Professional services firms face legal action for billing graduates who quit

07 June 2018 Authored by Consultancy.uk

Beleaguered outsourcing firm Capita and British professional services firm FDM are facing legal action, following allegations of billing graduates if they attempted to leave the firms. The case which will be brought by Jolyon Maugham QC makes a number of startling claims, including the use of the term “indentured labour” to describe the process supposedly used by the two companies to retain staff.

Following a concerted drive by the Labour government between 1997 and 2010 to boost the number of young people going to university, there are now more graduates in the UK than ever before. Despite falling well short of the proposed 50% threshold since abandoned by the incumbent Conservative administration, there were 14 million graduates in the UK as of September 2017, following a steady increase over the past decade.

While multiple sources suggest that this skilled pool of talent should be in demand, as an ageing population sees a growing number of the workforce reaching retirement age, a recession and lack of gainful employment afterwards have meant many have been left desperately searching for an inroads into gainful employment. Over the past ten years, this has seen a number of issues hit the group, including zero-hours contracts and an increased tendency for companies to favour candidates able to complete unpaid internships – something which social mobility watchdogs have often warned makes it almost impossible for those from poorer backgrounds to compete for top jobs.

Professional services firms face legal action for billing graduates who quit

Now, professional services firms Capita and FDM have found themselves at the heart of a storm regarding a further alleged elevation of this trend, with high profile lawyer Jolyon Maugham QC looking to bring a case against the duo. Should the claims reach court – something which Maugham’s Good Law project is currently fundraising for – Capita and FDM will stand accused of charging graduates thousands of pounds if they attempted to leave jobs before completing training and two years’ work with the firms. According to Good Law’s crowdfunding page, this amounts to “indentured labour”.

An indentured labourer is an employee within a system of unfree labour who is bound by a signed or forced contract to work for a particular employer for a fixed time. Indenturees usually enter into an indenture for a specific payment or other benefit, or to meet a legal obligation, such as debt bondage, a practice which theoretically contravenes Article 4 of the Universal Declaration of Human Rights.

Both companies feature schemes in which graduates must undergo training at a cost of up to £21,000 and then complete two years’ work. Should they leave before this date, they are liable to pay the full cost of the training as a penalty fee – a financial burden which has allegedly dissuaded a number of unhappy employees from exiting the firms. While in the case of Capita this charge has fallen from £21,000 to a maximum of £13,000 since 2017, this still represents a significant sum to most workers, especially in light of the apparent quality of the training.

Speaking to the British press, Jolyon Maugham claimed that firms were exploiting the naivety or desperation of graduates and subjecting them to “desperate unfairness” under “astonishingly asymmetric” contract terms. He added that the training was “very, very poor and the fees charged are massively inflated at a large multiple of the cost to the company of providing it.”

Following the launch of the fundraising campaign to bring the case forward, Maugham tweeted that he had received “a devastating series of emails in my inbox this morning of young lives crippled by Capita and FDM.” He concluded, “This is a huge scandal affecting many thousands.”

“Indentured labour”

Under the terms of the contracts, workers can also be re-located anywhere in the country at short notice, while travel expenses are not guaranteed, according to the barrister. The case is currently being prepared as the graduates in question are unsure as to whether the punitive bills are legally enforceable, and as they often can’t afford to pay so they remain. Maugham added that FDM particularly had “aggressively pursued” some former employees for debts.

While Capita is yet to comment, an FDM spokesperson has already denied the allegations, stating, “FDM Group’s training programme provides an opportunity for all graduates to gain and build a successful career in IT… We provide an average of 10 weeks of training which equips trainees with the skills and knowledge and nationally recognised qualifications that are essential for them to become an IT or business consultant, across a number of service areas.”

They added, “We have a clear and unwavering commitment for all trainees and employees to be treated and compensated fairly and in compliance with all applicable laws and regulations. Our employees also receive a competitive graduate salary that far exceeds national minimum wage levels.”

The allegations compound a difficult 2018 for Capita, with the firm having already been pilloried by authorities for its performance as an outsourcer. Capita and Atos' Independent Assessment Services are set to be paid more than £700 million for their five-year contracts enforcing controversial PIP tests – against an original estimate of £512 million – prompting accusations that the DWP were “rewarding failure.” Neither firm has ever met a target for 3% or fewer of their reports – into the suitability of disability benefit claimants for Personal Independence Payments – to be ranked “unacceptable”, while in the first half of 2017-18, 66% of 42,741 PIP appeals went in the claimant’s favour. 

Earlier in the year, meanwhile, Capita was subjected to a series of comparisons to the collapsed outsourcing firm Carillion, following a shock profits warning in February. The firm had just won several high profile governmental and private sector contracts, leaving authorities worried that they would have to step in to complete the work in the event of the firm’s possible liquidation. While Capita’s stock entered free fall, having already seen a share price crash by 14% at the end of a turbulent 2017, amid concerns of rising competition and a fall in its number of big ticket contracts, the firm has since stabilised, following a radical overhaul of the groups finances aimed at rebalancing debts of roughly £1.15 billion – including a £381 million pension deficit – and reducing the risk of unemployment to as many as 50,000 UK staff.

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