The Court of Appeal has now upheld an earlier EAT decision that TUPE only applies to service provision changes involving the same client. This meant that where the new owner of a building appointed new agents to manage the property after it took ownership, TUPE did not apply to transfer employees employed by the contractor appointed by the former owner to manage the building.
This decision addresses the second type of TUPE transfer introduced in 2006 to cover service provision changes, the first type being a transfer of an economic entity. The intention was to address the ambiguity as to whether TUPE applied in the context of outsourcing. Since 2006, TUPE transfers can arise where a person (the “client”) either outsources an activity, “in-sources” it or changes the identity of the contractor providing the outsourced activity, provided certain other conditions are met.
This case has important ramifications for organisations providing outsourced services, particularly in markets where the legal entity to whom the services are provided (the “client”) can change.
This is one of a number of cases which interpret regulations about service provision changes literally as opposed to purposefully. “Clients” should beware; this may signal a result to the pre- 2006 ambiguity, where disgruntled contractors argued that a change in service provider was a transfer of an economic entity.