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I say TUPE, you say 2p, let’s call the whole thing off!

April 8, 2011

What happens when people can’t agree whether TUPE applies to a service provision change? This is something that I have seen a lot of recently, although it is not a new phenomenon.

Scenario

Company A has a contract to provide services to a client, and over time this has become 75% to 80% of Company A’s business and turnover. Company A has scaled up considerably over time to service this client, and whether they employ dozens or hundreds, or even thousands of employees it is clear that the business is now based upon the work for that client and they would suffer horribly (and possibly enter insolvency) if they lost that contract.

Unfortunately Company A’s worst nightmare comes true, and they lose the contract, but there is a silver lining. At least the TUPE Regulations will take effect so that all of the staff they employ on that contract will transfer over to the new contractor. Or will they?

What happens when the new contractor and/or the client maintain that TUPE doesn’t apply? And maybe this situation has been sprung on Company A without warning; so what can they do about informing and consulting with employee representatives?

The simple truth is that when this situation arises, Company A is in a really bad position and there is no way of avoiding that fact. There is no easy way out, and every option available to Company A is full of risk and/or cost. But this wouldn’t be a very helpful blog if that were all I said about it.

The Law

The strict legal position is this:

  • TUPE will operate so as to transfer the employment of all employees assigned to that contract (Company A will have the best idea of who these are, although ultimately the deciding factors may rest with the employees themselves);
  • Those employees who are not assigned to the contract will not transfer. This might apply for example to some of the management team, whom although they spend most of their time on work related to the contract, they cannot be described as being assigned to it as their responsibilities are far wider.
  • TUPE will impact upon both the transferring staff (once we know who they are) and any retained staff who are affected by the loss of the contract (for example there may be necessary changes to duties or even redundancies that affect retained staff). Information and consultation is legally required with representatives of all of these employees (regardless of whether they transfer), if they are affected by the situation. 

So who is on the hook for the employment tribunal claims? Legally, all claims relating to the employees who should transfer (except those relating to failure to properly inform and consult) will transfer to the new contractor. From the date of the transfer, Company A can effectively treat them as employees of the new contractor.

Conversely, liability for those employees who don’t (and shouldn’t) transfer will remain with Company A.

The difficulty is that the only place where a definitive answer can be given as to whether an employee should or should not transfer is in a court or tribunal. So where the picture is not entirely clear, there will be an element of risk taking involved. This risk can be mitigated through the use of settlement payments and compromise agreements, but Company A is often not in a good position to use these methods given that it has just lost its biggest contract.

What to do

So that’s the law, but you can find that out anywhere. What Company A really needs is some practical help… “what do we do?” is the question they ask. So I answer…

In practice, if you are in Company A’s position you need to:

  1. First of all, identify all of the staff who are affected by the loss of the work, then split them into two groups, those who are assigned to the contract, and those who are not. (You may need the assistance of a TUPE expert to do this).
  2. Start consultation with representatives of the groups of affected employees (there are legal requirements for this process). An all-staff communication explaining the situation would also be helpful.
  3. Make contact with the new contractor, and inform them of the situation, and the details of the employees transferring. General details will be fine in the first instance, but this will need to be followed quite quickly by the legally required “employee liability information”
  4. Finally, if agreement cannot be reached with the new contractor, then Company A needs to make a judgement call about the employees in dispute. The decision over who to deem as transferring will depend on the specific circumstances, and should only be taken with proper advice. But there will be a risk whatever you do.

It is important to remember throughout this process is that judges and tribunals want to make decisions that protect the employees, and normally that means them transferring to the new contractor, regardless of what clever arguments the new contractor’s lawyers may come up with.

Have you had any experiences involving TUPE. Please share them by leaving a comment.

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4 Comments
  1. Shane Green permalink

    My company are currently trying to TUPE me to a self employed company with owner drivers. Which no one wants the hassle of running there own business as such! Can this be done? I also know that the other company (owner driver) will straight away give you redundancy notice once you’ve transferred across? I dunno the answers can anyone help? I’ve had about 8 different occasions with my boss with him trying to pressurise me into going Voulantary Redundancy as I’m the only driver out of 25 that’s not taken it?

  2. Hi Shane. If you go to see an employment lawyer, they will advise you of your rights in the circumstances.

  3. George permalink

    Hi there,the problem I have is the company I work with just now have lost the current contract,the contract finishes end of Jan,the company say tupe applies,the new company say tupe does not apply, where do we stand regarding this,your advice would be much appriciated.

    • Hi George. This is precisely the kind of issue that my article is referring to, but it isn’t possible to say what the right outcome is in your case. It sounds like you might be getting caught in the crossfire, and as an employee of the business (which I think is the perspective you are writing from) it is important that you take legal advice on your specific circumstances. I suggest that you try to find a local solicitor who will speak to you on an initial no cost basis (if possible), who will help you understand your rights.

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