The outcome of the case Mploy
Group Ltd v Denso Manufacturing UK Ltd reminds employment businesses of the
importance of having strong terms in place which are compliant with key
legislative requirements and that cover off commercial interests.
Mploy Group Ltd “MGL” an employment business, had supplied
workers to Denso Manufacturing UK Ltd “DMUK”.
DMUK decided to end this relationship and source workers from another
supplier, Prime Time Recruitment Ltd “Prime Time”. However, the workers supplied by Prime Time
had previously been supplied by MGL, so the question for the court was whether
MGL could claim for third party introduction and transfer fees for those
This question came down to the contractual terms in place
and the court found that the terms did not meet the requirements of the Conduct
of Employment Agencies and Employment Businesses Regulations 2003 (“Conduct
Regulations”), so as a result MGL were not entitled to fees for introducing
workers to Prime Time as a third party.
The Conduct Regulations provide that transfer fees are only
enforceable for up to 8 weeks from the end of an assignment or 14 weeks from
the beginning (whichever is the latter). Transfer fees are also unenforceable
unless the contract provides that instead of paying a transfer fee, the client
can opt for an extended hire period on terms that are no less favourable
to those that applied to the assignment, or where there has been no supply, on
terms included in the contract between the parties.
The lesson to take away is that the terms an employment business has in place with its client should allow for an extended period of hire, even if
there has been no actual supply of candidates. They should also cover all the potential risk areas that could expose the business to loss. This is an easy area to fall over on and so if you are unsure that your terms protect you sufficiently call us on 01273 236236. Lawspeed has been drafting terms for recruitment businesses since 1997 and to our knowledge our terms have never yet been beaten!