Saturday, 2 February 2019

Glasgow's Fight for Equal Pay



Glasgow's fight for equal pay took a big step forward yesterday with the publication of an official report to the Council's City Administration Committee which sets out the basis for bringing this long-running dispute to a long-overdue end.

Now not everything is signed, sealed and delivered as yet - there are still some fine details to resolve - but we're getting there step-by-step.

So watch this space for further news.

  

OFFICIAL

Glasgow City Council - City Administration Committee

Report by Director of Governance and Solicitor to the Council and Executive Director of Finance

Contact: Carole Forrest/Martin Booth Ext: 70467/73837

Purpose of Report:

To update members on the progress made in settling equal pay litigation and the strategy for funding the settlement and to seek approval of the settlement proposal.


Recommendations:

Committee is asked to:

note the report and progress made in settling equal pay litigation;

approve the Funding Strategy as set out in this report including the sale and leaseback of the properties listed in Appendix 1 in accordance with the draft terms set out in Appendix 2;

subject to securing the appropriate funding, approve the settlement proposal;

delegate authority to the Chief Executive and the Executive Director of Finance to conclude all legal and financial agreements associated with the terms of this report; and

note that a further update report will be brought back to the City Administration Committee once all legal and financial terms are concluded.


Ward No(s): Citywide: 
Local member(s) advised: Yes  No  consulted: Yes  No

OFFICIAL

Item 3 - 
7th February 2019

EQUAL PAY

1 Background

1.1 Since 2009, former and existing employees have presented equal pay claims against the Council and its ALEOs relating to the period from the implementation of our current WPBR pay and grading structure on 1 April 2006 to date.

1.2 The litigation of these claims was concerned with, firstly, the legitimacy of the pay protection arrangements which accompanied the introduction of WPBR and, secondly, whether WPBR met the statutory requirements of a valid job evaluation scheme.

1.3 Whilst the Council was initially successful at Employment Tribunal (“ET”), the lengthy litigation relating to both of these issues concluded in May and August 2017 respectively, with the Inner House of the Court of Session ruling that the pay protection arrangements were not justifiable and that the Council had not established that the WPBR was a valid job evaluation scheme.

1.4 The Inner House remitted all of the claims to the ET to be heard as equal value claims, which would determine whether, and if so to what extent, theCouncil’s WPBR pay and grading arrangements breached equal pay legislation.

1.5 On 17th January 2018, the City Administration Committee decided to not seek leave from the Supreme Court to appeal the decision of the Inner House of the Court of Session. See

http://www.glasgow.gov.uk/councillorsandcommittees/submissiondocuments. asp?submissionid=86705

1.6 Following initial meetings in December 2017, settlement negotiations have taken place throughout 2018 and into 2019 with representatives of Action4Equality, UNISON, GMB and, more recently, Unite (together “the Claimants‘ Representatives”) to progress settlement of outstanding claims.

2 The Settlement Proposal


2.1 The terms negotiated and agreed by the parties and now before Committee for approval, are for the settlement of all claims in which the Claimants’Representatives act for the period up to and including 31st March 2018 at an anticipated cost of £548m. This is dependent on the outcome of the Funding Strategy, which failing settlement will be for the period up to and including 31st March 2017, at an anticipated cost of £500m.

2.2 It is more cost effective for the Council to settle claims up to and including 31st March 2018, as this will extinguish a greater proportion of the liability and will mitigate the interest which would otherwise continue to accrue on the liability relating to financial year 2017/ 2018.

2.3 The settlement proposal is based on a methodology which allows the value of individual claims to be calculated. The proposal, therefore, does not specify a fixed total cost. The anticipated costs detailed above are based upon claims received by the Council up to 31 October 2018. Also included isan estimate of the costs associated with claims which each of the Claimants’Representatives have made since 31 October 2018, but which have not yet been received and processed by the Council. The final settlement figure may be higher or lower than the anticipated costs, following the application of the methodology.

2.4 The estimated costs represent the total cost to the Council, inclusive of employer contributions for national insurance and pensions.

2.5 For the purposes of this settlement proposal, the Claimants’ Representatives and the representatives for the Council have taken a consistent approach to the calculation of settlement offers irrespective of which of the Claimants’Representatives acts for any particular claimant.

2.6 If Committee approves the settlement proposal, payment of the settlement sum will be made following receipt of a properly executed settlement agreement on behalf of each claimant recipient. Payment will thereafter be made to each individual claimant, net of the deductions specified below. TheCouncil will also first deduct the fees due to the Claimants’ Representativesand will make this payment to the Claimants’ Representatives. It is anticipated that settlement payments will start to be paid from on or around June 2019.

