TUPE – Service Provision Change case update

December 2011 saw a number of important TUPE related developments take place, with both the EAT and Court of Appeal handing down a number of judgments concerning Service Provision Changes (SPCs), company administrations and unfair dismissal. Of particular note amongst these cases were those relating to SPCs. We consider recent developments in this area and the law relating to SPCs before considering the most recent cases.

TUPE 2006 – is there a relevant transfer?

Under TUPE, there are two types of transfer where employees will obtain protection from dismissal:

• Business transfers
• Service provision changes

TUPE 2006 – in what situations will an SPC transfer arise?

An SPC is common in outsourcing contracts when:
• a service previously undertaken by an employer is awarded to a contractor (called ‘contracting out’ or ‘outsourcing’)
• a contract is assigned to a new contractor during a re-tendering process or
• a contract is taken back ’in house’ by the former client (called ‘contracting in’ or ‘insourcing’)

TUPE 2006 – is there an exception?

Two exceptions exist. If the contract is:
• for the supply of goods for the company’s use (eg a restaurant changing food suppliers) and/or
• carried out in connection with a single specific event or short-term task (eg a catering company being used to cater a large corporate event)

If either of these exceptions applies, the transfer will be exempted from TUPE.

Case law up-date

1. In Pannu v Geo W King Ltd, the EAT addressed a scenario involving the ‘supply of goods’ exception, when it had to decide whether workers on a manufacturing assembly line were providing services for the purposes of an SPC. The case concerned the supply of axle assemblies for vans built by a company within the General Motors group. The EAT acknowledged that whilst the overall manufacturing process was more than just assembly or components, it was still ‘wholly or mainly’ a supply of goods. Neither was the position altered by the fact that the purchaser of the assembled goods also paid for the components. The EAT concluded that workers on a manufacturing assembly line were not providing services for the purposes of a SPC.

2. In Hunter v McCarrick, the EAT had to decide whether activities carried out by different providers before and after the transfer had to be carried out for the same client for there to be an SPC under TUPE. Mr McCarrick had been employed by a provider of property services. The company which owned the properties became the subject of a winding up petition. Receivers were appointed by the lender who assumed control of the properties and appointed a new property services company. The EAT subsequently concluded that there could be no SPC when there was a change of client as well as contractor. Whilst the decision did not come as a particular surprise, it is nonetheless helpful in clarifying a point which can occasionally arise in outsourcing situations.

For details of these and other TUPE developments please click the link to the attached Table here.

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1 Response to TUPE – Service Provision Change case update

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