Some recent cases in the Employment Appeal Tribunal have shown that the 'service provision change' under TUPE is not quite as wide ranging as one might think. This is of particular relevance to commercial landlords, but it could affect anyone selling a business in which services are outsourced.
When a service is outsourced, retendered or taken in house (a 'service provision change'), anyone who is part of an organised grouping of employees providing that service to a client will be protected by TUPE. For instance, if a business (the client) decides to change the cleaning company it uses from company A to company B, those people originally employed by company A as cleaners for the client will transfer to company B under TUPE.
Recent cases have examined what happens when the underlying business being serviced by the outsourced provider is sold or otherwise changes hands, and a new service provider is installed immediately following that sale or transfer.
The facts in Hunter v McCarrick are complex. In summary, Mr McCarrick was employed by WCP Management Ltd (and subsequently by the Managing Director, Mr Hunter) providing services to a property portfolio. That portfolio was taken over by receivers, who appointed King Sturge to provide these services in place of WCP. Mr McCarrick argued that his employment had transferred as part of a service provider change under TUPE, and the Employment Tribunal agreed.
But the Employment Appeal Tribunal overturned that ruling on the basis that the services were not contracted to the same "client". WCP serviced the previous owners of the portfolio while King Sturge serviced the receivers. Part of the decision hinged on how tightly to interpret the wording of the TUPE regulations. Because the concept of a service provider change is a UK construct (essentially gold plating the EU Directive) the EAT said that the wording should be given its ordinary meaning. Had this been a European law construct, a ‘purposive’ reading would have applied, meaning that it would have leaned towards protecting Mr McCarrick’s rights as an employee. A later EAT decision reached the same conclusion (Taurus Group Ltd v Crofts).
The decision is not yet final: Hunter v McCarrick is due to be considered by the Court of Appeal this month. Also, the government is currently reviewing the effectiveness of TUPE, including service provision changes.
The issue does contain some subtleties. For example, a traditional TUPE transfer may still apply to a change of service provider if the provision of services can constitute a transferring business which retains its identity.
Employers involved in outsourcing arrangements should avoid costly disputes by clarifying the potential liabilities and determining what will happen to outsourced staff when the relationship ends.