2.7 The Council is negotiating a central settlement with HMRC to determine the rate or rates at which tax and national insurance contributions require to be deducted.

2.8 Where a claimant is (or was during the period of their claim) a member of the Local Government Pension Scheme (LGPS), pension contributions will be deducted from settlement payment.

2.9 The terms of the proposed offer are such that Council will be entitled to set off debts owed by any claimant to the Council against the settlement sum, for example Council Tax arrears.

3 Residual and Ongoing Liability

3.1 The settlement proposal will not wholly extinguish the Council’s equal payliability.

3.2 There will remain a period of liability for those claimants who remain in employment until the new pay and grading system is in place. Theproposals agreed with the Claimants’ Representatives envisage furthernegotiations to resolve such outstanding liabilities, commencing once the new pay and grading system is in place. Similarly, future claims and claims by those not represented by the Claimants’ Representatives are not included in the settlement proposal.

4 Funding Strategy

4.1 The funding strategy to meet the Council’s equal pay obligations is based onmaximising the value of the property assets of the Council.

4.2 City Property Glasgow Investments LLP, a wholly owned Council arms-length company (CPGI), was requested by the Council to consider what capital could be realised from the property assets of both CPGI and the Council. This included an analysis of releasing the equity value in CPGI’s commercialproperty portfolio and the option of sale and leaseback of certain Council operational properties.

4.3 The market has now been formally approached in relation to the re-financing of the existing CPGI loan with Barclays Bank Plc (Barclays). Due to changes in interest rates since the original loan in 2010 it is opportune to re-finance now as there are expected savings to be generated in servicing the current loan value including breakage costs. The value of the CPGI portfolio has now grown and there is an opportunity to increase the loan value. This will allow CPGI to extinguish its residual liability to Barclays and return the balance to the Council. The savings from re-financing the original loan will be off-set by the costs associated with servicing the increased loan. The final net costs will be subject to the agreed terms with the funder.

4.4 The market has also been approached in relation to the sale and leaseback of a number of Council properties whereby it is proposed that the Council will dispose of certain operational property assets to CPGI for a capital receipt. These assets will be acquired and funded through debt finance provided by the market. The final list of properties is set out in Appendix 1.

4.5 The Council will thereafter lease these assets back from CPGI at a commercial rent for a similar term as the loan finance. Draft lease terms in this regard are contained at Appendix 2. Independent advice has been taken in relation to the value of the properties, and the market value of the leases. The recurring lease costs will be provided for in the Council’s revenue budgetfor 2019/20.

4.6 Whilst this is the Council’s preferred approach funders can, as part of their submissions, suggest alternative arrangements and these will be assessed as part of the evaluation process.

4.7 Most of the properties noted at Appendix 1 are currently leased to Glasgow Life for a peppercorn rent and are governed by an overarching Property Agreement. The sale and leaseback proposal will not change the arrangements in place with Glasgow Life. The same situation applies to the building leased to the Scottish Event Campus (SEC). Business operations will continue as normal for both organisations and this will support the longer term sustainability of these properties.

Financial:

The recurring revenue costs associated with the funding strategy will be provided for in the 2019/20 Budget. Both the re-financing and sale and leaseback transactions will be subject to Best Value.

4.8 The Council and CPGI have engaged independent financial and legalconsultants throughout the process and CPGI’s Board has been briefed onthe proposals.

4.9 The re-financing return and sale and leaseback capital receipt are estimated to make a significant contribution to the costs of settling equal pay claims related to the current settlement options as agreed.

5 Current Position with Funding Proposals
5.1 CPGI is currently engaging with a number of funders. This will result in the selection of a preferred funder(s). Thereafter there will be a process of due diligence and evaluation before financial close is reached. The estimated timescales associated with the transactions noted above are a financial close with the preferred funder(s) for re-financing by end of April 2019 and May 2019 for sale and leaseback. Settlement payments cannot be made to claimants until after these dates and agreement with HMRC on the treatment of Tax and National Insurance contributions.

5.2 CPGI will enter into a number of contractual commitments with the funder(s) and the Council. The Council may also enter into contractual agreements with the funder(s) e.g. a Council guarantee. The exact terms around this are still subject to detailed negotiation but, if required, are expected to be in similar terms to guarantees granted in the past.

5.3 In addition to the proposals set out above, the Council has designed a new Property and Land Strategy, setting out its ambitious plans for the next 10 years. This will support the budget pressures associated with the ongoing delivery of essential services across the City including potential future equal pay liabilities.

