Seven deadly sins

first_imgAhost of legislation kicks in when an outsourcing deal is under way.  Learn from the most common mistakes, to makesure that everyone – and everything – is covered. Helen jerry reportsOutsourcing– which involves the transfer of employees between a customer and supplier –presents complex legal issues. When a business unit changes hands a host oflegislative issues relating to employment rights arise. But practical actionscan prevent or overcome a number of nightmare situations.Theterms and conditions of employment for outsourced staff in the UK are protectedby the Transfer of Undertaking (Protection of Employment) Regulations (TUPE),which are derived from European legislation under the Acquired Rights Directive(ARD). TheARD places unexpected restrictions on employers when outsourcing staff andprevents the outsourcing of workforces without employers taking proper steps toinform and consult with staff about the expected impact.–Mixing business transfers with business downsizing and redundanciesInsome instances, economics may require an employer to undertake an outsourcingproject and cut jobs at the same time. Business transfers of employees andredundancies can clash. To avoid the clash, employers needs to be clear on thefacts behind its strategy. Will the downsizing and business transfer besimultaneous? If so, are the two related? If there is a relationship, then theemployer may face claims because job losses connected with the TUPE transfermay automatically be unfair. Consequently, the employer faces an expensive andmessy situation – and a public relations crisis.Ifthe employer can show the two issues are not inherently related, however, itmay have a statutory defence to the claims, an ETO (economic, technical ororganisational) reason entailing changes in the workforce, which should defusethe crisis.Toshow the transfer and redundancies are unrelated, a paper trail, proving theETO, is important. But to avoid the necessity of proving the ETO at allrequires effective communication with the workforce. Properly informed staffare less motivated to make claims.Ideally,communication begins before the formal consultation processes. An employer haslegal duties to inform and consult under TUPE and in mass redundancysituations. This can mean managing several streams of parallel and possibleoverlapping consultation (under TUPE, collective redundancy legislation and onindividual redundancies) at the same time. Thehuman resources department will need to ensure employee representatives are inplace, that the right people are consulted on the right matters, and that theaims (commercial and legal) of each consultation are borne in mind throughout.Early, transparent communication will alleviate the stress of this. –Failing to spot the impact of the deal’s employee dimension on timeframesAnemployer may be wholly unaware that the TUPE regulations require consultationwith employees – and that these duties must be factored into the outsourcingtimetable. Early liaison between HR and the commercial team is essential sothat the facts of the outsourcing can be established and the risks of failureto inform and consult staff flagged. Furthermore,HR’s early involvement enables that team to understand the scope of the dealand the headcount involved as well as identifying the necessity to consult, ifapplicable. Any changes to staff conditions or benefits mean consultation mustgo ahead.Theactual impact on timing will depend on all the facts. If there is asimultaneous downsizing exercise, and multiple jurisdictions are involved,consultation on the outsourcing may involve a period of up to a year or more insome European countries with criminal, as well as civil, penalties for failureto comply with the law. For unprepared employers, this can mean an unacceptablelevel of delay in deal timeframes and frequently “difficult” European countriesare removed from scope at short notice where insufficient planning has beenprovided for. Commercially, this is usually an undesirable outcome.–Failing to look at the end from the beginningAnoutsourcing company must think now about what will happen at the end of itsoutsourcing contract. When the contract is about to expire, and the servicesare offered for tender to new suppliers, the customer must identify theprovisions, if any, which will assist a potential retransfer either backin-house or on to a new supplier. Withoutthe right contractual framework, the employer may be unable to identifyaccurately how many people will be transferring, what their terms andconditions are and also what potential claims are lurking that will transferwith the staff; under TUPE, the liability for most claims transfers to the newemployer. This onus of responsibility can be amended by tight contractualdrafting. Therefore, what liabilities the parties are prepared to accept, bothat the beginning and end of a contract, must be established when the contractis initially drafted. Specific termination assistance should be included, suchas a requirement for the provision of: –Employee information–A hands-off period for key, and potentially transferring, staff–Transfer of key individuals who may not be covered by TUPE –Indemnities for apportionment of risk–Obligations impacting successor suppliers.Thesupplier will only be prepared to discuss these terms at the beginning of acontract, rather than at the end when it risks losing out to a competitor.