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Employment Law: TUPE Service Provision Change

Friday, 18 May 2012

The Transfer of Undertakings (Protection of Employment) Regulations, known as TUPE, protect employment contracts when a business, part of a business or service provider changes ownership. Two types of changes invite protection:

  1. If a business is transferred from one employer to another such that the employer changes; or
  2. If a service provision changes.

The Employment Appeal Tribunal’s interpretation of the latter has received much attention recently.  Service provision changes are common where businesses utilise contract work in areas such as cleaning or security. At a time when contracting provides businesses with much needed flexibility, employers and employees both benefit from understanding the scope of the TUPE provisions for service provision changes.

What is a Service Provision Change?

TUPE 2006 Reg 3(1)(b) provides that there will be a Service Provision Change where:

  1. Activities cease to be carried out by a client on his own behalf and are carried out instead by a contractor (‘outsourcing’);
  2. Activities cease to be carried out by a contractor on a client’s behalf and are carried out instead by a ‘subsequent contractor’; or
  3. Activities cease to be carried out by a contractor on a client’s behalf and are carried out instead by the client (‘in-sourcing’).

Specifically excluded from the definition is:

  1. A contract for the supply of goods for the company’s use; or
  2. A contract carried out in connection with a single specific event or short-term task.

Employment Tribunal Interpretation

Aside from the core requirements, there are several additional factors that the employment tribunal takes into account regarding Service Provision Changes:

  1. What was the “activity” being carried out and was it the fundamentally or essentially the same both before and after the alleged transfer?
  2. Was there a group of formally organised employees who carried out the activity for that client within Great Britain?
  3. Was the activity being carried out actually a service or was it a supply of goods?

Recent cases suggest that the employment tribunal is inclined towards narrow interpretation of these elements:

Fundamentally or Essentially the Same Activity?

Nottingham Healthcare NHS Trust v Hamshaw & others – provision of care in a care-home was not the same as care in residents’ own homes.  Johnson Controls Ltd v Campbell & another – a contracted centralised taxi booking service was not the same as employed secretaries booking taxis.

A Formal Group?

Enterprise Management Services Ltd v Connect Up Ltd & others – fragmentation of a service between different providers after the change meant there was no organised grouping. Eddie Stobart Ltd v Moreman & others – employees working mostly on the business of one client did not necessarily entail a formal grouping in respect of services provided to that client.

Supply of Services not Goods?

Pannu & others v Geo W King (In Liquidation) & others – the relevant activity to be considered is that of the contractor (supplying parts) not the employees (assembling those parts).

If you would like more information regarding TUPE or any other Employment matters, Rollingsons has experienced lawyers who can advise you. Please contact Aneil Balgobin via e-mail or by telephone on 0207 611 4848.