Is it reasonable to dismiss an employee at the request of the customer under an outsourcing agreement?

Our Employment Law colleagues have blogged on a recent Employment Appeals Tribunal decision over the dismissal of an employee by an outsourcing services provider following a request by the customer to remove the inidivual.

You can read more about the EAT’s decision by following this link.

Provisions that allow the customer to demand the removal of a member of staff are often an area of disagreement when negotiating an outsourcing contract. Often, the customer will require such a right for regulatory reasons (for example to comply with the FSA’s rules on outsourcing). However, the customer will also often insist on such a right to maintain the smooth running of the services and to ensure that disruptive employees (or those suspected of wrongdoing) are removed.

Outsourcing suppliers frequently push back on this as they fear that complying with such a request could lead to an unfair or constructive dismissal claim from the employee concerned.

This decision confirms that a decision to dismiss an employee at the request of a third party can be reasonable (and therefore lawful). However, the employer must consider the degree of any injustice on the employee and what alternative steps could be taken prior, or as an alternative to, dismissal. In this case, it appears that the employer did not investigate the underlying problem before dismissing the employee.

The decision will provide customers with some reassurance that such provisions are reasonable and should not automatically cause the outsourcing services supplier to be in breach of its obligations under employment laws, whilst also providing outsourcing services suppliers with some guidance on how such requests should be handled.

Martin Sloan

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