TUPE and Service Provision Changes
Email Update 53
Since the new TUPE regulations came into force in 2006, it has been widely anticipated that in the cases of contracting-out, contracting-in or a change of contractor, it will be much harder for the incoming employer to argue that TUPE does not apply.
Under ‘old’ TUPE (pre-2006), the decision as to whether a TUPE transfer had taken place would depend upon whether there was an identifiable economic entity which retained its identity after the transfer. This meant that in contracting-out, contracting-in or change of contractor cases, it was often possible under the old law for the incoming employer to avoid the application of TUPE by performing the services in a different way.
Under ‘new’ TUPE, a relevant transfer takes place either if the old test is met or if the new ‘service provision change’ test is met. Under the ‘service provision change’ test, there is no explicit requirement for anything to retain its identity post-transfer. All that is required is a change of provider of a service and an organised grouping of workers whose principal purpose pre-transfer was carrying out the service now being transferred.
In the recent case of Metropolitan Resources v Martin Cambridge the incoming employer tried to argue that the requirement for retention of identity post-transfer should be implied into the ‘service provision change’ test. The Employment Appeal Tribunal firmly rejected this argument.
The Employment Appeal Tribunal held that a ‘common sense and pragmatic approach’ is required to determine whether there is a relevant transfer. The fundamental question is whether the activities pre and post transfer are ‘essentially the same’.
You can read the full text of the Judgment by clicking on the following link:
http://www.employmentappeals.gov.uk/Public/Upload/08_0286rjfhwwRN.doc
It now seems reasonably clear that where the question of how a service is to be delivered following a contracting-in, a contracting-out or a change of contractor is largely irrelevant to the question of whether TUPE applies.
As an outgoing employer, you can now be more confident that if you have an organised grouping of workers carrying out the activities being transferred, the party taking over these activities will have to take on your employees, regardless of how and where the activities will subsequently be carried out.
As an incoming contractor, you can be reasonably sure that liability for employing the people currently assigned to the contract will rest with you, even if you don’t need them. This makes it critical that you obtain as much information as possible about your potential employment liabilities before committing to the contract.
It may sometimes be possible for an incoming employer to dismiss some or all of the transferring employees after the transfer, but this is subject to very rigid conditions, upon which careful advice should be taken. In any event, liability for such dismissals will rest with the incoming employer.
The outgoing employer has a duty to provide ‘employee liability information’ about the workforce being transferred to the incoming employer at least 14 days before the transfer takes place.
Also, the incoming and outgoing employers have a joint duty to inform and consult with affected employees about the implications of the transfer and any ‘measures’ they anticipate taking in connection with the transfer. The penalties for failure to inform and consult are quite severe, with awards of up to 13 weeks’ pay per affected employee being possible.
The new Department for Business, Innovation and Skills (BIS), which has responsibility for employment laws, has published (June 2009) a new guide on TUPE. You can download the guide by clicking on the link below:
http://www.berr.gov.uk/files/file20761.pdf
TUPE remains arguably the most complex area of employment law and employers are well advised to take detailed advice from a specialist before entering into any transaction to which TUPE may apply. Just Employment Law is well-placed to assist employers with managing both the strategic and practical implications of a TUPE transaction.
For employers who have the benefit of our retainer service you can obtain bespoke advice to your particular circumstances without incurring any further charge.
For employers who do not have the benefit of our retainer service we would be happy to discuss your employment law issues with you and agree suitable terms.
