Acting for a client in relation to the loss of a contract with a major supermarket

We acted for a longstanding client in relation to the loss of a contract with a major supermarket. The client imports, grows and packs fruits for major supermarkets and wholesalers. One of its supermarket contracts was to be terminated early by the supermarket and re-contracted to another provider.

We advised our client on the compensation that was proposed to be paid to it in respect of the early termination of the contract and, unusually, was to be paid by the new provider.
As part of this negotiation we also advised our client in respect of the transfer of a number of its employees to the new provider under the transfer of undertakings regulations (TUPE).

The new provider sought to push workforce costs and liabilities onto our client. With the benefit of our advice, the client was able to push back on these, including that:

1. The new provider had to take on our client’s transferring employees according to their existing terms of employment, including where the new provider considered these to be above market rate
2. Any proposed redundancies on the basis that the new provider thought the contract was overstaffed would be a matter for the new provider, to take place after the transfer of the contract. Our client resisted pressure for it to carry out redundancies before the transfer, which would have exposed it to liability for unfair dismissal claims
3. The cost of those redundancies, such as notice payments and redundancy payments, were a matter for the incoming provider, and
4. In response to challenge from the new provider, we assisted our client to demonstrate that the employees due to transfer were wholly assigned to the contract with this supermarket and thus within the scope of the TUPE transfer.

Following negotiations and with the benefit of our advice, our client was able to reach an agreement that meant it was adequately compensated for the early termination of the contract and ensured a smooth transfer of employees to the new provider.

If your business is involved in any side of a re-tendering, outsourcing or insourcing of services situation, we recommend taking early at an early stage.  We can help you to understand your rights and obligations and so can approach negotiations from a well informed position.