When a business changes owner, its employees may be protected under the Transfer of Undertakings (Protection of Employment) Regulations (TUPE).
Under TUPE, it is the responsibility of the new employer to take over employment contracts, but what about in the case of ‘service provision changes’, such as where activities cease to be carried out by one employer and move to another firm entirely? Here’s a closer look…
Since 2006, it has been clear that TUPE can apply to ‘service provision changes’, and can be in the case of a client contracting out services, changing providers, or bringing the workload back in-house. Common examples are seen in sectors such as cleaning and catering – but it may be possible for professional services to be covered by the regulations, too.
Such protocols apply to service provision changes where there is an organised grouping of employees which has the principal purpose of carrying out the activities which will continue, and not be related to a specific event or of short-term duration, and aren’t wholly, or mainly, the supply of goods.
Legal services will be covered where they meet these requirements. It is not hard to imagine an example whereby a firm has a specific team employed to work solely on one large client’s work.
If the regulations apply, affected employees will automatically transfer to the new service provider, but they must be informed and consulted about the transfer, as well as any measures the new employer intends to take, and they are protected from dismissal or changes to their contracts.
TUPE in practice – tribunal claims
In Royden and others v Barnetts Solicitors ET 2103451/07 an employment tribunal considered the application of the regulations to a situation where one firm lost legal work it carried out, on behalf of a Building Society, to two other firms.
The tribunal decided there was a relevant transfer for the purposes of the Regulations, because the activities ceased to be carried out by the original firm, and instead would be carried out by Barnetts.
Further, the tribunal held that even though the employees didn’t focus exclusively on the work which was transferring, there was an organised grouping of employees whose principal purpose was the carrying out of activities and two employees were assigned to this organised grouping.
As such, the two employees therefore transferred to Barnetts and were subsequently deemed to be automatically unfairly dismissed, with Barnetts having failed to inform and consult with them.
A further case, Ward Hadaway Solicitors v Love and others UKEAT/0471/09, considered whether the regulations applied where a client went to tender for its work and a new firm won the bid.
In this case, there was a run-off of work for a period of around six months for Ward Hadaway – who would not receive new work. While there was an organised grouping of employees carrying out the work because the activities didn’t cease – and new work would be carried out differently – there was no service provision change.
Things to consider for employers
Bearing in mind the potential for TUPE to apply, firms should always consider the following when winning or losing work:
- Where winning work which will be a regular service for a client, do due diligence in respect of who is already carrying out the work, and whether there is a risk any employees of that firm could argue they transfer with the work.
- Where carrying out work for clients, to prevent the application of TUPE, no employees should be identifiable as being assigned to the client with their principal purpose being the carrying out of those activities.
- Where there is any claim that employees should transfer, consider whether the activities being carried out by the firm are different to those being carried out by the outgoing firm.