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TUPE- Service Provision Change, has there been any?

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In our TUPE- How to Comply article last month, we explained that TUPE obligations apply on two types of transfer- a transfer of business and a service provision change.

A service provision change occurs when there is reassignment or transfer ‘in-house’ of a sub-contract where a client has engaged with a contractor to do work on its behalf.

Where a service provision change has occurred, the employment contracts of those employees who were assigned to providing those services, will automatically transfer to the new supplier of those services under the existing terms.

When does service change provision apply?

The definition of service change provision under TUPE covers the following changes;

Please refer to the supporting document for further clarification.

The Employment Appeal Tribunal (‘EAT’) has provided guidance on how to assess whether there has been a service provision change for TUPE purposes by asking the following key questions;

  1. What are the relevant ‘activities’?;
  2. Do the activities fall within one of the scenarios above?; and
  3. Prior to the service change, was there an organised grouping of employees?

Relevant ‘activities’

The activities need to be ‘fundamentally’ same as those that were carried on prior to the service provision change and for the same the same client. This is looked at in relation to whether the activities have ‘retained their identity’ following the transfer.

Example: A sandwich bar and a catering company were found to be ‘wholly different’ activities- the fact that both relate to the provision of food did not make them the same activity.

Employment Tribunals have historically taken a very narrow approach in identifying if the services are the same, which will be specific to the facts of each case.

In analysing the first limb, a Tribunal would look at any change to the contract in relation to the size or scope of the contract and whether there has been any fragmentation-i.e. the activities are split across numerous new contractors. Reduction or fragmentation of a contract can often make it difficult to identify where, and if, the activities have been reallocated. Where this cannot be identified, the activities will not be found to be the same.

Example:

The identity of the client on whose behalf the activities are being carried out should also remain the same. It is only the identity of the person who is providing the services which can change. This is particularly relevant when a company goes into administration- services carried out on behalf of administrators following a company entering administration, will not necessarily be on behalf of the same client. 

Organised grouping of employees

Which employees are assigned are not always easy to identify. Only employees who are assigned to the provision of the affected services immediately before the transfer, who will automatically transfer to the new provider.

TUPE defines the affected employees as those who are ‘employed and assigned to the organised grouping of resources of employees subject to the relevant transfer’.

The principal purpose of the organised group of employees should be delivering the affected services. This will be a question of fact for the Tribunal and will depend on a number of factors including taking into account the percentage of an employee’s time spent working on the relevant activity, although this is not always a conclusive factor.

The employees must have been intentionally organised for the purpose of delivering the services. Case law has identified that where employees are grouped by way of shift pattern, or job function rather than by client, there is unlikely to be an organised grouping for TUPE purposes.

Examples-

What next?

Where the service change provisions are met, the obligations of TUPE will apply to both the new service provider and the previous service provider. Service change provisions therefore broaden the scope of scenarios in which the TUPE provisions and obligations apply. Failure to recognise a service provision change could lead to a breach of TUPE obligations and open an employer up to claims for unfair dismissal.

If you want to learn more about TUPE, we are hosting an introductory seminar on TUPE on 28 June 2016. Click here for more details and to register your interest.

If you want to discuss TUPE and want to understand how it might apply to your business, please do not hesitate to get in touch with Sarah Tahamtani.

Our next article in our TUPE series will look at the TUPE implications in insolvency situations will be published later this month.

Disclaimer: Anything posted on this blog is for general information only and is not intended to provide legal advice on any general or specific matter. Please refer to our terms and conditions for further information. Please contact the author of the blog if you would like to discuss the issues raised.