How joint employment nearly spelt disaster for outsourcing

6 Feb 2018 By Sarah Ozanne

A recent case brought against the University of London posed a significant threat to businesses that use outsourced employees, as Sarah Ozanne explains

An application to the Central Arbitration Committee (CAC) was brought by the Independent Workers Union of Great Britain (IWGB) that it should be granted collective bargaining rights in respect of 75 workers who provide services to the university through outsourcing partner Cordant. 

The IWGB claimed that the group of workers represented a bargaining unit made up of security guards, postroom workers, AV staff, porters and receptionists, who worked for both Cordant and the university.

The IWGB’s recognition would allow it to collectively bargain the employment terms and conditions of such workers on the same basis that it already collectively bargained in relation to the university’s employees. A decision in favour of this application by the CAC would have effectively meant that the workers had joint employment with the university and its outsourcing partner.

In support of its case, the IWGB argued that while Cordant was the workers’ legal employer, the university was their employer in practice, on the basis that it effectively dictated their terms and conditions of employment. The university should therefore be determined to be the workers’ ‘employer’ for the purposes of schedule 1 of the Trade Union and Labour Relations (Consolidation) Act 1992, which contains the UK law on collective bargaining arrangements.

The IWGB claimed that to deny the workers the ability to negotiate their pay and terms and conditions of employment with Cordant through collective bargaining with the university amounted to a breach of article 11 of the European Convention on Human Rights.

Comfortingly for both the university and Cordant, the CAC rejected the IWGB’s application on the basis that the university is not the ‘employer’ of the relevant workers for the purposes of schedule 1. In coming to this decision, it said that to allow the IWGB to collectively bargain with the university would be a “recipe for chaotic workplace relationships”, and that it would be up to parliament to further define ‘employer’ in schedule 1 if it intended the law on collective bargaining to apply in such circumstances.

The decision by the CAC is unambiguous, and should curtail any similar application in the future. A decision to the contrary could have had catastrophic implications for outsourcing arrangements and affected approximately 3.3 million workers who work under such arrangements.

Rather than being able to access a suitable workforce while avoiding the direct costs and risks associated with an employment relationship with those workers, a client organisation would instead be exposed to the exact risks that the outsourcing arrangements are intended to protect it from. This could make outsourcing pointless in such circumstances.

It is worth noting that the case relates to an application to the CAC, not a claim to an employment tribunal. It is therefore still open to a relevant worker to bring a claim to an employment tribunal that they are in fact an employee of the university. A decision in favour of a worker in such a claim could also have a disastrous wider impact on outsourcing arrangements, but it seems unlikely that such a claim would be successful unless the employment relationship with Cordant was determined to be a sham.

This case is a good example of the constant challenges and opportunities that current workplace arrangements throw at the existing framework of employment law. While not directly relevant to the issues in this case, the government’s proposals in response to Matthew Taylor’s report on modern working practices are still awaited. It is hoped that these proposals will lay out steps to address some of the uncertainties in this area of law that employers are currently grappling with.

Sarah Ozanne is an employment partner at CMS Cameron McKenna

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