The row about who should pay off Atos Origin's staff after their
work for Lucent was transferred to Compaq could lead to
clarification of how Tupe law applies to outsourcing. Bill Goodwin
reports
A row between IT suppliers Compaq and Atos Origin over the fate of
60 desktop and network support staff has highlighted the legal
uncertainty surrounding the regulations that govern the transfer of
staff from one company to another during IT outsourcing
contracts.
Introduced two decades ago, the Transfer of Undertakings
(Protection of Employment) - or Tupe - regulations were designed to
protect employees' jobs, pay and conditions, when organisations
sold or outsourced parts of their business operations to other
companies or contracting firms.
A European law, known as the Applied Rights Directive, has ensured
that similar rights are available to workers across Europe.
Throughout the 1980s test cases in the UK and Europe built up a
body of case law which has reinforced employers' obligation to
staff when business units change hands.
But more recently, the European Court of Justice has shown a shift
in emphasis away from employees and in favour of employers. This
culminated in a 1997 case which ruled that, if employees, for
whatever reason, do not actually transfer to the new organisation,
then their Tupe rights do not apply.
The result, said Julian Hemming, employment partner at London law
firm Osborne Clarke, is two conflicting lines of case law and a
great deal of confusion.
One argues that Tupe rules apply whether or not employees actually
transfer to a second organisation. This would stop them being left
in limbo over a disputed outsourcing deal such as the current
disagreement between Lucent, Compaq and Atos Origin. The other
suggests that employees do not have Tupe rights, if their transfer
does not take place.
This murky scenario is the backdrop for the row between Atos Origin
and Compaq. Both companies were chosen by telecoms supplier Lucent
to provide an outsourced desktop and network support service in
July 2000.
With the collapse of the telecoms market this year and after some
heavy shedding of staff, Lucent decided to end its contract with
Atos Origin and rely solely on Compaq for support services.
Atos Origin assumed that under the Tupe rules the 60 staff, half of
whom are in the UK, that it employed to meet the Lucent contract
would automatically transfer to Compaq and retain their terms and
conditions. But Compaq thought otherwise.
Paul Bingham, managing director of Atos Origin, said, "The first
group of staff who were affected by this left our organisation on
31 July - five employees. We notified Compaq in the UK that these
staff would be reporting for duty to them the following working
day. But Compaq has not accepted responsibility for any of
them."
Compaq set out its case in an e-mail to the Atos staff who were
affected. It argued that the transfer falls outside Tupe
regulations because:
- No assets will be transferred from Atos to Compaq
- No employees need to be transferred from Atos to Compaq to
provide the services to Lucent
- Compaq would use a different operational model to provide the
services, including providing helpdesk and network support from a
remote call centre, rather than locally
- The firm will need fewer resources; it will provide services in
fewer countries to a lower volume of users.
Compaq's publicly-stated reasons have failed to impress employment
experts contacted by Computer Weekly. However, Compaq's claim that
no assets have been transferred, and that helpdesk services will be
provided from a central call centre, rather than locally, have
little relevance, said Robert Morgan, chairman of Morgan Chambers,
an outsourcing advisory firm.
Ultimately, Compaq's position under the Tupe regulations will
depend on just how different the services it provides to Lucent
really are, he said.
"In my opinion, Atos is right and Compaq is incorrect. If the
service continues in the same operational way, Compaq should take
the staff. Lucent would want that for its business continuity, so
that it doesn't lose people who it is used to dealing with and who
understand the system."
Valmai Adams, employment partner at Nabarro Nathanson, agreed.
"Compaq will have to argue that the services provided are so
different that you can't say there was any similarity. Atos
employees were employed to X and Compaq will do Y, therefore Tupe
does not apply," she said.
Compaq could argue that it needs fewer support staff for technical,
economic or organisational reasons. But under Tupe, the company
would still be obliged to hire the Atos staff before offering them
redundancy.
The dispute has left 60 IT staff, including 30 in the UK, most of
rest in Germany, and others in the Middle East and Africa, in a
state of limbo, effectively employed by no one, with no work and no
redundancy payments.
"Both firms are saying that they are definitely employed by the
other," said Graham Briggs, national organiser of the Association
of Management and Professional Staffs. "If they go down to the
benefit office and they are asked whether they are unemployed how
can they answer?"
The union plans to bring an the case to an employment tribunal
against Lucent, Atos Origin and Compaq to force the issue. "We will
take it to the European Court of Justice if necessary," he
said.
The case is likely to become an important test case, said Adams.
"Having those arguments aired before the employment appeal tribunal
or even the European courts would be useful, as this is an area
where there is uncertainty."
Just how far the case will go is open to debate. Compaq or Atos,
for example, may decide that it is simpler and cheaper to pay
redundancy costs than to fight.
Some clarification in the Tupe laws could, however come later this
year, when the Department of Trade & Industry publishes the
results of consultation on Tupe reform. Meanwhile, any IT
department looking to outsource some of its functions should take
specialist expert advice, particularly if it wants to ensure
continued access to its former staff.
"Because Tupe is an evolving law you cannot expect your own legal
people to deal with it," said Morgan. "We have also seen
innumerable cases where companies go to corporate lawyers who know
very little about outsourcing or Tupe. It needs a very specialised
person to understand the issues. There are probably only 20 legal
practices that have that expertise."
What you need to know about Tupe
Julian Hemming,
employment partner at law firm Osborne Clarke, offers the following
advice:
- Tupe implements a European Directive in the UK which applies in
most other EU countries
- All employees caught by Tupe will transfer automatically on
their existing terms and conditions
- Suppliers cannot contract out of their Tupe obligations
- Tupe applies when there is a transfer of a business operation
from one organisation to another where the business is in the UK
immediately before the transfer
- Does Tupe apply? Key criteria include (but are not limited to):
whether tangible or intangible assets have transferred; whether
employees have transferred; the similarity of the activities
carried on before and after the transfer.
Top Tupe tips for IT departments
- Make sure your outsourcing agreement is well drafted and
anticipates what will happen at the end of the contract
- The contract should only allow the supplier to move key
employees who are dedicated to the contract with your consent
during the notice period
- Subject to any Data Protection Act restrictions, your contract
should give you the right to inspect all the suppliers' employment
records relating to the employees working on the
contract.