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22nd September 2016

TUPE Regulations and Service Provision Changes

Marketing segmentationThere has been plenty of debate recently about how the UK’s vote to leave the EU will impact on legislation that the UK has derived from the EU, and chief amongst this legislation is the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE Regulations). Whilst there may or may not be changes in this legislation in the coming years, it is important that, at least for the time being, the provisions of the (often complicated) TUPE Regulations, along with their impact on employment, are fully understood.

When do the TUPE Regulations apply?

The TUPE Regulations provide that, where there is a “relevant transfer” of a business or part of a business, the employment of the employees assigned to the organised grouping of resources or employees affected by the transfer will automatically transfer from one employer, the transferor, to another employer, the transferee. A “relevant transfer” will take place where there is either:

  • A transfer of a business or undertaking, where there is a transfer of an economic entity that retains its identity; or
  • A service provision change. This includes insourcing, outsourcing, and the change of a service provider.

For a service provision change to occur:

  • Activities should cease to be carried out by a person (“a client”) on his own behalf and carried out instead by another person on the client’s behalf (“a contractor”) (outsourcing); or
  • Activities should cease to be carried out by a contractor on a client’s behalf (whether or not those activities had previously been carried out by the client on his own behalf) and are carried out instead by another person (“a subsequent contractor”) on the client’s behalf (change of service provider); or
  • Activities should cease to be carried out by a contractor or a subsequent contractor on a client’s behalf (whether or not those activities had previously been carried out by the client on his own behalf) and are carried out instead by the client on his own behalf (insourcing)

If the TUPE Regulations apply to a particular transfer, employees are protected from suffering any detriment as a result of the transfer, and their terms and conditions of employment are also preserved. However there has to be a transfer or a service provision change before these protections are provided, and this was the situation facing the Employment Appeal Tribunal (EAT) in the recent case of C T Plus (Yorkshire) CIC v Mr J Black and others and Lincolnshire Road Car Limited t/a Stagecoach.

C T Plus (Yorkshire) CIC v Mr J Black and others and Lincolnshire Road Car Limited t/a Stagecoach (“Stagecoach”) [2016]

In this case, C T Plus (Yorkshire) had a contract with Hull City Council to provide a park and ride service. A competing service was set up by Stagecoach, and this led to the Council cancelling its contract with C T Plus (Yorkshire) from the day on which the Stagecoach service started. But was there a service provision change here, which would mean that the C T Plus (Yorkshire) employees working on that service would automatically transfer to Stagecoach?

The Employment Tribunal had initially said no, and the EAT agreed. There was no service provision change in this situation. Stagecoach was simply carrying out its own commercial venture on its own behalf. If there was to be a service provision change, they would need to have been providing this service on behalf of the Council as a client, and this was not the case.

In order for a service provision change to have taken place, the Council would have needed to have been in agreement with Stagecoach for them to carry out the park and ride contract, and it would have been clear that a transfer was taking place. Simply because the contract was cancelled because of a competing company introducing a competing service, does not result in a service provision change, and does not result in the protection of employment of the affected employees.

Guidance for employers

It is always sensible to take a common sense approach in these circumstances, and if in doubt about whether or not a transfer is taking place or whether the TUPE Regulations should apply, it is always best to seek clarification at an early stage. This could involve speaking with the contract provider, or seeking legal advice.

In the case where a transfer does not take place, this may result in the affected employees being subjected to the possibility of being made redundant or redeployed if the employer has that option available to it.

*All information is correct at the time of publishing

Anthony Fox

Napthens LLP – Employment Law Specialist

Anthony is one of our Employment Law Specialists from Napthens Solicitors. Read more

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