There will be a service provision change under TUPE where activities cease to be carried out by a contractor on a client’s behalf and are reassigned to a subsequent contractor to carry out those activities on the client’s behalf (Regulation 3(1)(b)(ii)).
In Taurus Group Ltd v Crofts, the EAT held that the activities carried out by the different contractors before and after a transfer must be carried out for the same client.
Mr Crofts was employed by Reliance Security Services Ltd as a security officer at a student accommodation building. When the building owner went into administration, Reliance lost the contract to provide security services to Taurus Group Ltd. At the same time, there was a change in ownership of the building. Reliance told Mr Crofts that he would be automatically transferred to Taurus under TUPE. However, Taurus disagreed and Mr Crofts brought a claim for unfair dismissal.
The employment tribunal held that Mr Crofts’ employment had automatically transferred to Taurus, reasoning that employees would otherwise lose the protection of TUPE every time there was a change in ownership of a building, managing company or managing agents. However, since this tribunal decision, the EAT held (in Hunter v McCarrick) that there cannot be a service provision change where there is not only a change in the contractor providing the services, but also a change in the client. Applying Hunter v McCarrick, the EAT therefore held in Taurus Group Ltd v Crofts that TUPE did not apply since Taurus was not providing the security services to the same client.
These decisions mean that employees may lose the protection of TUPE on some commercial property transactions, and unfair dismissal and other employment costs could remain with the transferor. In some cases, however, it might be possible to bring the transaction under the more general definition of a business transfer, provided that there is an economic entity which retains its identity before and after the transfer.
There is probably more to come on this issue. The Government is due to publish consultation on the TUPE Regulations, including the amendment or removal of clauses relating to service provision changes. In addition, Hunter v McCarrick is due to be heard by the Court of Appeal in October 2012.