fm forum - termination & tupe
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FM ForumTermination & TUPE
Clare Reddy and Jonathan Carr
21 November 2013
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Termination & Facilities Management
Clare Reddy
21 November 2013
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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
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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
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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
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Termination – other contractual
• Break clauses
• Failure to achieve KPIs
• Change of control
• Disposal of property• Disposal of property
• Other client/ project specific
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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!
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Termination - consequences
• Express provisions
• Appropriate to the reason for termination
• Damages
• Handover and information• Handover and information
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Thank you
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TUPE & Facilities Management
Jonathan Carr
21 November 2013
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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
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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
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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)
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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
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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)
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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)
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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
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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
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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?
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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