FM ForumTermination & TUPE

Clare Reddy and Jonathan Carr

21 November 2013

Termination & Facilities Management

Clare Reddy

21 November 2013

Termination for breach

• Breach of a condition

� Entitlement to terminate

• Breach of a warranty

� Remedy in damages only

• Breach of an intermediate term• Breach of an intermediate term

� Depends on the gravity of the breach

• Period for remedy/ warning

Termination at will

• No breach required

• Notice period

• Duty of good faith did not apply to termination (TSG

Building Services plc v South East Anglia Housing Ltd

[2013])[2013])

• Reallocation of work to another contractor

• Compensation

Termination on insolvency

• Insolvency not automatically breach of contract (Perar BV

v General Surety & Guarantee Co Ltd (1994)

• Not usually automatic

• Beware the definition of insolvency

Termination – other contractual

• Break clauses

• Failure to achieve KPIs

• Change of control

• Disposal of property• Disposal of property

• Other client/ project specific

Termination at common law

• Repudiatory breach

� Breach goes to the root of the contract

� Unequivocal acceptance of the repudiation

� Affirmation

• Frustration• Frustration

� External circumstances prevent performance as originally intended

� Further performance impossible, illegal or radically different from original intention

• Beware getting it wrong!

Termination - consequences

• Express provisions

• Appropriate to the reason for termination

• Damages

• Handover and information• Handover and information

Thank you

TUPE & Facilities Management

Jonathan Carr

21 November 2013

What is TUPE?

• This involves three elements:

1. an economic entity;

2. which transfers; and

• “Classic TUPE”: transfer of an business or part of a

business to a new employer

2. which transfers; and

3. retains its identity following the transfer

Company A Company B

Sale

Service provision changes

• Service provision change:

� There is an organised grouping of employees

� Situated in Great Britain immediately before the transfer

Client

transfer

� Which has the principal purpose of carrying out the relevant activities on behalf of the client

� Another person/company takes over responsibility for carrying out those activities

Contractor A Contractor B

FM context – when is this relevant to you?

• TUPE may apply when:

� FM currently done in-house is outsourced (1st generation outsourcing)

� FM services already outsourced to a contractor who loses the contract and a new FM contractor takes over (2nd

generation outsourcing)generation outsourcing)

� FM services already outsourced to a contractor but client decides to take FM function back in house (insourcing)

• Can potentially apply to the outsourcing/insourcing of a

particular aspect of FM (eg security)

Key ingredients

TUPE more likely TUPE less likely

• FM activities remain very similar – like for like swap, same site, similar staff numbers and skills required

• There is a clear organised

• Activities materially change

• Way in which activities performed changes

• Contract fragmented and multiple new contractors• There is a clear organised

group of employees dedicated to contract/client/site

multiple new contractors

• No organised grouping of staff (eg shared services model)

• ‘Client’ changes at same time

• One off/short term duration contract

Who transfers

• Employees & apprentices

� Employed by transferor (client or incumbent service provider)

� Assigned to the organised grouping

� ‘Immediately before’ the transfer

� Haven’t objected� Haven’t objected

• Not agency staff or self-employed contractors (although

consultants and contractors required provide their

services personally may transfer)

What transfers

• Employment contracts

• Continuous service

• Union recognition and collective bargaining

agreementsagreements

• Liabilities relating to transferring employees

• But not ... occupational pension rights

(subject to some exceptions)

Other features of TUPE

• Consultation obligations (<90 days pay penalty)

• Some additional dismissal protection

• Changes to terms and conditions are difficult

• Employees are not forced to transfer. They may opt out but • Employees are not forced to transfer. They may opt out but

generally no rights or payments if they do

• Staff information sharing required by TUPE and usually by

contract

Key points to be aware of ...

• Can defeat the point of client moving the contract

• Potential for large redundancy bills if staff don’t transfer

and cannot be redeployed. Think about:

� Seeking all parties agreement early on that TUPE applies

� Consider scope to run-down permanent headcount � Consider scope to run-down permanent headcount

� Budgeting for redundancy costs or agreeing cost sharing

• Get information about transferring staff – contract terms,

disciplinary records,

• TUPE equivalent in other EU countries is different and

service provision change concept doesn’t generally exist

Contract tips and pitfalls

Limitations on flexibility to change or add staffLimitations on flexibility to change or add staff

Mirroring entry & exit termsMirroring entry & exit terms

Who is in scope?Who is in scope?

What happens on your ‘watch’ is your responsibility

What happens on your ‘watch’ is your responsibility

Redundancy costs?Redundancy costs?

The relocation problem

• FM change on a site relocation may defeat TUPE (not the

same activity)

• Even if TUPE does apply, staff may not want to transfer to

a new location – potential redundancies