The words "TUPE transfer" can strike terror in the hearts of organisations that are looking to take over a business or dealing with the transfer of a service provision. With outsourcing from the public sector on the increase in a drive to make cost savings, an increasing number of third sector organisations are tendering for services and having to quickly get to grips with legislation.
TUPE is designed to protect employees who find themselves being moved to a new employer when the service provision or undertaking they work in is transferred. The objective is to ensure that the employees' terms and conditions are protected and maintained under the new employer.
The obligations the business faces will be very different depending on whether it is the transferor, that is, the organisation transferring employees to another organisation, or the transferee, the organisation taking on the employees of a transferred service.
Until recently, the transferer and transferee could have had some certainty that TUPE would apply to a first or second generation outsourcing. This would apply where there was an organised grouping of employees situated in Great Britain, which has as its principal purpose the carrying out of the activities concerned on behalf of the client and the client intended that the activities will, following the service provision change, be carried out by the transferee.
Are we now seeing a change in the tide against TUPE applying to a service provision change? With the employment appeal tribunal holding that TUPE does not apply unless the activities carried out by different contractors before and after an alleged transfer of the same client (Hunter v McCarrick). The employment tribunal must also hold that a group of employees deployed on a particular activity will not constitute an "organised grouping of employees". Unless they are organised by reference to the requirements of the client in question (Eddie Stobbart Limited v Morman and Others), it seems that employees – and those managing the service provision change – face considerably more doubt as to whether or not TUPE applies.
In the Eddie Stobbart case, the employees who work principally on one contract during the day shift were held not to be an organised grouping of employees, because they were not a dedicated, autonomous team. To what extent should the transferer "badge" the employees?
Furthermore, where a service provision divides between two or more subsequent contractors, will TUPE apply? In some cases, the employment appeal tribunal has found that there is a service provision change within TUPE, even where a service has been split between two contractors (Kimberley Housing v Hambley and Others). In other cases, the employment appeal tribunal has found that a service was too fragmented to give rise to a service provision change where five old service providers were replaced by three new providers.
What difficulties does this cause for employees involved in outsourcing? These decisions introduce a new note of uncertainty, which creates commercial risk for transferers and transferees alike.
For those organisations involved in transfers out of the public sector they must also take into account the various codes of practice that apply and sit alongside the TUPE legislation. In particular, organisations must be mindful of the additional protection offered in the context of pension provision, a highly valuable benefit for employees and often a highly costly benefit for employers.
Kate Meadowcroft Partner, Employment and Pensions, Employment, DWF LLP. Kate will be running a workshop on TUPE at the ACEVO Conference.
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