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British Airways Strike Highlights Potential Dangers Of Outsourcing

Hiring spin-off company to handle catering services a case of outsourcing gone awry.
LONDON -- The wildcat strike against British Airways that brought London's Heathrow Airport to a standstill last week shows a hidden risk companies take on when they outsource key operations -- they can fall victim to any labor disputes their vendor has with its employees.

While the job action that stranded thousands at one of the world's busiest airports was taken by a catering company, the basic facts of the situation could easily apply to many technology-outsourcing scenarios as more and more IT vendors look to trim costs by paring staff.

British Airways spun off Gate Gourmet in 1997 and then hired the company to provide catering services. Hundreds of Gate Gourmet workers walked out last week to protest job cuts. With labor under pressure at many vendors, experts say companies that hand over critical operations to a third party need to look beyond just technical competence when awarding a contract.

Companies "need to be careful with the agreements they enter into and about how responsible the outsourcing partner is likely to be," Ian Marshall, head of employment and pensions at London law firm Martineau Johnson, told the U.K.'s Birmingham Post on Thursday.

Similar situations could crop up in the technology industry, where major outsourcing vendors such as IBM and HP have announced significant layoffs in recent weeks. Companies that hire those vendors need to ensure that the cutbacks won't affect the successful fulfillment of their contracts.

In a twist, Gate Gourmet officials in part blamed BA for the mess. They felt that overly generous labor policies they inherited from the airline made it difficult for them to run their company efficiently and ultimately forced them to cut staff. The U.K.'s Transfer of Undertakings law compels companies in the country to guarantee existing pay and working conditions for employees that are transferred to a vendor as part of an outsourcing deal.