Public workers' rights at risk

The job security of hundreds of thousands of British workers was undermined yesterday by a surprise European Court ruling.

The decision means that the "contracting out" of public services will now be far more hazardous for the employees concerned. Under the judgment, the terms and conditions of workers will not be automatically protected when their employer loses a contract and the work is transferred to another company.

The ruling by judges in Luxembourg, on a case brought by a German cleaner, will no doubt be welcomed by ministers who are keen to promote the contracting out of state-funded services. It will also prompt a fresh wave of litigation between employers and unions.

Lawyers yesterday said the decision would reopen the debate over whether all work contracted out by state-owned public services was covered by the European Acquired Rights Directive, under which the rights of employees are protected when a new contractor was appointed. John McMullen, head of the employment department at solicitors Pinset Curtis, said it would leave uncertainty over the degree of job security enjoyed by employees whose work had been contracted out.

Critical to any decision about whether the directive applied was if there had been a "transfer of undertakings" between one company and another. Such a transfer was said to have taken place if the incoming company took over tangible or intangible assets of the old contractor, its employees or its customers.

Unions fear the ruling means that where the new company takes over only a proportion of existing employees, it may now be possible to argue that the directive does not operate. Existing workers could then be taken over by the successful bidder on inferior terms and conditions. The out-going contractor who would have to foot redundancy bills for those left.