure to harmonise the terms and conditions of staff transferred-in under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE Regulations) amounted to indirect race discrimination.

In this insight, we look at the reasons for that decision and key takeaways.

Background

The claimants, a group of 80 cleaners, mostly Black, Asian or Ethnic Minority backgrounds, worked at Great Ormond Street Hospital (GOSH) for a contractor, OCS, until 1 August 2021, when cleaning services were brought in-house and their employment transferred under the TUPE Regulations to the Great Ormond Street Hospital for Children NHS Foundation Trust (the Trust).

By 30 April 2021, the Trust knew that the claimants would be entitled to the NHS-based Agenda for Change (AfC) Band 2 rates and benefits upon transfer, having carried out a local job evaluation. The claimants sought AfC rates from ‘day one’ of the transfer.

Due to the delays in harmonisation of terms post-transfer and the disadvantage they suffered as a result, the claimants brought indirect race discrimination claims against the Trust for both the pre-transfer period (for failing to require OCS to provide them with the more favourable AfC pay and benefits) and the post-transfer period (for failing to provide them with AfC terms immediately on/after the transfer).

Their claims were dismissed by the Employment Tribunal (ET) and the claimants appealed. The Trust also cross-appealed.

The EAT’s decision

In relation to the pre-transfer period, the claimants’ claims (and their appeal) failed and the Trust’s cross-appeal was upheld. The EAT held that the Court of Appeal’s judgment in Royal Parks Ltd v Boohene [2024] meant that section 41 of the Equality Act 2010 (the EqA) did not permit a discrimination claim to be brought by a contract worker against a principal (in this case, the Trust) about contractual pay terms set by the supplier and the claimants’ employer (in this case OCS).

In relation to the post-transfer period, the EAT upheld the claimants’ indirect race discrimination claims under section 39 of the EqA (and their appeal) on the basis that:

• The Trust had applied a provision, criterion or practice (PCP) from 1 August 2021 to all staff of “making receipt of the band 1 or 2 AfC rate of pay and other benefits for working as a cleaner at GOSH dependent, directly or indirectly, on not having been transferred to the Trust from an outsourced contractor employer under a relevant transfer in respect of their work as a cleaner at GOSH”.
• The PCP resulted in a prima facie case of indirect race discrimination as it placed the claimants at a particular disadvantage when compared with other Trust employees who were engaged on AfC band 1 and 2: 78% of cleaners transferred in were of Black, Asian or Ethnic Minority backgrounds as compared with 51% of staff employed by the Trust at band 2.
• The Trust had the power to vary the claimants’ terms and conditions as their contracts with OCS contained an express unilateral variation clause (and Regulation 4(5)(b) of the TUPE Regulations does not render void a variation of contract under such a clause).
• The unilateral variation clause, and the fact that there was no good reason provided for any delays in implementing the changes, meant that the Trust’s failure to provide the claimants with AfC terms on, or soon after, ‘day one’ of the transfer, amounted to indirect race discrimination that could not be objectively justified.

What to take away

Any changes to terms and conditions will be void if the sole or principal reason for the variation is the transfer (Regulation 4(4) of the TUPE Regulations), even where the proposed variation benefits employees (although such positive changes are less likely to be challenged in practice). Conversely, any changes will be valid if (a) the sole or principal reason for the variation is an economic, technical or organisational (ETO) reason entailing changes in the workforce, provided that the employer and employee agree that variation, or (b) the terms of that contract permit the employer to make such a variation (Regulation 4(5) of the TUPE Regulations).

The EAT found that the discrimination identified could and should have been remedied by the employer from ‘day one’ of the transfer because the employer had a contractual right to unilaterally vary the terms. However, the position is less clear when no such clause exists: a change can only then be made (even if beneficial for the employee) where there is an ETO reasons entailing changes in the workforce and the employee agrees, and that definition is more difficult to satisfy. 

Going forward, we recommend that employers seek to identify any post-transfer indirect discrimination pay risks. Information on protected characteristics, terms and any differentials between transferred staff and existing staff should be analysed to ascertain:

• Whether pay and conditions could / should be changed post-transfer to remedy any potential indirect discrimination identified; and,
• If so, what are the risks/benefits of either seeking to harmonise terms or having a ‘two tier’ workforce (e.g. the potential for indirect discrimination claims).

It is also worth noting that changes to the Procurement Act 2023 (made by the Employment Rights Act 2025) will take effect in October 2026. These changes aim to prevent ‘two tier’ workforces being created when public sector employers outsource services to a new provider. Public sector employers will be required to include an obligation that the new provider shall not treat transferring employees less favourably than they were treated prior to any transfer and that the new provider’s existing employees shall be treated no less favourably than the transferred employees (see the government’s factsheet on Public Sector Outsourcing for further details).

How Capsticks can help

We have specialists in TUPE who can help you identify the activities being delivered by an organisation or team which are potentially subject to a TUPE transfer and ensure that you are compliant with your obligations under the relevant legislation or guidance.

Capsticks also continues to support employers and national organisations to meet the challenges posed by the government’s ongoing requirement for organisational change in the health sector.

For further information on how we might assist your organisation, please contact Raj Basi, Sian Bond or Alistair Kernohan.