Will TUPE apply where a packing or service provision contract is transferred?

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How a growing trend in the Employment Appeal Tribunal (EAT) over the last two years has produced decisions which make the interpretation of TUPE simpler and more certain.

In its call for evidence on reforming the 2006 Transfer of Undertakings Regulations (TUPE), the Government suggests that the level of protection now given to employees involved in service provision changes could amount to "gold-plating" the rights conferred by the underlying EU directive.

TUPE is designed to protect the rights of employees where a business is sold or where there is a change of service provider. When it applies, the employees working in the business or delivering the service are transferred to the new owner or service provider with their terms and conditions unchanged.

The Government has been concerned that too generous an interpretation of these provisions is bad for business. However, two recent cases from the Employment Appeal Tribunal (EAT) could be seen as redressing the balance in the employer's favour. The first of these cases involves workers at a meat packing warehouse.

After their employer lost out on a meat packing contract to a competitor, staff working full-time servicing the contract expected to transfer to the new contractor since this appeared to be a service provision change under TUPE. However, the EAT said that it was not enough that these workers happened to be working for the customer involved before the change of service provider.

TUPE would apply only if those workers had been deliberately grouped to work for that customer. In this case, since it was more by chance than design that they were organised in that way, TUPE did not apply.

A second case involved two separate groups of meter readers whose employment was transferred when the contract they were working on moved to an organisation which had adopted a franchise model to deliver its meter reading service.

Instead of engaging individual workers directly, the new provider required its meter readers to provide their services using a corporate franchise model. Most of the companies involved were owned by a single meter reader. Assuming these arrangements were not a sham, the EAT said that the meter readers working for the transferee via a franchised company could not be regarded as part of its workforce, as opposed to the new meter readers transferring from the previous contractors.

It followed that the dismissal of the transferred employees who were not willing to work on a franchised basis was not automatically unfair, since the reason for dismissal was the transferee's need to reduce its workforce rather than being directly transfer-connected.

Of course, not all service provision cases go the employer's way. However, there appears to be a growing trend in the EAT over the past year or two to produce decisions which make the interpretation of TUPE simpler and more certain, and this often works in an employer's favour.

For more information about these and other recent TUPE cases, please contact James Kidd

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