Question: Mark, you describe yourself as a specialist in ‘security law’. How have you been able to specialise in this way, and what exactly is ‘security law’?
Answer: “My family has always been involved in the contract manned guarding industry and, consequently, from the age of 17 my holidays were spent working as a security officer at various sites and shows in and around London. This allowed me to gain a wide-ranging appreciation of the security industry at large, and its attendant problems.
“Having qualified as a lawyer specialising in employment law and commercial litigation, I decided to make use of my experience and specialise in those areas of the law directly affecting the contract manned guarding sector. You can’t hope to advise a client properly unless you have a detailed understanding of that client’s business.
“My colleagues and I now advise and act for a large number of firms on a variety of different areas of the law as they relate to manned guarding. On a personal level, I also advise and act on behalf of senior management when it comes to termination of employment and their exit options.”
Q: What do you see as the major legal challenges facing the contract manned guarding sector in the year 2001?
A: “In order of importance? The Transfer of Undertakings (Protection of Employment) Regulations 1981, more commonly known as the TUPE Regulations, the Working Time Directive and management ignorance of employment law issues – including correct disciplinary and grievance procedures, and the lack of properly-drafted contracts of employment and policies affording the greatest flexibility to the employer. Discrimination, be it racial, sexual or based on disability and poorly-drafted terms and conditions of employment are further problems that need to be ironed out.
“I’m also deeply concerned about firms’ potential liability to third parties and avoidance of insurance cover in those circumstances where security officers are not properly vetted to BS 7858.”
Q: Let’s briefly consider each of these areas in turn. Why is it that TUPE remains the bane of the contract manned guarding industry, and what practical advice do you have for companies in a TUPE situation?
A: “In essence, the TUPE Regulations were implemented to safeguard the rights of employees in circumstances in which the employing company was being purchased by another company. This was the ‘relevant transfer’ contemplated in the TUPE doctrine.
“By carrying out the normal due diligence checks, the purchasing company would be fully aware of what it was letting itself in for, and would have access to all information relating to the selling of a company’s employees before agreeing to the transfer.
“That said, if you were to apply TUPE to the transfer of a contract for the provision of services, you’d start running into problems. There is simply no legal obligation on – nor commercial incentive for – the outgoing company to provide information to the incoming concern.
“In actual fact, although it may sound a touch cynical there is far more incentive for such an outgoing company to intentionally withhold important information, such as paid holiday entitlement, in the hope that it renders the contract unprofitable for the successor.
“This problem is compounded by the attitude adopted among the majority of clients. Contracts are normally awarded by the clients’ purchasing departments, many of whom are guided by economic as opposed to practical considerations. They have little or no interest in the tendering companies’ problems in acquiring relevant and essential information from the outgoing company.
“The end result is that the successor company (usually the company which has submitted the lowest quotation for the services to be provided) inherits an unprofitable and unworkable contract which it is then forced to perform badly. The client doesn’t benefit from an improved service and will soon re-tender, the scenario repeating itself all over again.
“As for the question of whether taking over a manned guarding contract amounts to a ‘relevant transfer’ for the purposes of the TUPE Regulations, the safest approach is to accept that it does. So long as the ‘economic entity’ (ie the contract itself) retains its identity after the transfer, it doesn’t matter that no assets – including employees – are transferred. While I would obviously recommend examining each contract in detail, unless the contract post-transfer is completely different from that being performed pre-transfer, TUPE will apply.
“There is no easy answer to the TUPE problem. My advice is to raise the necessity and benefits of a TUPE audit with the client at the outset of the tender process, and to simultaneously protect one’s position by incorporating a degree of contractual flexibility into the tender/contract document. From the outset of any tender, clients should be encouraged to require the incumbent company (if needs be as a condition of its participation in the tender process) to provide the necessary TUPE information, and participate in a comprehensive TUPE audit.
“Clients should also be made aware of the correlation between a comprehensive TUPE audit and the quality of service that is ultimately provided. In my experience, if sufficient pressure is brought to bear by the client on the incumbent security provider, unless the client is small and wholly unimportant there are very few security companies who will refuse to provide the information requested. Not only that, highlighting the importance of a TUPE audit can only reflect well on the professionalism of the security firm raising the issue.”
Q: What about the retention of contracts that are running at a loss?
A: “A clause within a tender document or contract entitling the incoming security company to either recalculate its hourly charge-out rate or terminate the contract without penalty [in those circumstances in which non-disclosure by the outgoing company has rendered the contract unprofitable or unworkable] has been welcomed by my clients. Not only that, it has also been warmly received by the end users as well.
“There is absolutely no point in retaining a contract which can only run at a loss.
“Similarly, the end client would much rather renegotiate the contract and pay a little more than resubmit to tender and further disrupt the client’s security cover.
“Circumstances that might invoke such a clause include those in which transferred employees have not taken – and, consequently, have not been paid for – any of their paid holiday entitlement, and/or have received a pay rise shortly before the transfer.”
Q: Presumably, problems with the Working Time Directive are closely related to those difficulties experienced under TUPE?
A: “Absolutely. There is nothing within the provisions of the Working Time Regulations 1998 which need concern properly-managed and administered security companies. In the contract manned guarding scenario, most security officers will want to agree to ‘contract out’ of the 48-hour working week in order to earn more money. However, the provisions relating to paid holiday entitlement are open to abuse, particularly in a TUPE situation.
