UK: Outsourcing Your Employment Liabilities – Recent Developments

Last Updated: 29 November 2017
Article by Purvis Ghani, Dan Holland, David Berry and Beth Hale

The Independent Workers’ Union of Great Britain ("IWGB") has brought a case before the Central Arbitration Committee ("CAC") against the University of London ("UoL") on behalf of certain support staff working at the UoL. What is significant about this case is that the support staff are not employed by UoL, but rather, by UoL's outsourced service provider. In what has been described as a "landmark test case" the IWGB are seeking the right to agree their pay and various other contractual issues directly with UoL rather than their employer, the outsourced service provider.

Despite the UoL stating that it has no direct responsibility for these support staff, the IWGB argue that these workers have a right to bargain with UoL over pay and working conditions and denying this would breach Article 11 of the European Convention on Human Rights, regarding their rights to join trade unions and have the unions protect their interests.

Companies often see huge benefits in outsourcing certain services, resulting in over 3 million outsourced workers in the UK. Some of these benefits include:

  • Procuring a greater pool of skilled resource.
  • Access to specialist vendors.
  • Focusing on core business process rather than supporting ones.
  • Sharing of risk regarding poor performance of service.
  • Flexible staffing.
  • Improved service levels and management reporting.
  • Reducing overhead costs.
  • Should the IWGB be successful, it could fundamentally change the rights of outsourced workers and significantly undermine some of the key benefits for businesses in outsourcing certain functions.

Can the Customer and Service Provider be joint employers?

This is the latest in a series of claims in which courts and tribunals have been asked to rule on the employment status of individuals working in the so-called “gig economy”. The decision of the CAC in this case will directly impact only on union recognition and will not be binding on an employment tribunal. However, if the IWGB is successful it would certainly open the door for employment status claims to be brought by individual outsourced workers against the end user of their services.

Similar claims have been brought previously by agency workers claiming they are, in fact, employees of the end user client. Such claims have had mixed success and tribunals have been reluctant to find an employment relationship where there is an employment contract in place between the agency and the agency worker. The IWGB is seeking to argue in this case that the end user and the outsourced providers are joint employers – a finding that, in the absence of an express contract to that effect, would only be made in an employment status case where a tribunal found that it was “necessary” to imply such a relationship.

Such a decision would be surprising, but certainly not out of the question in an environment in which the courts appear keen to protect workers’ rights as the gig economy grows.

Protect yourself

Typically an outsourcing contract does not necessarily envisage the situation in this case arising. However, there are some provisions you should include to protect against employment liabilities in an outsourcing contract. These include:

  • Employment warranties and indemnities in relation to employment status claims or allegations of 'joint employment' brought by any individuals engaged by the service provider or any subcontractors.
  • Clearly setting out the roles and responsibilities of the service provider regarding the day to day management of its staff e.g. pay, conditions and performance. The service provider should actively manage its staff and remove this responsibility for the customer. The customer should not treat such staff in the same way as its own staff.
  • Ensuring that the customer's staff are clear on the levels of responsibility and control that they should exercise over the service provider's staff on a day to day basis. Issues of supervision and control of the service provider's staff should be funnelled through a select number of key individuals within the service provider who can in turn pass on any instructions to staff assigned to the contract.
  • Include commitments from the outsourced service provider to comply with minimum employment standards (e.g. National Living Wage and also modern slavery commitments in line with the Modern Slavery Act 2015) and other requirements which would be regarded as best practice.
  • The Customer should also consider whether it should help to fund the cost of the service provider providing more generous terms and conditions for staff assigned to the contract as a means of preventing discontent and claims of joint employment. This is certainly a sensitive issue in the outsourcing of some functions such as facilities management, catering, cleaning and security.

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