The recent case of Taurus Group Ltd v Crofts & another UKEAT/0024/12 confirms that the Transfer of Undertakings (Protection from Employment) Regulations 2006 (TUPE) do not apply where there is a change in service provider AND a change in the client.
Most businesses understand that TUPE needs to be considered whenever there is a change in contract provider. The concept of a Service Provision Change was introduced by TUPE 2006 and confirms that there will be a relevant transfer for the purposes of the Regulations whenever:
- A client ceases to carry our activities on its own behalf and assigns then to another person (or contractor) to carry them out on the client’s behalf
- The activities cease to be carried out by a contract on a client’s behalf and are instead carried out by another person (or contractor) to carry them out on the client’s behalf
- The activities cease to be carried out by a contractor or a subsequent contractor on a client’s behalf and are instead carried out by the client on their own behalf.
Despite the fact that the concept of a Service Provision Change was introduced to help employers understand the situations in which TUPE would apply, and the Employment Appeal Tribunal has confirmed that there should be a ‘straightforward and common sense application of the relevant statutory words to the individual circumstances’ there has been much litigation about what amounts to a Service Provision Change, and whether in fact, TUPE applies.
In Hunter v Carrick  IRLR 274 the Employment Appeal Tribunal found that on its ordinary meaning TUPE required the same person to be the same person before and after the change of contractor.
This approach was confirmed in The Taurus Group case where there was a change in the provision of security services at a building and the ownership of the building also changed hands.
This decision and the decision in the Hunter case are significant for second generation outsourcing transactions and also to commercial property transactions in general. The decisions essentially mean that where ownership or management of a commercial property changes hands at the same time as the facilities services are changed the facilities staff will not transfer to the incoming facilities contractor. This means that liability for redundancies and other employment costs will remain with the outgoing contractor and facilities providers will therefore need to factor this potential risk in to their contract with their client.
Whilst these cases appear to be good news for incoming facilities providers such as providers of cleaning and security, the Hunter case is currently being appealed and the Government are currently considering whether to remove the definition of a Service Provision Change from TUPE 2006. Employers will therefore have to watch this space for more developments in this area, but should still be comforted by the fact that the tribunals appear to be adopting a straightforward and common sense approach!
Bhayani Bracewell are employment law solicitors based in Sheffield and Doncaster.