SPCs after McTear: how should contracts be split?

Last week we reported on the outsourcing case of McTear and we are coming back to it for more reaction. This is the decision of the Scottish Employment Appeal Tribunal that, following a service provision change, the contract of a transferring worker can be split between multiple transferees. It means an employee can go from working full time for one employer to working part time for two or more, so a very different approach in SPC cases to what we have been used to. 

In our programme last week - ‘McTear: more questions than answers for UK outsourcing’  - Gill Ross explained how the approach of multiple transferees is one the courts have previously recognised for business sales – following the ECJ’s decision in Govaerts – but this is the first time it has been applied to SPCs. The decision is binding on tribunals in England, Wales and Scotland and it is already having an impact in outsourcing. The EAT sent the case back to the Glasgow Employment Tribunal to decide who is liable for what – because one of the great unknowns is how the ‘Goaverts approach’ will be applied in practice. Gill Scott again:

Gill Ross: “This is one of the things we're hoping that the employment tribunal decision will help to clarify, you know, practically how does this decision work for employees because the point it appears to protect employees’ rights and their contractual terms. Where they're being split between two or three different transferee employers you're going to have to look at aspects like their hours of work, which days do they work for which employer, how do they work out their holidays, their sick pay? There’s just going to be a variety of complications that they wouldn't have if they just transferred to one employer in a normal TUPE scenario. The other issue is in things like confidentiality. If they are working for two competitors, how to ensure they're not breaching their confidential information obligations to each employer. So, there are so many different practical issues with this decision coming out and the impact on of employees and employers.”

Joe Glavina: “Is there any liability remaining with the transferor in this situation?”

Gill Ross: “There shouldn't be. The way the decision is worded, the employees would either transfer on a split employment basis or the termination costs of redundancy liability would transfer over to the transferees in various portions depending on what volume of the contract they take on, or how the contract is split up. It would only really be where the commercial agreement sitting behind the contract would set out that the transferor would retain liability in that situation that they would maintain some level of responsibility for termination costs. From practical experience, some employers are at the moment, rather than letting employees face the uncertainty of split employment, or pursuing a number of different transferee employers for redundancy costs, be it from a moral perspective, deciding they are our employees and we don’t want to leave them with this uncertainty and we will cover their redundancy and notice costs.”

Joe Glavina: “Going back to the issue of splitting time and salaries, what happens if the transferee employers don’t agree on what should happen?”

Gill Ross: “That’s going to be a really difficult situation because the employee may have suggestions, the employers may have suggestions, but, practically, I guess the different employers could try and reach some agreement but ultimately, if they can't, then you could be left with a situation where a ‘some other substantial reason’ dismissal might result, we can’t work out a working arrangement that works for all the parties, then what do you do in that situation? If it's not possible to structure it for the employers and the employee in a way that works then what can you do? Regrettably, employees could face termination of employment and that situation.”

Joe Glavina: “Last question Gill. Often the transferees will be competitors if it’s a competitive tendering process. That must complicate things?”

Gill Ross: “Yes that definitely complicates matters because quite often with these contracts with, maybe, a framework agreement setting at the top and different contracts where they are bidding for each piece of work, and if you've got an employee who is a project manager, for example, who is split 50% between one competitor and 50% between another competitor then of course they're going to have knowledge of what the other party is bidding on a particular contract. So, it leaves many undesirable issues and outcomes for competing companies, for the employees, in terms of what they can say and what they can't say. So, really difficult all around.”

Gill at some length about this case last week in our programme called ‘McTear: more questions than answers for UK outsourcing’. That is available now for viewing from the Outlaw website.

LINKS
- Link to EAT’s decision in McTear Contracts Ltd v Bennett and others