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Jobs outsourced to arms' length LLP can be comparators for purposes of equal pay claims, Scottish court rules

Out-Law News | 25 Mar 2014 | 12:57 pm | 1 min. read

Predominantly female employees whose work for a local authority has been outsourced to a limited liability partnership (LLP) can compare themselves to predominantly male employees whose jobs remain with the authority for the purposes of an equal pay claim, the Court of Session in Scotland has ruled.

The court said that the LLPs, which were set up to operate outsourced parking enforcement and care services, were 'associated employers' for the purposes of the 1970 Equal Pay Act and the legislation that has since replaced it. This meant that the women were able to compare their pay with that of men still working for Glasgow City Council, it said.

"The purpose of the provision ... is to determine who are the employees whose terms and conditions fall within ... the appropriate arc of comparison, these being the employees of employers one of whom is controlled by the other or both of whom are controlled by a third party," the court said.

"It follows that Glasgow is to be treated as an associated employer of both Parking and Cordia [the care company] and that therefore subject to the other requirements of the legislation, men employed by Glasgow are to be treated as in the same employment with women employed by the AELOs [arms' length external organisations]," it said.

Lawyers for Glasgow City Council had argued that as an LLP was not a 'company' as defined by the 2006 Companies Act, it could not be classed as an 'associated employer'. However, the court said that there was no authority requiring "a narrower meaning of 'company' ... than would be suggested by the ordinary use of language".

Under the Equal Pay Act, women are entitled to the same pay as men in circumstances where "the woman is employed on work rated as equivalent with that of a man in the same employment". The Supreme Court has already held that "the same employment" need not necessarily mean that the men and women shared a workplace, while the 1970 Act extends the meaning of "same employment" to employment by an "associated employer ... at which common terms and conditions of employment are observed either generally or for employees of the relevant class".

The Court of Justice of the European Union (CJEU) had held previously that applicants who had been transferred from the employment of the local authority to that of an entirely separate commercial company would not be able to compare their pay with that of men remaining with the local authority unless that local authority remained the "single source" of any allegedly discriminatory differences in pay. This was because there would be no one body responsible for the inequality and therefore able to restore equal treatment. However, the Court of Session said that this was irrelevant where the 'associated employers' test was met.

The case will now return to the employment tribunal, which will rule on whether the women's jobs were of equal value to those of the local authority's male employees.