Five hundred sacked dinner ladies face a further wait for redundancy payments after a former school meals catering firm was forced to pick up the £300,000 bill.

An employment tribunal ruled CastleView was responsible for making the payout to their former staff.

The company argued West Sussex County Council and Gardner Merchant, now called Sodexho, the company that took over the school meals contract, should pay instead.

In the report on the eight-day tribunal, it was ruled CastleView had lost the contract so was responsible for compensating its staff.

Bosses at CastleView were today holding an emergency meeting to discuss the result. They are considering taking the case to the European Court of Justice.

The report added a European law giving protection to jobs when a contract was taken over did not apply because the company was at fault for losing the contract.

CastleView said it lost the contract because the county council changed its policy from providing hot meals for primary schools to cold ones instead which, represented a change in service.

The council cut the hot meals service in a bid to save £500,000 a year last September.

The new contract was awarded for cold lunch boxes.

Councillors defended the move by saying the number of children having a hot meal had slumped.

Former dinner lady Michelle Lewis, from Littlehampton, said:"I lost my job a year ago through no fault of my own and I am still waiting to be compensated for that.

"I need the money and I'm sure everyone else who was made redundant feels the same. We are having to cope with going on the dole or finding new jobs and all they can do is fight over who pays the money. It is horrible."

The Public Contractors Association said on behalf of CastleView yesterday that it was disappointed and surprised at the tribunal's decision and intended to contact local government minister Hilary Armstrong to discuss the result.

PCA spokesman Phil Cooper said: "The ramifications of this decision threaten to blow the concept of employee protection out of the water.

"We are facing a situation where any contractor taking on a service faces a huge redundancy liability if the service changes at the time of renewal."

The tribunal report was critical of the county's handling of the situation and said it had not considered the matter properly, leading to the problems with the contracts and expensive legal costs.

Mr Cooper said the association would do everything it could to help CastleView.

He said: "At no point in the report has the tribunal criticised CastleView. I can understand the distress the former employees are going through and we are sorry for the continued delay.

"If we give in now the far reaching implications for other companies throughout the country are not good."

County secretary Mike Kendall said: "We are very pleased the county's argument has been accepted and that the tribunal has ruled in our favour.

"We will be pressing CastleView to pay the redundancy money to the catering assistants as quickly as possible."

Nobody from Sodexho was available for comment last night.