Beware of Outsourcings that Trample Employee Rights

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A recent morning paper reported that telecoms giant Orange, who are outsourcing their call center services to IBM in the Philippines, told their night-shift call center employees in Darlington that if they want to keep their jobs they would need to move to Manila. Orange reportedly offered these employees a transfer package which showed that they would receive the same package as the local employees, which is a £200 monthly salary and a rice and laundry allowance. Does this amount to Orange being brutal – as suggested by the reporter – or simply uninformed of their legal obligations to Orange employees? Have jobs become so scarce that employees are willing to accept a lower employment package and a substantial cross-border relocation?

With the continuation of the current global economic downturn, outsourcing has been used effectively by some companies to reduce costs and (hopefully) provide a more efficient service. A successful outsourcing by a European company can derive many benefits for both the company and its employees, particularly due to stringent employment laws in Europe, which are designed to protect employees’ rights when they transfer to a new service provider, whether onshore or offshore. The fact that a few employees at Orange are considering a substantial relocation and significantly reduced employment package is indicative that an employer must not assume that the employees whose job are affected by an offshore outsourcing will be unwilling to consider relocation to another country, no matter how far. Therefore, when companies are considering outsourcing, they must prioritize dealing with employment issues.
The law requires that an employer provide proper information to, and carry out adequate consultation with, the representatives of any employees affected by the transfer concerning any measures which the new service provider is proposing. Generally speaking , the employee’s terms and conditions of employment are protected so that a new service provider must hire employees on those terms. It is also unlawful to harmonize terms and conditions of employment if the reason for doing so is connected with the transfer.

An employer is only allowed to change terms and conditions of employment in certain specified circumstances – namely when the change in terms is not linked to the transfer or where there is an economic, technical or organizational (“ETO”) reason entailing a change in the workforce. The difficulty with the ETO definition is that it is very narrow and an employer may not be able to satisfy the test. Orange or IBM would be risking exposure to constructive unfair dismissal claims being made if they are indeed offering the employees a transfer package which contains such substantial and detrimental changes to their employment terms unless they can satisfy the ETO test or it is unconnected to the transfer. The transfer package may have been given to the employees by mistake as Orange issued a statement to say that “the information about a move to Manila was not given out officially and apologized to those who were upset by it”; however this may not prevent claims being made. Clear and tight communication is vital to effecting a successful transfer, keeping staff morale high, avoiding negative publicity and minimizing the risk of employment related claims.