Whistleblowers: Nord Anglia in race row

Government ministers are likely to receive a rough ride from union leaders at the Trades Union Congress in Brighton next week over plans to increase the private sector's role in education and other public services.

All parties in the debate, which focuses on accountability, may be interested to read the findings of an employment appeal tribunal (EAT) judgment delivered this summer concerning a higher education subsidiary of Nord Anglia plc, one of the government's favourite private providers of education.

Nord Anglia, the first profit-making company to manage a state school, makes £1.5 million a year from publicly funded education services and is a favourite to cash in on the anticipated privatisation bonanza.

In May, the EAT upheld a 2000 tribunal judgment that found that a Nord Anglia subsidiary, the School of Finance and Management in London, discriminated racially against Srian Perera, a senior manager. The EAT agreed that the school dismissed Mr Perera in a "sham" disciplinary case after attempts to declare him redundant failed. His unfair dismissal was part of a deliberate clear-out of employees of Asian origin, instigated by new managers installed by Nord Anglia after it took over the school in June 1998.

The original tribunal found that Nord Anglia and SFM were liable, but the EAT found that, while Nord Anglia "encouraged, instigated and authorised" the unfair dismissal, it could not be liable as Mr Perera was employed not by Nord Anglia, but by SFM.

Nord Anglia's chief executive, the millionaire entrepreneur Kevin McNeany, was singled out for criticism in the original tribunal.

It said that Mr McNeany made remarks during the hearing that showed "a tendency to categorise individuals by reference to racial stereotypes". He also had "no concept" of equal opportunities methods.

Mr McNeany admitted to the tribunal that when he took over the school he was "very concerned that there were too many students of an Indian or similar background represented in the student cohort". The tribunal noted that the proportion of white staff almost doubled in just a few months after Nord Anglia took over.

In the appeal, Nord Anglia and SFM did not contest that there had been a sham disciplinary case, but argued that the tribunal had "jumped straight from their finding that the dismissal process had been carried out in bad faith, and the fact that Mr Perera is of Asian ethnic origin, to a conclusion that his dismissal must have amounted to racial discrimination".

They argued that the law required a comparison with someone of a different racial group and that the tribunal had failed to identify what the individuals against whom claims were lodged had done that amounted to unfavourable treatment.

In his appeal judgment, Mr Commissioner Howell QC, said: "It is implicit in the nature of the facts found, in effect a deliberate and otherwise unexplained clear-out of Asian employees... instituted... by the new management imposed on SFM by Nord Anglia..., that in being disciplined and dismissed in bad faith and having his job taken over by a white person, Mr Perera was treated 'less favourably' on any fair basis of comparison."

But despite Nord Anglia's role, SFM had to shoulder the liability. Commissioner Howell said: "Mr Perera's dismissal from SFM's employment, even though encouraged, instigated and authorised by the controlling company Nord Anglia, could not amount to an act of unlawful discrimination on the part of Nord Anglia, since he was at no time a person employed by it."

A Nord Anglia spokeswoman said: "Nord Anglia appealed the original decision and was removed as one of the respondents in the case. SFM was found responsible for the action. The case has been referred back to the original tribunal. In the meantime, SFM is pleased to announce that an amicable settlement has been concluded."