One of the country’s largest trade unions discriminated against female members while negotiating a pay deal with their employer, the Court of Appeal said today in a ruling that could cost it and other unions millions of pounds.

The landmark case will also have ramifications for thousands of local authority workers.

The court ruled that the GMB union discriminated against female workers at Middlesbrough Council while negotiating a new pay deal. The women, who claimed they had been “sold down the river” by their union, are now entitled to compensation that will be assessed at a separate hearing at an employment tribunal.

At least 40 similar group actions have been launched on the same issue.

Today’s decision follows two earlier verdicts on the controversial case, known as GMB v Allen. An employment tribunal originally ruled that the GMB had discriminated against the women.

That decision was later overturned at the Employment Appeal Tribunal leading to the Court of Appeal hearing that has now restored the original verdict.

The GMB was refused permission to launch a further appeal, although it said it plans to make an application directly to the House of Lords.

The case concerned equal pay negotiations between male and female GMB members who worked for Middlesbrough Council.

The negotiations aimed to secure a one-off compensation payment for women, who had historically received lower pay than men in the same position, while simultaneously fixing equal pay rates for all workers in the future.

Unions say the negotiations are fraught with difficulties because they must balance winning compensation for past wrongs while also securing future pay from a finite pot of local authority money.

But three appeal judges today endorsed the original employment tribunal ruling that said in focussing its attention on future pay at the expense of historic compensation, the GMB had “rushed headlong” into an “ill-considered” and discriminatory deal with Middlesbrough council.

The deal indirectly discriminated against women because although it was negotiated on behalf of all workers, women were much more likely to have suffered lower pay in the past and so they were much more affected by the decision not to push for historic compensation.

Although the women did receive some compensation, the court was told it was around a quarter of the amount they could have secured if the union had taken a stronger stance. The employment tribunal criticised the GMB for “deliberately omitting” to advise its own “relatively unsophisticated” members that they were not getting the best deal.

James Baker, an employment expert at Macfarlanes, called the decision "extremely damning, and potentially very expensive, for the GMB.

"The Court of Appeal has confirmed that the GMB is guilty of discriminating against those female members and we can expect similar pay deals to come under the judicial microscope as a result."

According to Daniel Barnett, an employment barrister at 1 Temple Gardens, it is thought that the GMB will have to compensate around 4,000 women as a result of this decision while Unison, another trade union, is facing similar claims.

Mark Irvine, a spokesman for Action 4 Equality, a group run by Stefan Cross solicitors, who acted for the Middlesbrough workers, said: “We are being inundated with enquiries and expect a huge influx of cases, as word spreads and union members realise that they can seek redress in the courts."

However, others warned that the ruling could damage unions’ ability to operate in the best interests of their membership.

Jon Taylor, head of employment at emw law, said that the need to strike a balance between all of their members puts unions in a extremely difficult situation. If they can be held to account and forced to pay compensation for their recommendations on pay deals, they may simply stop advising members altogether, he added.

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