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Equal pay decision plunges council into fresh financial crisis

Equal pay decision plunges council into fresh financial crisis

🕔25.Oct 2012

No-win no-fee lawyers could send Birmingham City Council’s budget crisis plunging to new levels of despair with a relentless pursuit of equal pay compensation for female former local authority staff.

A Supreme Court ruling against the council threatens to open the financial floodgates by allowing back-pay claims, potentially on behalf of more than 1,000 women, to be pursued in the High Court rather than at an employment tribunal.

The decision is a blow not just for Birmingham but for many other local authorities and public bodies because it means that claims can be made up to six years after a person ceased to be employed.

Cases heard at employment tribunal, the traditional route for such claims, must be brought no more than six months after employment ceased.

The Supreme Court case involves 170 former city council employees, mostly women, who now have the right to seek compensation at the High Court on the grounds that they were paid substantially less than men for carrying out the same type of work.

It is understood that some of the former cooks, cleaners and home care assistants received up to £10,000 a year less than their male counterparts, with one woman thought to be in line for back pay in excess of £100,000.

Anomalies began to come to light seven years ago when the council began seriously to look at implementing Single Status – a Government measure designed to eradicate differences in pay and conditions between blue and white collar workers.

It was soon discovered that thousands of women might have grounds for compensation based on the council’s practice of rewarding male employees with enhanced wage rates and hefty bonuses.

However, it was not until no-win no-fee lawyers took an interest that the back-pay claims began to take off. Before that, women who complained to trade unions about their treatment were advised they could not make a claim if they had left the council’s employment more than six months previously.

It is the precedent set out by the Supreme Court that will most concern council leaders.

There are at least 1,000 other potential claimants known to lawyers, and it’s thought other former staff are likely to come forward now in an attempt to secure six years-worth of back pay.

Birmingham City Council has set aside £291 million to meet the equal pay bill, but that figure appears to be severely understated. Lawyers predicted two years ago that the compensation figure could reach £1 billion if the courts agreed to hear cases stretching back six years.

Council leader Sir Albert Bore gave details this week of an unprecedented financial crisis facing the local authority, which has to deliver £600 million in budget savings between 2010-11 and 2016-17. He warned that a number of non-essential services would have to be “decommissioned” as the council struggled to identify funds to continue providing social care and education.

The council may ask for Government permission to extend its borrowing in order to create a larger war chest to meet equal pay claims. That would create even more problems, pushing up interest repayments on the city’s record £2.7 billion debt.

Council debt has almost tripled since April 2004, although it remains within levels set out under the Government’s prudential borrowing arrangements.

The rise can be explained partly by the need to borrow to finance large capital projects including the new library, the refurbishment of New Street Station and modernisation of the council housing stock.

Estimates prepared a year ago stated that by 2013-14 the city would be repaying debt at the rate of almost £270 million a year – equivalent to £43 on the council tax.

However, the figure has worsened since then as a result of the need to borrow a further £336 million to compensate for the abolition of Government housing subsidy. The cost of funding a higher equal pay bill could throw debt repayment over the £300 million-a-year mark.

The law firm Leigh Day & Co, representing the 170 claimants at the centre of the Supreme Court hearing, described the judges’ decision as “historic” and said it would have huge implications.

Chris Benson, a partner at Leigh Day, said: “This is a great day for equality and for all those women massively underpaid over many years. Birmingham City Council should do the decent thing and settle the claims.

“They saved money by underpaying ex-workers for so many years, and so should now stop wasting taxpayers’ money fighting court cases they cannot win.”

A spokeswoman for Birmingham City Council said: “Equal pay litigation until now has always been pursued in employment tribunals as these tribunals are experienced and specifically trained in dealing with such claims. In addition, there are very limited situations where costs follow the losing party, whereas in the civil court costs almost always follow the losing party.

“The council is reviewing this judgement in detail before considering its options going forward and will be making no further comment at this stage”.

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