TUPE and change of customer contract advice for food and drink client

We acted for a longstanding client in relation to the loss of a contract with a major customer. The client imports, grows and packs fruits for major supermarkets and wholesalers. It was unsuccessful in its tender to retain a key customer contract, which was therefore due to be re-contracted to another provider.

The change of contracts amounted to a transfer under the TUPE Regulations, such that our client’s employees who were assigned to that contract were eligible to have their employment transferred to the new provider on their existing terms of employment.

The new provider considered that it did not need all of these employees to service the contract and that some of their terms of employment were above market terms.

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. Under the TUPE Regulations 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.

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 customer and thus within the scope of the TUPE transfer.  And following negotiations, with the benefit of our advice, our client was able to reach an agreement that ensured a smooth transfer of its employees to the new provider without any redundancy costs or dismissal liabilities being incurred by it.

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.