Delegates hear third party contract liability warning

Following recent changes to the Transfer of Undertakings (Protection of Employment) Regulations  (TUPE), any company taking on a new contract providing services such as third party logistics or warehousing may now find that the previous contractors workforce has been transferred to them, leaving them responsible for redundancy payments and potentially liable for unfair dismissal claims.  In addition, there may be a substantial liability to employees to compensate them for failure to consult in advance of the change of contractor.  For the unwary, these liabilities could appear out of the blue, as the rules apply whether or not the company intends to take on the previous contractors staff, or indeed has any contact with or knowledge of the previous contractor.

That was the message delivered at the United Kingdom Warehousing Associations (UKWA) recent Annual Conference by Simon Edwards, a senior partner in the legal firm Aaron and Partners.

For third party warehousing companies the problem is obvious,  Simon Edwards told conference delegates. Any company that wins a contract to provide warehousing services faces inheriting staff who might be based a long way away. If these people do not want to move nearer to their new employers facility they will have to be made redundant. As a result, it is likely that many third party logistics services and warehousing companies will have to incorporate the costs of dealing with inherited staff when tendering for a new contract.

Roger Williams, Director General of UKWA, commented: We are advising our members to gather as much information as possible about how the contract they are tendering for has been previously  carried out and how the current contractor organises his resources. In particular, it is important to ascertain whether the contractor has used, or is using, a group of workers whose primary task is to carry out the contract.  If there is such a group, it is likely that the employees in it and liabilities relating to them will be transferred to the company taking on the contract.  If there is no such group, or it is not primarily working for the client, then probably the employees will not be transferred.  This is a crucial judgement with expensive consequences if that judgement is wrong; so unless the position is clear one way or the other, companies operating in the sector will need expert legal and or human resources advice.

The United Kingdom Warehousing Associations Annual Conference 2006 was held at The Manor Hotel, Meriden (near Coventry) on April 27, 2006. Other speakers included: John Mee, Managing Director of The Supply Chain Centre of Excellence; Alexa Cotterell, Director and Head of Birmingham Building Consultancy, Lambert Smith Hampton; Kristine Beuret, Director of Social Research Associates;  Dr Mick Jackson from Skills for Logistics and Stephen Vickers, a consultant who specialises in helping SMEs in the logistics sector.