Negotiating and Managing Contracts for Security Services – Part Four

Employees

TUPE (as defined below) is a valuable part of almost every security contract as the seller will take on any employees previously engaged in the buyer’s security operation. Therefore, the seller will be careful to take steps to minimise its exposure to claims from the TUPE’d employees. Likewise, the buyer will want to remove his liability, especially where the outgoing provider has been at fault.

The Transfer of Undertakings (Protection of Employment) Regulations 2006 (known to everyone as “TUPE”) have significant effect in pretty well every security contract and they are particularly significant with manned guarding contracts.  The effect of TUPE is that any employee wholly engaged in the security operation for the buyer, whether employed by the buyer direct or employed by the buyer’s then current security service provider, will automatically transfer to be employed by an incoming provider on the date that the contract takes effect, resulting in a ‘TUPE transfer’.
The effect of a TUPE transfer in law is that the new employer, our seller for the purposes of this article, becomes liable for any claims which the transferring employee may have against his old employer, and will also be responsible for continuing those employees’ terms of employment, as to salary, benefits, hours and overtime.
Against this background it is good practice for a company outsourcing its security services to require the provider to agree a number of special terms relating to his employees including:

a)    an obligation on the provider to supply full and accurate employment information to the incoming provider;

b)    not within the six months before termination of his contract change the terms of employment of his relevant employees, or remove those employees from their tasks without the agreement of the buyer.  This is to avoid the outgoing provider creating a poison pill for an incoming provider, the seller;

c)    an indemnity against any loss or claim suffered by the company or an incoming provider from a transferring employee in respect of events occurring before the transfer.

These provisions protect the buyer as he negotiates a new contract with a seller in the following ways:

a)    if the seller asks for a price adjustment in the event that the employment information is wrong, the buyer can assign to the seller his right of recourse against the outgoing provider; and

b)    the buyer will not confront difficulties in persuading the seller to take on the contract as a result of the outgoing provider changing employment terms or removing good employees from the contract; and

c)    the buyer will be able to pass on to the seller the right of indemnity from the outgoing provider in respect of claims from transferring employees deriving from events before the transfer.

The buyer and seller should have no difficulty in agreeing a mutual no poaching of the employees provision.

Finally, the buyer should not expect to have the right unilaterally and without justification requiring the seller to remove an employee from the buyer’s contract: this could leave the seller exposed to a claim by that employee for discrimination or constructive unfair dismissal.  The buyer’s right to require removal should be qualified that it does not cause the seller to do anything which is unlawful.  This enables the seller to carry out a fair procedure under the employment legislation to achieve the buyer’s requirement.

If you would like any firther information, please contact John Spratt, Chairman and Head of Company Commercial, on 01295 204112 or email jspratt@se-solicitors.co.uk.

*Disclaimer: While everything has been done to ensure the accuracy of the contents of this article, it is a general guide only. It is not comprehensive and does not constitute legal advice. Specific legal advice should be sought in relation to the particular facts of a given situation.*