6 Next Steps

6.1 Agreements with the preferred funder(s) will be progressed to conclusion by the Chief Executive and the Executive Director of Finance in line with theCouncil’s governance frameworks and financial and legal requirements as set out in this report.

6.2 A further report will be presented to the appropriate committee once all legal and financial terms are concluded.

7 Policy and Resource Implications 

Resource Implications:

Legal: 
Legal Services will ensure that all legal implications associated with the terms of this report are implemented

Personnel: 
No direct personnel implications, however, for aslong as WPBR continues as the Council’s payand grading model so also does an equal pay liability. CAC has approved the adoption of the SJC Job Evaluation Scheme and a further report dealing with the implementation of that scheme is currently being finalised for presentation to CAC. That new scheme will be implemented in April 2021.

Procurement: Funding is being procured by CPGI following appropriate procurement procedures.
Council Strategic Plan: 
The recommendations set out in this report meet the instruction of the Council to negotiate a settlement of equal pay claims

Equality and Socio- Economic Impacts:

Does the proposal support theCouncil’s Equality Outcomes 2017-22? 
Yes, settlement of the litigation relates directly to Outcome 2. Glasgow City Council females employees are supported to overcome any challenges that gender may present

What are the potential equality impacts as a result of this report?
There should be no direct operational impact as a result of refinancing. However this will be kept under review during the course of implementation.

Please highlight of the policy/proposal will help address socio-economic disadvantage.
Settlement of the litigation will have a positive financial impact for claimants, many of whom live in Glasgow.
Sustainability Impacts:

Environmental: 
None identified.

Social: None identified.

Economic: Possible positive impact on local economy when settlement sums received by claimants.

Common Good: 
It is considered that the subjects do not form part of the Council’s Common Good. The subjects are not on the list of common good assets. There are no conditions in the title that would suggest that the subjects were being acquired to be held as part of the common good.

Privacy and Data Protection impacts: 
No data protection impacts identified

8 Recommendations

Committee is asked to:

note the report and progress made in settling equal pay litigation;

approve the Funding Strategy as set out in this report including the sale and leaseback of the properties listed in Appendix 1 in accordance with the draft terms set out in Appendix 2;

subject to securing the appropriate funding, approve the settlement proposal;

delegate authority to the Chief Executive and the Executive Director of Finance to conclude all legal and financial agreements associated with the terms of this report; and

note that a further update report will be brought back to the City Administration Committee once all legal and financial terms are concluded.

List of Properties
Bellahouston Leisure Centre
City Halls
Emirates Arena
Glasgow Museums Resource Centre Glasgow Royal Concert Hall

Gorbals Leisure Centre Riverside Museum Scotstoun Leisure Centre SEC Armadillo

Tollcross International Swimming Centre Toryglen Football Centre

Appendix 1

Proposed Lease Terms


Landlord:
 
City Property Glasgow (Investments) LLP

Tenant: 
 Glasgow City Council

Tenant’s
Solicitor: 
To be confirmed

Subjects: 
Various

Lease Duration: 
To be confirmed

Rent: 
Rent will be paid annually at the rate detailed in the Lease Schedule, uprated in line with rent review mechanism (see below)

Rent review: 
The rent will be subject to review on the fifth anniversary of the date of entry.
With effect from the rent review date the annual rent payable shall be reviewed to the greater of: 1) the rent payable immediately prior to the review date and 2) the RPI linked rent based on the following calculation:-

A
B x Passing Rent


A= The monthly RPI Index number for the month preceding the rent review date


B= The monthly RPI Index number for the month preceding the date of entry or the preceding rent review date

The Passing Rent for the purposes of the calculation of the revised rent in respect of the review, as at ****************, will be the commencing rent documented within the lease of £*********** per annum
Date of Entry:To be confirmedUse The subjects shall be used as a ******(To be agreed)******* and for no other purpose without landlord’s Consent.

Alienation: 
No further assignation or subletting withoutLandlord’s consent. No charges or securities to begranted by the tenant over the property without consent of the landlord.

Alterations 
The Tenant undertakes not to make any alterations or additions to the Premises (whether of a structural or non-structural nature) without the prior written consent of the Landlord, nor without the necessary statutory consents, which the Tenant will require to exhibit to the Landlord prior to commencement of any works.

Repairs/ Maintenance 
At their own cost and expense, the tenants have to repair, keep in good and substantial repair and maintain the property (all to the reasonable satisfaction of the Landlord and to renew or rebuild whenever necessary the leased subjects and all additions thereto.

Insurance 
Landlord will insure the subjects and the Tenant will pay the premium on demand.

Dilapidations The tenant will indemnify the Landlord against any loss due the state of repair or condition of the property in relation to its condition at the end of the lease.