TUPE loophole? Service provision changes and TUPE 2006
May 2008
In this article...
The background
On a transfer of undertakings, the Transfer of Undertakings (Protection of Employment) Regulations 2006 (“TUPE”) operate to protect the rights of employees by moving the obligations and actions of the old employer (the transferor) to the new employer (the transferee).Under TUPE 2006, in order for there to be a valid service provision change, there must be an organised grouping of employees that has as its principal purpose the carrying out of activities on behalf of the client, which continue for the incoming contractor providing services for the client.
Thomas-James and ors v Cornwall County Council and ors (unreported) is one of the first cases to consider the application of TUPE 2006 on a service provision change.
The facts
Cornwall County Council (“the Council”) was one of 17 organisations which contracted with the Legal Services Commission (“the LSC”) to supply free legal advice through a national telephone helpline. Each contractor was allocated a certain number of hours coverage to provide, and when calls were received, they were randomly allocated to an advisor with the appropriate legal specialism. The Council had a team of advisors dedicated to servicing the LSC contract.In September 2006, the LSC commenced a re-tendering exercise. The Council decided not to tender for the new contract. When the process was complete, the number of contractors had reduced from 17 to 9, and hours were re-allocated to new or ongoing contractors.
An Employment Tribunal was asked to consider, as a preliminary issue, whether these circumstances amounted to a relevant service provision transfer under TUPE.
The decision
The Employment Tribunal (“ET”) held that there was no relevant transfer. In coming to its decision, the ET noted that for a transfer of service provision it should be possible to identify:
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the particular activities performed by the transferor contractor; and | |
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a nexus between the activities carried out by the transferor contractor and the activities carried out by the transferee contractor. | |
The ET found that when the new LSC contract commenced, the activities performed by the contractors continued to be randomly allocated, but to the 9 new and ongoing contractors rather than the previous 17. As the Council’s allocated hours had been spread amongst the new and ongoing contractors, there was no identifiable nexus between the activities that were carried out by the Council prior to April 2007 and the performance of activities after that date.
The ET was careful to point out that this decision was reliant on the activities being randomly allocated. The decision may have been different had the activities been allocated by the particular location of the contractor, or even alphabetically.
What does this means for me?
This decision suggests that:|
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if contractual activities are dispersed amongst various contractors after a service provision change, there may be no identifiable nexus between the outgoing transferor and incoming transferee; | |
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such a “nexus” is essential if TUPE is to apply; but | |
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much will depend upon the way in which the activities in question are organised. |
It is also important to note that this is only a first instance decision, and it is open for a future tribunal to come to a different conclusion.
Indeed, the Employment Judge in this case was referred to another Employment Tribunal decision, Hambley and ors -v- Leena Homes and ors (unreported), which found that TUPE did apply to a service provision change, where a single contract was split between two incoming contractors. In that case, the ET apportioned liability under TUPE between the two incoming contractors. This was not a practical option in Thomas-James, due to the large number of ongoing and new contractors and the impossibility of tracing to which contractor the Council’s hours had been transferred.
Hambley was heard by the Employment Appeal Tribunal on 24 April 2008, and we will update you when the decision is published.
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