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Managing agents and property service companies who employ staff to provide services such as security, maintenance, cleaning or caretaking to buildings should take note: if the landlord/owner terminates their service contract and engages another agent or service company their staff may well transfer automatically to the new service provider if the Transfer of Undertakings (Protection of Employment) Regulations 2006 (“TUPE”) apply. Similarly, if the landlord directly employs security guards or cleaning staff and then decides to contract out the service, TUPE is likely to apply.
Importantly, on the sale of a property in certain circumstances, the services of such security, maintenance , cleaning or caretaking staff may also have rights under TUPE to follow their work.
TUPE applies where there is a “relevant transfer”, either where a business or part is sold (a business transfer) or where there is a change in service provider (a service provision change (SPC)). It is important to be aware of this, because there are a number of legal obligations which arise if TUPE does apply. There are financial consequences if they are not complied with. This article focuses on the SPC aspects and their application to staff who provide services to buildings through managing agents and property service companies.
Very briefly, there are three types of SPC; where a service is outsourced (by the client to a contractor), it is reassigned (second generation outsourcing) or it is brought back in-house (in-sourced). However, if a property is sold or leased, but there is no change in the managing agent or service provider, there would be no TUPE transfer as the employees continue to be employed by the same employer.
In order for a change in activities to qualify as an SPC there are other conditions, which must also be satisfied:
This is a complicated area of law and there is a great deal of litigation concerning the application of TUPE. If this is not properly considered in advance, there are significant implications and consequences. It is important to be aware of these. Broadly, if TUPE applies:
It is important for any service company involved in a change of service provider to take specialist employment advice on whether TUPE is likely to apply, irrespective of whether they are the transferor or transferee. This will put them in a good position to assess the likely cost consequences and to consider what provisions and protection, including indemnities, they will need in any outsourcing agreement.
This article was written by Emma Bartlett.