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Case law: Employees may be TUPE-protected on transfer of only part of a client's activities to a new provider

Businesses taking over only part of the services provided to a client by a previous service provider should check whether TUPE applies, so that they must take on the previous provider's staff on the same terms, a ruling makes clear.

Legal Alert

This update was published in Legal Alert - May 2016

Legal Alert is a monthly checklist from Atom Content Marketing highlighting new and pending laws, regulations, codes of practice and rulings that could have an impact on your business.

A local authority had contracted with an organisation to provide services but then split that work into two ('case management work' and 'intervention work') and put each out to tender separately. Different providers won each tender and they took over the respective category of work.

The issue arose as to whether the successful tenderer for the case management work had to take on any of the old provider's staff under TUPE. The TUPE rules are designed to protect employees in certain circumstances – by preserving their jobs and their terms and conditions of employment.

One of the circumstances in which TUPE applies is on a 'service provision change'. A service provision change can take place where a client engages a contractor to do work on its behalf, where work being done by a contractor is brought in-house or, as in this case, where a contract is re-assigned from an old to a new contractor.

In order for TUPE to apply on a change of service provision the activity carried on by the previous provider must continue to be carried on by the new provider, and there must be an 'organised grouping of employees' which 'has as its principal purpose the carrying out of the activities concerned on behalf of the client'. In those circumstances, the employment contracts of the employees assigned to the organised grouping of employees will pass to the transferee.

In this case, the new provider said that splitting the old provider's activities into two and giving each activity to a separate service provider meant the original activity did not continue under the new arrangements. TUPE did not therefore apply.

However, the Employment Appeal Tribunal (EAT) disagreed: it was not necessary that all activities carried out by an old provider should transfer to a single new provider in order for TUPE to apply. It could apply even if only part of the activity was transferred. The case management work had been carried out by the old provider and was now being carried out by the new provider. It therefore 'continued' as required under TUPE – and the TUPE rules therefore applied.

The EAT also found that there were two organised groupings of employees at the old provider, each of which had carried out case management activities and each of which could therefore transfer to the new provider.

It probably did not help the new provider's case that the successful tenderer for the intervention work accepted from the outset that the previous provider's staff doing that work should transfer to it.

Operative date

  • Now

Recommendations

  • Businesses taking over only part of the services provided to a client by a previous service provider should check whether TUPE applies, meaning they must take on the previous provider's staff on the same terms.

Case ref: Arch Initiatives v Greater Manchester West Mental Health NHS Foundation Trust & Others UKEAT/0267/15/RN

Disclaimer: This article from Atom Content Marketing is for general guidance only, for businesses in the United Kingdom governed by the laws of England. Atom Content Marketing, expert contributors and ICAEW (as distributor) disclaim all liability for any errors or omissions.

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