Disclosing employee transfer costs information during a restructuring

Are you tendering for cleaning, food catering, orderly, laundry or caretaking services?

Or are you thinking of changing the person or company who provides these services for your business?

Or do you provide these services to other businesses?

If so, your business may have extra obligations. These obligations apply when you buy and sell certain businesses, or when certain services are contracted out or brought in-house. A recent law change means the obligations now also apply when you win and lose contracts for services, or if you let contracts for these services. For information on which businesses have these extra employment obligations see our fact sheet Does your business provide cleaning, food catering, orderly, laundry or caretaking services?.  
If your business is affected, then from 14 December 2006, you may be able to request or be asked for ‘employee transfer costs information’.

What is employee transfer costs information?

This is information about the labour-related costs that a new employer would need to fund if “specified” employees transfer in a restructuring situation. These specified groups of employees are employees who work in the following types of employment:

• cleaning services and food catering services in any place of work
• laundry services for the education, health, or age related residential care sector
• orderly services for the health, or age related residential care sector
• caretaking services for the education sector.

For more information on who is covered see our fact sheet Does your business provide cleaning, food catering, orderly, laundry or caretaking services?  

Employee transfer costs information includes, but is not limited to:

• the number of employees eligible to transfer
• wages or salary payable to those employees in a stated period (e.g. week, fortnight, month) for doing work that may be subject to the restructuring
• total number of hours in the stated period spent by the employees doing the work that may be subject to the restructuring  
• cost of all service-related entitlements (both legislative and as agreed by the employer and employee) e.g. costs of annual leave and sick leave balances, costs of any agreed annual or other leave above statutory minimum entitlements
• cost of any other employee entitlement, such as entitlements agreed but not due until a future date e.g. long service leave.

The costs must be aggregated and, if possible, provided in a format that does not identify individuals.

Why can employee transfer costs information be requested?

Employee transfer costs information can be requested to assist making a decision to terminate or let a contract lapse, negotiate an agreement, enter into an agreement, or tender for work. 

Who can request, and who has to provide, the employee transfer costs information?

The following examples illustrate when information can be requested and who has to provide the information.  These examples should be read in conjunction with the question ‘What happens if I don’t have the information requested’ (see below) which deals with subcontracting situations.

Example 1: Contracting in

A rest home uses an independent contractor to provide its food catering services.   Employees of the independent contractor do the food catering work.  The rest home is considering whether to end the contract and use its own employees to do the food catering work. The rest home can ask the independent contractor for employee transfer costs information. The independent contractor who has been asked for this information must provide it to the rest home.

Example 2: Contracting out

A school has employees who provide cleaning services. The school is considering entering into an agreement with an independent contractor to do that cleaning work. A potential independent contractor can ask the school for employee transfer costs information to help it make a decision about whether to enter into an agreement for the work. The school that has been asked for this information must provide it.

Example 3: Sale or transfer

The owners of a cleaning company are considering whether to sell the business and their employees who do cleaning work would be affected by the sale.  Potential purchasers can request employee transfer costs information from the owner to help make a decision about whether to purchase the business.  The owner must provide the potential purchaser with the information requested.

Example 4: Subsequent contracting

An airport operator has an agreement with an independent contractor to provide the airport’s food catering services. That agreement is about to end and the airport operator has issued a request for tenders. A potential independent contractor can ask the airport for employee transfer costs information to help it decide whether to tender for the work.  The airport operator must provide the potential independent contractor with the information requested.

What if I don’t have the information requested?

You may receive a request for information you don’t have because the work has been subcontracted and is not performed by your employees.

If you have subcontracted the work to another person, you must ask the subcontractor to provide this information. The subcontractor is required to provide you with the employee transfer costs information they have. 

If the subcontractor does not have this information because it has been further subcontracted, they must provide the person from whom they received the request with the contact details of the person whose employees actually perform the work.  

Example 5: Proposed subsequent contacting with subcontracting

In example 5, if cleaning company C requests information from the school, the school is required to get the information from cleaning company B.  Because cleaning company B has subcontracted the work to cleaning company B1, company B is required to ask company B1 for the information and company B1 must provide it to company B.

When cleaning company B1 has further subcontracted the work to another company (cleaning company B2), they may not have some or all of the information requested. If this is the case, cleaning company B1 must provide cleaning company B with any details they have about and how to contact cleaning company (B2). Cleaning company B must then ask cleaning company B2 for the information and company B2 must provide it to company B.

How much time do I have to gather the information and provide it to the person who has requested it?

The information has to be provided to the person who is considering entering into a restructuring situation in sufficient time for them to be able to use the information when making a decision on whether to enter into a restructuring.

This means it would be good practice to keep employee transfer costs information up to date or easily updateable, so it can be provided quickly if requested.

What happens if wages or other labour costs change between when I provide the information and when the restructure happens?

You must tell the person who requested the information that it has changed and what the revised information is.

In example 5: ‘Proposed subsequent contacting with subcontracting’, this means that if cleaning company B1 tells cleaning company B that the information originally provided has changed, cleaning company B must pass the revised information on to the school and the school must inform cleaning company C. 

Once decisions about the restructuring have been made and the contract has been awarded, there is no longer any obligation to update the information.

What happens if I don’t receive the information I request?

You can apply to the Employment Relations Authority for a compliance order. This means that the Authority may require the person or company to provide the information requested. 

What happens if my current contract states that I must not disclose this type of information?

The new disclosure provisions are legal obligations and they override anything inconsistent that is contained in your current contract. 

In addition, a request to provide employee transfer costs information cannot be declined for reasons set out in the Official Information Act 1982 other than those reasons set out in section 6.