A recent decision of the Employment Appeal Tribunal (EAT) in Taurus Group Ltd v Crofts & another confirms that where there is a change in service provider and a change in client, there is no relevant service provision change under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE).
Mr Crofts worked as a security officer at student accommodation where Reliance, his employer, was a contractor providing security services. When the managers of the property changed, Reliance lost the contract at the site and Taurus took over as the new contractor. Reliance informed Mr Crofts that his employment automatically transferred to Taurus under TUPE. Mr Crofts disputed this, and following his subsequent dismissal he brought a claim for unfair dismissal against both companies.
TUPE provides that a relevant service provision change occurs where activities cease to be carried out by one service provider on a client’s behalf and are reassigned to another provider. Accordingly, had Reliance lost the contract to Taurus, but the property managers remained the same, it is likely there would have been a straightforward TUPE transfer of Croft’s employment to Taurus. However, in this case there was a change in both the service provider and the client in receipt of the service.
The Employment Tribunal initially held that there had been a service provision change under TUPE. This decision was on the basis that to have held differently would mean that contractor staff would not be protected by TUPE where a contractor changed at the same time as a change of ownership or change of managing agent. The EAT, following its recent decision in Hunter v Carrick, overturned this decision. On its ordinary meaning, TUPE requires the same entity to be the client both before and after the change of contractor. A purposive interpretation of the Regulations was not necessary, and there should be a straightforward and common sense application of the statutory words. Accordingly, there was no relevant service provision change in this scenario.
Impact for employers
- This decision is particularly relevant for commercial property transactions. Where ownership (or management) of a property changes at the same time as outsourced services, contractor staff will not necessarily transfer to the new provider. However, whilst there may not be a service provision change under TUPE, employers should be aware that there may still be a traditional business transfer. The Government has announced that it intends to review TUPE and one potential outcome of this might be the removal of the service provision change definition altogether. If this is indeed the result, there will be a need to revert to the traditional business transfer definition in all cases in any event.
- The decision in Hunter v Carrick, which prompted the EAT’s approach in this case, is due to come before the Court of Appeal in October this year. Accordingly, before incoming service providers in similar circumstances can presume that they are free from inheriting staff, they should watch this space for any further developments.