London Borough of Havering Council contracted with Saturn Leisure( SL) to operate an ice rink and a car park. SL sub-contracted the car park work to Regal Car Parks (RCP). The Council terminated the contract with SL and took management of the car park back in-house. Mr Jinks complained to an employment tribunal that his employment automatically transferred from RCP to the Council and their refusal to take him on amounted to an unfair dismissal.

The Employment Judge struck out the unfair dismissal claim as having no reasonable prospect of success as RCP’s client was SL, not the Council. As there was no contractual relationship between RCP and the Council, there could be no service provision change.

The EAT disagreed. The question was who was RPC running the car park ‘on behalf of’ and was the Council the ultimate client of RPC. The EAT found: this is a question of fact, not law; there can be more than one client in any case; and the ‘client’ may be not necessarily be the contractor from whom the sub-contract is held but the ultimate client even where there is no contractual relationship. The EAT concluded that ‘too narrow an approach had been taken’. The case was remitted back to the employment tribunal for consideration.

IMPACT OF THE DECISION

Although this case concerns insourcing of service provision the principle should also apply to outsourcing and changes of contractor. Facts will need to be very carefully scrutinised and the question asked - who are the services provided on behalf of? Businesses involved in subcontracting / partially subcontracting services or those carrying out the services under a sub- contract should consider exit provisions in their contracts dealing with the requirement to provide employee liability information (required under Reg 11), warranties and indemnities to cover potential claims. 

Businesses may also wish to consider retaining some control over the group of employees who are likely to transfer. They will not want to inherit employees who have significantly superior terms and conditions than existing employees and they will want a say over who is hired and fired – this will avoid loss of key personnel or inheriting unwanted personnel. This should go some way to mitigating the effects of inheriting or losing employees in the event of a change of service provision by the head contractor or client.