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The Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) have created many a headache for in-house facilities managers and their service providers.
For several years, there has been great uncertainty over whether or not TUPE applies to service provision changes - for example, where there is a change of contractor or where an in-house service is outsourced. Significant employment liabilities can arise if TUPE does apply and so it is important to get this right.
Recent decisions are helpful and may make it possible to avoid TUPE service provision changes altogether.
The purpose of TUPE is to protect employees when the business that employs them transfers from one employer to another. There must be a “relevant transfer”. This occurs on either a business transfer or a service provision change.
If TUPE applies, then employees will automatically transfer on their existing terms and conditions to the new employer. The new employer will also inherit all employment-related liabilities.
Any dismissal because of TUPE is likely to be automatically unfair and any change to the terms of employment because of TUPE is likely to be void. TUPE also triggers obligations to inform and consult affected employees which if breached can lead to punitive compensation.
New contractors risk inheriting employees and associated employment liabilities if TUPE applies. Often they will seek indemnity protection or negotiate a reduced contract price to reflect those risks.
Service providers and in-house facilities managers who appoint them may benefit from avoiding the application of TUPE.
A service provision change is the most common type of TUPE transfer encountered by in-house facilities managers and FM firms when a property is sold.
Possible scenarios include:
In the first scenario, the same contractor would continue to provide the services at the property and so TUPE issues are unlikely to arise. The remaining scenarios used to be the cause of many a TUPE headache.
Decisions in McCarrick v Hunter and Taurus Group Ltd v Crofts, however, have clarified that where the identity of the client (for example, the property owner) changes at the same time as the identity of the contractor, there will be no TUPE service provision change.
Liability for redundancies or other employment costs will therefore stay with the old contract.
Even more recently, the Employment Appeal Tribunal (EAT) has followed the Court of Appeal in McCarrick and held in Horizon Security Services Ltd v Ndeze that the same principles will apply even if there is no property sale.
In this case, the client (a local authority) owned a business. It contracted with a managing agent, who in turn engaged a third party to provide security at the property.
The managing agent subsequently terminated its security contract and the client bypassed the managing agent and contracted directly with a new security company to guard the property.
The EAT held that because the identity of the client had changed (from the managing agent to the local authority) at the same time as the identity of the security company, there was no TUPE service provision change.
Such decisions are welcome news and mean that, with careful planning, in-house facilities managers and their service providers may be able to avoid a TUPE service provision change altogether. These cases do not, however, remove the TUPE headache entirely, and they may need to seek legal advice to check the position.
In particular, they should:
This article was written by Jessica Shemmings.
For more information contact Jessica on +44 (0)20 7427 6499 or email@example.com