“In line with the provisions of the Working Time Regulations, employees are entitled to four weeks paid holiday after having completed 13 weeks of continuous employment. Contracts of employment will normally specify that, after this 13-week period is up, the paid holiday entitlement accrues on a monthly pro rata basis, failing which the employee could simply choose to draw down his or her entire holiday entitlement after the 13-week qualification period and resign.
“In the manned guarding sector, the requirement to pay employees during holidays is factored into the hourly rate charged to the client, and the client is fully aware of the proportion of the rate applicable to holiday pay.
“However, what often occurs when a manned guarding contract changes hands is that the incoming company discovers that a significant proportion of the transferring security officers have accrued paid holiday entitlement. The outgoing company will have charged the client for this entitlement through its hourly charge-out rate, but will not have passed on the benefit to the relevant employees. Without any legal obligation to do so, the outgoing company will obviously not willingly refund the client in circumstances in which it has lost the contract.
“The incoming security company then inherits a considerable liability which it will not have provided for in its tender, and for which the client will obviously not want to pay.
“The lesson is simple. Had a comprehensive TUPE audit taken place at the time of the tender, the holiday entitlement of the transferring employees could have been properly assessed and provided for.”
Q: Is there anything else that manned guarding firms should watch out for with the Working Time Directive?
A: “Yes, there is. Security companies must make express provision in their contracts of employment that, while employees may elect to opt out of the 48-hour working week, it’s a condition of any such ‘opt out’ that the relevant employees unequivocally accept that holiday pay will nevertheless be calculated on the basis of a 48-hour working week.”
Q: What exactly do you mean by “management ignorance of correct disciplinary and grievance procedures”?
A: “On 4 September 2000, a new ACAS Code of Practice on Disciplinary and Grievance Procedures came into force. Most managers in the industry will have been too busy to have registered this. That said, the importance of this document should not be underestimated, insofar as a company’s failure to abide by the correct stipulated procedures will almost certainly lead to successful claims for unfair and/or wrongful dismissal. This is a ridiculous situation, if you consider that the document is very simply written and can be read in about half an hour.
“In recent times I’ve visited companies so that I can sit down with the management for half an hour or so and run through grievance and disciplinary procedures. Management ignorance of the importance of getting procedures right is simply inexcusable, not to mention a ridiculous waste of money.”
Q: Poorly-drafted contracts of employment are presumably the result of companies drafting their own contracts by cobbling together clauses taken from other companies’ offerings…?
A: “That’s right. While this practice is totally understandable from a cost-saving point of view, it’s really a false economy as it exposes the company concerned to a variety of claims in the future. A contract consisting of clauses cherry-picked from several other contracts will not hang together, and will not provide for recent legal developments.
“A far more cost-effective approach is to take a standard precedent, which can be lifted from the system and tailored to the individual company’s needs – and which can be updated on a periodical basis such that managers can keep abreast of legal developments.
“I cannot even begin to tell your readers how many claims arise as a direct result of poorly-drafted contracts of employment.
“When drafting contracts it’s extremely important to afford the employer as much flexibility as possible. A contract should include a clause which allows the employer to change the terms and conditions of employment to cater for changes in the law. A clause which allows the employer to change the hours worked at his or her absolute discretion, and which clearly defines which clauses of the contract are contractual terms and which are mere policies and not contractually binding.
“The importance of this last point can be demonstrated in the context of disciplinary and grievance procedures. Wherever possible, contracts should now be amended to include grievance and disciplinary procedures which mirror those set out in the new ACAS Code.
“However, it’s important that the contract clearly specifies that these procedures are for guidance only, and are not contractual. If this isn’t stated, any failure to adhere to the strict letter of the procedure will automatically result in a claim for breach of contract – with little or no chance of a successful defence.”
Q: With the advent of various pieces of legislation implementing the Government’s White Paper on Fairness at Work, isn’t discrimination in the workplace becoming a thing of the past?
A: “The situation has certainly improved a great deal. Seemingly, the industry is finally beginning to wake up to the importance of women in all sectors and at all levels. Security is no longer viewed as a male preserve.
“Similarly, direct racial discrimination and disability discrimination are on the decline. Companies and individuals alike are showing a much greater awareness of issues like these. Unfortunately, both direct and indirect discrimination does still take place. It can only be fought by companies adopting clear policies on discrimination, raising employees’ awareness of what constitutes discriminatory behaviour, and of the disciplinary consequences of failing to adhere to policy.
“It’s important to remember that there’s no upper limit to discrimination claims, and any substantial claim will put the majority of small-to-medium-sized companies out of business.
“The Government will increase the scope of its Fairness at Work legislation by introducing provisions to fight against discrimination on the grounds of age or religious belief.”
Q: Finally, with profit margins continually squeezed, how can companies realistically hope to afford the level of legal input and involvement you are advocating?
A: “The steps which I’ve advocated are not only simple to effect, they’re also inexpensive. Different companies will have different requirements and different priorities. As a general rule, I advise my clients to conduct a biannual employment audit. This costs around the GB pound 500 mark. It considers existing contracts, and whether updates or redrafts are necessary.
“These audits will also look at disciplinary and grievance procedures, terms and conditions and employment policies. Hopefully, such an audit will also highlight and avoid potential discrimination situations.
“An audit like this really is a ‘must’, and will save companies a fortune by avoiding any unnecessary claims.”
Mark O’Neil is senior associate at City-based international law firm Sinclair Roche & Temperley, specialising in employment law as it relates to the security sector
