Explore what the latest Central Arbitration Committee's decision means for end users of outsourced services


The Central Arbitration Committee has rejected a trade union's application for statutory recognition by an end user in respect of a bargaining unit composed of individuals providing services under an outsourcing contract. The individuals were not "workers" for the purposes of the relevant legislation due to the absence of a contract between them and the end user. The CAC was not prepared to say that because the end user substantially determined the individuals' terms and conditions they were the "employer". To do so would extend the definition of employer, which was a matter for Parliament, not the CAC (Independent Workers' of Great Britain and University of London)


Background law

Independent trade unions can apply to be recognised by an "employer" to conduct collective bargaining on behalf of a group of "workers" (known as the bargaining unit). 

For the purposes of the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA), "worker" means an individual who works, or normally works or seeks to work:

(a)        under a contract of employment (i.e. an employee); or

(b)        under any other contract whereby he undertakes to do or perform personally any work or services for another party to the contract who is not a professional client of his; or

(c)        in employment under, or for the purposes of, a government department in so far as such employment is not covered by the other categories.

(Section 296, TULRCA)

Therefore, worker status is achieved where work is performed under a contract, it is performed personally for another party to the contract, and that other party is not a client or customer of the individual. 

They initiate this process by asking the employer to voluntarily recognise them. If the employer resists, then they can make a formal application for recognition under TULRCA to the Central Arbitration Committee (CAC) (known as the statutory recognition procedure). Where such an application is made the CAC must determine whether the application is valid according to various criteria. Only valid applications can be considered for statutory recognition.

The application made in this case was novel in that it sought statutory recognition from an end user in respect of individuals providing services under an outsourcing contract. 

Facts

The University of London (the University) outsourced various functions to Cordant Security (Cordant), a facilities management company. Cordant employed approximately 75 employees to perform security, post-room, porterage, audio-visual and reception services to the University. The University substantially determined the terms and conditions upon which the employees were engaged by Cordant, particularly in relation to pay, hours and holidays. Notably, these terms and conditions were inferior to those given to direct employees of the University.

The Independent Workers' Union of Great Britain (IWGB) made a request to the University to voluntarily recognise them for collective bargaining purposes in respect of the 75 Cordant employees. The IWGB's position was that they were "workers" of the University and the University was the "employer". The University rejected the request on the grounds that it was not the employer of the individuals in the proposed bargaining unit.

The IWGB went on to make a formal application to the CAC for statutory recognition. They argued that the University should be considered the de facto employer of the "workers" because they substantially determined the terms and conditions of employment of the Cordant employees. The fact that they were employed by Cordant should not prevent them being treated as workers of the University. In other words, for collective bargaining purposes at least, there could be more than one employer.

Specifically, the IWGB argued that the CAC should recognise the employment relationship between the workers and the University in order to give effect the union's collective bargaining rights under Article 11 (i.e. freedom of assembly and association) of the European Convention of Human Rights (ECHR). The IWGB sought to argue that TULRCA could be construed in line with the extended definition of "employer" used for whistleblowing purposes which covers any entity that "substantially determines" the terms and conditions of the affected individuals.

CAC decision

The CAC dismissed the application, deciding that it was invalid because the University was not the employer of the workers in the proposed bargaining unit.

Looking at the definition of "worker" in s.296 of TULRCA (see Background above), the CAC concluded that there would need to be a contract between each individual worker and the University – this was an "absolute requirement". Here, there were no such contracts, meaning the definition of "worker" was not satisfied. 

The CAC also rejected the argument that an extended definition of employer should be used. It noted that the extended definition existed only to provide protection for whistleblowers and had been designed with health workers in mind. Not only would the use of this definition require TULRCA to be rewritten, it would create the potentially chaotic situation of the workers in the bargaining unit being subject to two different collective bargaining arrangements with two different trade unions.  Permitting this would be contrary to the CAC's statutory duty to encourage and promote fair and efficient practices and arrangements in the workplace.

In the CAC's view, it would be for Parliament to amend TULRCA to allow an extended definition of employer. If the IWGB wanted to pursue the argument that the existing definitions of "worker" and "employer" in TULRCA were incompatible with its Article 11 ECHR rights, then it would have to ask the High Court to judicially review the decision. 

Comment

This decision is welcome news for end users of outsourced services. It confirms that the individuals providing the services under the outsourcing contract will not be workers of the end user for the purposes of TULRCA. This means that applications by trade unions for statutory recognition are bound to fail. Had the decision gone the other way, the trade union could have sought to collectively bargain terms and conditions equal to those given to direct employees of the University, which would have led to an inevitable increase in costs. 

It probably also means that such individuals would fail in any argument that they are workers employed by the end user for the purposes of other employment legislation such as the Employment Rights Act 1996, the National Minimum Wage Act 1998 and the Working Time Regulations 1998. Under all of these pieces of legislation, worker status is only achieved where work is performed under a contract, it is performed personally for another party to the contract, and that other party is not a client or customer of the individual. These individuals will still be entitled to these employment rights - but compliance will be the responsibility of the outsourced employer, rather than the end user.

Independent Workers' Union of Great Britain and University of London

Key contacts

Amanda Steadman

Amanda Steadman

Principal Knowledge Lawyer, Employment
London

View profile