Exceptions to the rule – and TUPE is no different!

3rd September 2014

Exceptions to the rule – and TUPE is no different!

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The Transfer of Undertakings (Protection of Employment) Regulations 1996 are complex.  Their purpose is to protect the employment rights of employees in situations where there is sale of a business or part of a business as a going concern, or if there is an outsourcing of services (or a change of outsourced service providers).

If TUPE applies, then the employees who are directly engaged either in the business or provision of those services are transferred either to the new owner or service provider.  They are entitled to the benefit of their old terms and conditions of employment and their continuity of service is unbroken.  Any liabilities relating to those employees also pass to the new owner or service provider.  Understanding when TUPE may apply is therefore critical.

As with anything, there are exceptions to the rule.  When it comes to a service provision change, TUPE will not apply where the client for whom the services are provided has changed, nor where the contract in question relates to a task of ‘short term duration’

In Horizon Security Service Ltd v Ndeze and Another, Mr Ndeze worked as a security guard at the Alpha Business Centre, which was a serviced office complex owned by the London Borough of Waltham Forrest.  The business centre was managed by Workspace Limited.  Mr Ndeze was employed by the PCS Group, who were engaged to provide security services for Workspace Plc.  Workspace gave PCS notice that the business centre would be closing, because it was due to be demolished and turned into a supermarket. The Borough decided to retain the site and engaged a different security contractor company, Horizon Security Services Ltd (Horizon) to take care of the site for a fixed period of time (8 to 9 months). Mr Ndeze and other employees of PCS argued that their employment should have transferred to Horizon, arguing that this amounted to a service provision change under TUPE.

The Employment Appeal Tribunal (EAT) referred to the rule established by the Court of Appeal in Hunter v McCarrick, in that the client for whom the services are provided must remain the same for a service provision change to apply. This was not the case here, as PCS was engaged by Workspace Plc and Horizon by the Borough, respectively. In addition, the EAT referred to the fact that the contract provided to Horizon was for a fixed term, and was only in effect until the site’s demolition and therefore was of short term duration; thus the employees were not entitled to transfer to Horizon.

Comment:  It pays to look at the different scenarios that may arise at the end of a contract.  It is not always be the case that TUPE applies where a site or property is sold, or if the end client changes.  It highlights that the effects of TUPE have been limited, especially in relation to commercial property transactions, since ownership or management of a commercial property often changes at the same time as the subcontractors providing facilities services at the property. This may mean that if you enter into a contract for the provision of management services, for example, you need to consider the possibility that at the end of the contract, TUPE might not apply, leaving you with liabilities that will not transfer – most notably redundancy and notice costs.  It may be possible to negotiate a degree of protection into the contract for those liabilities, but that will of course depend on your negotiating position at the outset of the contract.

If you would like legal advice from either an employment or commercial perspective please contact Andrew West, our Employment Lawyer or Martin Whitworth our Commercial Property Lawyer. We have offices in Ipswich, Hadleigh and Felixstowe.

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