Euro ruling threatens huge bills for caterers

By David Shrimpton

Catering contractors are urgently seeking clarification of advice issued by the European Court's advocate general, as it could see them saddled with huge bills when they lose a contract.

The advocate general's advice relates to a case due to be heard by the European Court of Justice (ECJ) in the next few months. He has said that the European Union's Acquired Rights Directive should not have applied in the case of a cleaning contract for a school in Germany. As the ECJ very rarely goes against the opinion of the advocate general, it seems likely that this advice will be confirmed.

The Acquired Rights Directive was incorporated into UK law as the Transfer of Undertakings (Protection of Employment) regulations, commonly known as Tupe.

Under Tupe, a company taking over a contract currently inherits all the staff that go with it and their accrued service rights, such as rates of pay and pensions.

But the ECJ's ruling could put an end to this situation, so an outgoing contractor would be forced to lay off all its staff and pay the redundancy bill.

"What do you do if you are a company that's been in the business for a while and has accrued massive liabilities under Tupe?" asked Cliff Davis-Coleman, secretary of the Public Contractors Association, whose members include Castle View and Sita. "That could cripple an awful lot of companies."

The Business Services Association (BSA) said it was asking the Department of Trade and Industry for clarification of the situation. And Norman Rose, BSA director general, said the association would be seeking assurances from the Government that UK companies would not be left to bear any costs unaided, if indeed the ECJ upheld the advocate general's advice.

However, others in the industry are playing down the significance of the case. "Every ruling on a case reflects only the circumstances of that particular case," said Bob Cotton, director of corporate affairs at Gardner Merchant and chairman of the British Hospitality Association's contract catering forum. "Most major catering companies have indemnity clauses in their existing contracts against any change in the law," he added.