The Transfer of Undertakings (Protection of Employment) Regulations   (TUPE) preserve employees' terms and conditions when a business or undertaking, or part of one, is transferred to a new employer.

A failure to identify when the Regulations apply can have severe financial penalties.   Compensation can be awarded for unfair dismissal and the failure to consult.

 

This Newsletter provides guidance in order to help understand the Regulations and specifically the 2006 changes which introduced a widening of the scope of the Regulations to cover cases where services are outsourced, insourced or assigned by a client to a new contractor (described as ‘service provision changes’).  

 

‘Service provision changes’ concern relationships between contractors and the clients who hire their services. Examples include contracts to provide such labour-intensive services as office cleaning, workplace catering, security guarding, refuse collection and machinery maintenance. Equally, the Regulations have also been found to apply to professional services, such Solicitors assigned to conveyanceing work.

 

The changes to these contracts can take three principal forms:

 

1)          where a service previously undertaken by the client is awarded to a contractor (a process known as ‘contracting out’ or ‘outsourcing’);

 

2)          where a contract is assigned to a new contractor on subsequent re-tendering; or

 

3)          where a contract ends with the service being performed ‘in house’ by the former client (‘contracting in’ or ‘insourcing’).

 

The Regulations apply only to those changes in service provision which involve ‘an organised grouping of employees … which has as its principal purpose the carrying out of the activities concerned on behalf of the client’. This is intended to confine the Regulations’ coverage to cases where the old service provider (ie. the transferor) has in place a team of employees to carry out the service activities, and that team is essentially dedicated to carrying out the activities that are to transfer (though they do not need to work exclusively on those activities). It would therefore exclude cases where there was no identifiable grouping of employees. This is because it would be unclear which employees should transfer in the event of a change of contractor, if there was no such grouping. So, if a contractor was engaged by a client to provide, say, a courier service, but the collections and deliveries were carried out each day by various different couriers on an ad hoc basis, rather than by an identifiable team of employees, there would be no ‘service provision change’ and the Regulations would not apply.

 

Broadly speaking, the effect of the Regulations is to preserve the continuity of employment and terms and conditions of those employees who are transferred to a new employer when a relevant transfer takes place. This means that employees employed by the previous employer (the ‘transferor’) when the transfer takes effect automatically become employees of the new employer (the ‘transferee’) on the same terms and conditions (except for certain occupational pensions rights). It is as if their contracts of employment had originally been made with the transferee employer. However, the Regulations provide some limited opportunity for the transferee or transferor to vary, with the agreement of the employees concerned, the terms and conditions of employment contracts for a range of stipulated reasons connected with the transfer.

 

Finally, we have recently started to see how Tribunals are dealing with whether a service provision change has occurred.   It is clear that Tribunals will take a wide view of whether the revised Regulations apply.