During the late 1980s and early 1990s it became clear that when there was a change in the provider of a service, that change may well be governed by the Transfer of Undertakings (Protection of Employment) Regulations 1981 (TUPE). This meant that when for example local authorities outsourced their refuse collection services, TUPE applied. When TUPE was revised and became TUPE 2006, service provision changes were expressly included in the legislation. The Conservative party stated in April 2010, before the election, that they would seek to rein in these provisions, but the coalition government have now stated that they have no intention of changing TUPE.
The effect of TUPE applying to these types of contracts is wide ranging. One of the main provisions of TUPE is that all the employees employed in the undertaking which transfers have their employment automatically transferred to the new service provider on their existing terms of employment and that any changes made to those terms as a result of the transfer are likely to be ineffective. Further, any dismissal of an employee as a result of the transfer other than by reason of redundancy is automatically unfair, subject to their having 1 year’s service. All the rights and liabilities in respect of the employees will transfer to the new employer. TUPE also imposes a duty on both the old and new employers to consult with the employees.
Under TUPE 2006, where there is a service provision change the undertaking being transferred does not have to retain its identity and it does not matter that there are no assets transferring – the test is whether there is a change in the service provider. However, a couple of recent cases have thrown the scope of TUPE in service provision changes into doubt.
In the first case, OCS Group v Jones , the Employment Appeal Tribunal (EAT) had to decide whether TUPE applied to a change of service provider in a work canteen. Before the change the canteen had provided a full catering service; after the change there would only be a sandwich and salad bar. However, arguably the service was the same, ie feeding the employees of the company. The EAT held that there was no TUPE transfer – the provision of a salad and sandwich bar was a “wholly different operation” from the full canteen service. It seems therefore that although the Regulations do not require an undertaking to retain its identity, where there is a substantial change, the original undertaking loses ceases to exist and a new undertaking is born. As a consequence there is no transfer and TUPE does not apply.
This case has been followed by two other unexpectedly narrow interpretations of TUPE: Ward Hadaway Solicitors v Love and Law Society v SoS for Justice and the Office for Legal Complaints. In Ward Hadaway there was a change in the provider of legal services to the Royal College of Nursing. Originally the RCN had used a panel of law firms to provide legal services but following a review they decided to move all their work to one firm. However, the firms on the original panel would retain the jobs they had already been instructed on, but would receive no further instructions. The question was whether TUPE applied. The EAT held that because the panel firms retained the work upon which they had been instructed there was no work transferring and therefore TUPE did not apply. A similar conclusion was reached by the High Court in the Law Society case. This looked at the closure of the Legal Complaints Service, which dealt with the resolution of complaints ageist solicitors, and the introduction of the Legal Services Ombudsman. The Legal Services Ombudsman was taking responsibility for, amongst other things, the resolution of complaints against solicitors. Notwithstanding the similarity in the services before and after the change, the High Court ruled that the fact that the Legal Complaints Service was retaining its existing case load and that no existing cases were transferring to the Legal Services Ombudsman the change was outside the scope of TUPE.
In practice, it has always been notoriously difficult to determine in advance whether TUPE will apply to a particular service provision change. The pragmatic approach has always been that if there is doubt, assume it applies. Whilst each set of facts will be different, these cases do suggest that it may be possible to structure service provision changes so as to escape the rigours of TUPE. This is a notoriously difficult area of law and it is imperative that you seek advice if there is a service provision change and the likelihood of TUPE applying.
If you would like to talk through a situation you are dealing with, or if you need advice on any aspect of employment law, please contact any member of the Pure Employment Law team 01243 836840 or [email protected]