Fine tuning Tupe

Heard the one about the caterer which six months into a contract discovered one of its employees had, without its knowledge, been on maternity leave and now wanted to come back, thank you very much? Or the dinner lady on extended leave who returned eight months into a new contract?

Unfortunately for contract caterers neither of these true scenarios is a joke, and neither has a punch line.

Since 1981, when contract caterers have taken on a new contract the rights and terms of employees being transferred have been protected by the TUPE legislation. Formally known as the Transfer of Undertakings (Protection of Employment) Regulations 1981, the underlying principle of TUPE is laudable enough.

It ensures that, when an employee changes "ownership", his or her terms and conditions should largely remain the same and transfer with them. In effect, the only change they should notice should be that the identity of their employer is different.

In the hospitality trade, TUPE is most likely to come into play when a bar, hotel or restaurant is bought or when a catering contract changes hands.

In an ideal world the transfer of staff should work smoothly, and most of the time it does. But a continuing bone of contention for contract caterers, argues Henry Watts, finance director of 7-Day Catering, is that, in a hugely competitive environment, outgoing contractors, either through disorganisation or malice, are not always being completely open about the contract.

"The biggest problem for us is the lack of information that passes from the outgoing contractor to the incoming one. Even if we move heaven and earth to verify that the information we have been given is correct but someone does nothing more than lie, we have no recourse," he explains.

An incoming contractor can find that agreements have been struck with workers that it knows nothing about; or workers it thought were fine are, in fact, off on long-term sick leave. Worst of all, the contractor can find itself taking over an expensive tribunal or disciplinary case, or - as happened to one - a £50,000 insurance claim about which it knew nothing.

"Sometimes we get just a single page: ‘These are the names. This is when they started. This is their holiday entitlement.' There is no sick pay record, record of injuries, insurance cases and so on. But there is absolutely no legal requirement on the outgoing contractor to tell the truth," adds Watts. "It is about getting full disclosure and full knowledge."

It's not just the contractor that suffers. Even with the knowledge that they are protected by TUPE, staff will inevitably find the process stressful and uncertain.

If, as an employee, you arrive to find your new contractor suddenly changing the holiday entitlement you'd agreed a month earlier or unaware that you always leave early on a Friday, say, relations can quickly become strained. This can lead to resentment and disillusionment and may even cause you to leave the new company's employment.

It may not be the fault of the new contractor, but the damage will already have been done.

"It makes you feel pretty foolish, and it is not a good start to employing somebody," agrees Mark Herman, director of management services at the In-house Catering Company.

Common complaints include pay rates not being as people thought; outstanding disciplinary cases that have not been revealed; and variations in hours worked compared with the contract.

"The incumbent contractor is simply not interested in its employees any more. There is no incentive to do right by them apart from your own professionalism," adds Herman.

It's also a problem for the client. What clients want is a seamless transfer, with service unaffected - and, hopefully, improved - and ideally some cost savings. If there's a lot of toing and froing between worker and contractor, it makes it that much harder to get the contract up and running smoothly and quickly.

So, what's to be done? Watts, for one, suggests it should be made a legal requirement that an element of responsibility, say, for tribunal or insurance cases, stays with the outgoing contractor. Another alternative is the creation of a standard disclosure letter that contractors would be legally required to fill in. Herman agrees that some sort of legally binding standard letter would go down well with the industry.

"We have had to chase some of the large organisations up for information. The emphasis is on the incoming contractor getting the information it needs, but I do not think it should be that way around," he says.

Looked at optimistically, the industry may be pushing at an open door. Early last year the Government announced plans to reform TUPE, and a consultation was carried out.

While the process may have been undertaken at a snail's pace - it was originally intended the reforms would come into force in spring this year - a key area will be making it a requirement that incoming contractors are notified about any employee liabilities that will transfer over.

Quite what this means in detail is, as yet, unclear. The latest update from the Department of Trade & Industry is that a consultation will now be carried out in February, with the new regulations expected to come into force in October 2005.

Until this all comes about, taking on a new contract will remain a leap of faith, and one that can end up costing a contract caterer dear.

"It only takes a couple of big claims that you do not know about to sink you. People should be made to take responsibility for their actions, not the other way around," says Watts.

Case Study
Catering manager Susan Thomas has been transferred under TUPE twice in her career. She now works in the staff restaurant at fruit machine maker Bell Fruit Games in Nottingham, a contract run by 7-Day Catering.

But four-and-a-half years ago she was a chef-manager at the Pork Farms factory in the city, working for caterer Nelson Hind, when the contract was transferred to Catering Alliance.

"It is quite daunting the first time you do it. As an employee you do not really know it is happening until it happens. One minute you are working for one company, and the next another," says Thomas, 40.

When Catering Alliance came in there was some confusion over her holiday entitlement, with not enough days being carried forward. There was also an issue over a bonus that had been promised.

"They were both things that could have just been forgotten or overlooked. But if the information is not given, that can lead to a huge bill for the company," she says.

For the employee, it's vital to ensure you have a record of any agreements that have been made, she advises.

"If you have not got the paperwork, you are stuck. It is your word against theirs. It was three months before I finally got it all sorted out."

Two years ago Thomas moved to Bell Fruit, where the contract at that time was still with Catering Alliance.

In July last year 7-Day Catering took over. This time round the transfer was much easier, mostly because she knew what to expect.

"Once you have gone through it you are more prepared, because you know at the end of the day that you will not lose out. But I've been to see people who've found it very, very frightening, because it is the unknown," she says.