–Ignoring third-party employeesATUPE outsourcing may unexpectedly involve the movement of staff in addition tothe obvious dedicated workforce. To avoid difficulties with both claims fromunidentified additional transferring employees, as well as the difficultiesposed by the non-transfer of key individuals, an employer should carefullyidentify as soon as possible who is in scope and who they work for – andwhether they are likely to transfer under TUPE. Foursets of people to consider are: the employer’s own employees; those who arededicated to a service that has already been outsourced; any subcontractoremployees; and individual contractors. The complications of failing to identifythe actual transferring workforce are many.Forinstance, thought needs to be given as to which party picks up the costs offailing to inform and consult with any additional employees who transfer.Further, in Europe, subcontractor staff do not normally transfer across underthe Acquired Rights Directive. However, if the subcontract under which theywork allows the customer control over their day-to-day working then they mayclaim co-employment by the customer and, as an employee, they could claim theytransfer across to the customer’s supplier. And so on.Toiron out any co-employment issues that may arise in Europe, local legal adviceshould be taken early on. –Ignoring a European Works CouncilInthe rush to contract-out services, a company may misunderstand the role of itsWorks Council. Lawyers will normally use this term to refer to the EuropeanWorks Councils set up under European legislation, but in many organisations theterm is actually commonly used to refer to local employee representative fora. Theconfusion becomes a problem when a company believes it is complying with itsduties to consult with its Works Council, but it is actually talking only tolocal employee representatives in each country. Both sorts of works councilswill need to be involved in consultation, both in accordance with theirconstitutions.–Failure to understand the impact of data protection lawThereis a prevalent misconception about how much information can be shared with apotential supplier at each stage before completion of an outsourcing. If anemployer gives away too much specific personal information (such as salary)during due diligence without express consent of an individual, it is likely tobe in breach of the European Data Protection Directive. To avoid this, ensurepersonnel information is anonymous and relates to bands of employees. Becertain that detailed information cannot be specifically linked to any oneperson. Immediately before  completion,more specific information can be shared, for instance, to facilitate seamlesspayroll provision.–Failing to consider the effects of an outsourcing that covers more than onecountryWhenan outsourcing covers more than one country it may be complicated by mixingvarious legislative frameworks together. Problems arise with an agreement thathas been drafted with the legislation of one country in mind but which is thenrolled-out and applied to a number of countries. Wiseoutsourcing companies will factor in the time and cost of getting local adviceabout whether the contract terms are lawful or enforceable in each specificjurisdiction. It is vital to make any necessary local variation agreements toensure contractual certainty. This process can be complicated by differences ofopinion between local lawyers taking a purist approach and in-house humanresources departments that have local understandings and agreements with staff.Factorin the time necessary to get the necessary advice and to ensure the advicereceived is consistent and accepted locally. If not, multi-million eurotransactions may be held up at the last minute for lack of agreement in ajurisdiction with only a handful of affected staff.ConclusionTosummarise, the common pitfalls encountered in the people aspects of anoutsourcing deal can all be minimised in most cases by: early fact-finding; arealistic approach to the timing needed to ensure compliance with the statutoryregime; and an open, and open-minded, approach to communication with staff. Affectedemployees are real people with real jobs – and while they rarely have theopportunity to stop a company doing what it wants, they will have the power tomake the process as easy – or as painful – as the company makes it for them.HelenJerry is head of employment law at Shaw Pittman UK Related posts:No related photos. Seven deadly sinsOn 1 Nov 2003 in Personnel Today Comments are closed. Previous Article Next Articlelast_img

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