Contracting Out Services
It is becoming increasingly unusual for businesses to directly employ staff to work in the areas of cleaning, catering and security operations. It is more common for businesses to contract out these ancillary services to specialist companies. One of the major advantages is that a business does not then directly employ the cleaners, catering staff and security guards and so is generally not at risk of any employment law claims from these workers.
The employment law issue that arises is in relation to the treatment of cleaners, catering staff and security guards at the point where the contract changes hands. The legal question is whether the Transfer Regulations 2006 apply to the contracting out of these services. These regulations were originally introduced in 1981 and subsequently amended to deal with the situation where one business takes over another business and essentially provide that all the existing employees must be retained on their existing terms and conditions.
For the past 15 years, there has been a complex and unhelpful legal controversy about whether the Transfer Regulations apply to the contracting out of cleaning, catering and security guard operations. As a general rule, the regulations will only apply if the operation retains its identity after the change of contractors but this may not be sufficient. The European Court of Justice have suggested that the regulations will only apply if there is some kind of transfer of assets or if a major part of the workforce are taken on by the new contractor. To add to the complexity, the courts have suggested that, if the reason for the new contractor not taking on staff is to avoid the Transfer Regulations, then this might be a factor that goes towards showing a transfer!
The most recent test case has suggested that catering operations will often be treated as transfers and that security guard operations may be if a significant amount of equipment is involved. The position remains particularly uncertain in relation to cleaning operations where there are often no assets to be transferred and the activity is labour intensive.
If a new contractor fails to take on one of the existing employees of the previous contractor, then that employee will have a claim for automatic unfair dismissal provided that they have been employed by the previous contractor for at least one year. To some extent, this is not a problem for the main business itself since the claim will be against the new contractor. However, it has a knock on effect on businesses since the reason for wanting to change the contractor will often be dissatisfaction with the employees and the regulations will require the new contractor to take on the same employees!
Naturally, there are social policy advantages and disadvantages of the Transfer Regulations applying to contracting out services. However, what is very important is that the law is straightforward and clear and this is certainly not the case.
October 2008
This article gives a general overview only and the legal position at the time of writing this article. It cannot be relied upon in any particular case. Specific legal advice must always be considered to include consideration as to whether the legal position contained in this article has changed since going to print. For further information and advice, please contact Paul Archer or Lauren Harkin on 01793 527141 or alternatively by email on Paul.Archer@lemon-co.co.uk or Lauren.Harkin@lemon-co.co.uk.
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<p><strong><a href="http://www.lemon-co.co.uk/article_contracting-out-services.php">Contracting Out Services</a></strong><br />
It is becoming increasingly unusual for businesses to directly employ staff to work in the areas of cleaning, catering and security operations. It is more common for businesses to contract out these ancillary services to specialist companies...</p>
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