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In recent months Taylors have acted for a
number of clients who’ve experienced difficulties relating to the
Transfer of Undertakings (Protection of Employment) Regulations 2006
(“TUPE”) after deciding not to re-tender for a service contract or
after winning the tender for a service contract.
In cleaning, domiciliary care and the security sectors it is
common for many businesses to operate on the basis of being awarded,
sometimes through a tender process, various contracts from large
companies or local authorities
In April 2006 new TUPE regulations were introduced which
significantly widened the definition of a transfer to include
service provision changes to the extent that the awarding of
contracts to new suppliers is more likely than not going to be
caught by TUPE as a “transfer” meaning that those employees’
assigned to the contract will automatically be inherited by the
incoming contractor.
Relief
If you have lost the contract then this maybe welcome relief for you
as you can palm your employees off on the incoming contractor and
save thousands of pounds in redundancy pay. If you are the incoming
contractor you are invariably inheriting staff, at short notice,
without any specific information as to whom they are and without any
mechanism of control over the outgoing contractor as to employment
issues that may exist at the point of transfer.
You may inherit a member of staff who is in the middle of
disciplinary proceedings or on long term sickness. Incoming
employees employment terms maybe more favourable than your existing
employees. You maybe inheriting an operation which has been running
at a significant loss requiring an immediate restructure to turn
things around resulting in redundancies which you will have to pay
for but may not have budgeted for.
One of the questions in the “your questions answered” section of the
May 2008 Employ! employers newsletter is a typical issue
that arises upon the successful tender of a contract.
When you bid for a contract you may not necessarily have bargained,
or indeed budgeted for, some of the difficulties that arise from
TUPE applying.
Due Diligence
You need to treat the tender process similar to that of business
purchase carrying out due diligence checks on the employees to
ascertain the risks that may transfer across and identifying action
that may need to be taken once the transfer has taken place. Take
advice before being awarded the contract if possible.
It may be the case that part of the service previously provided by
an outgoing contractor is being split up by a local authority to be
awarded to more than one contractor. Where this occurs a detailed
analysis of each individual employees duties needs to be carried out
to determine which employees are assigned to the part of the
contract you are being awarded. Only those employees assigned to
your aspect of the contract will should transfer to you. Issues
inevitably arise where an employee’s duties are assigned across the
split of contracts.
Liability
It is also possible for an unscrupulous outgoing contractor to
simply fail to pay wages to the staff immediately before transfer.
The liability transfers to the incoming contractor who is left with
the difficult task of trying to recoup those monies. The outgoing
contractor has no contract with you and is not subject to warranties
or indemnities which you would ordinarily find in a business
transfer agreement to maintain control over the outgoing contractor.
The outgoing contractor is obliged to provide Employee Liability
Information to the incoming contractor. A failure to do so allows
the incoming contractor to bring a claim against the outgoing
contractor for a breach with an award of at least £500 per employee
to whom the failure relates to. This could be used to try and keep
the outgoing contractor on the straight and narrow.
If you are involved in the tender for a service contract or are
losing a service contract take legal advice at the earliest
opportunity to ensure that TUPE is applied correctly and where
possible you avoid redundancy payments or avoid inheriting staff you
shouldn’t be.
Copyright 2006 -
2010 Taylors Solicitors
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Tendering
for Service Contracts –TUPE
nightmare!