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09th September 2014

TUPE service provision changes - change of client

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Many businesses will have come across the Transfer of Undertakings (Protection of Employment) Regulations, commonly known as “TUPE”.

Many businesses will have come across the Transfer of Undertakings (Protection of Employment) Regulations, commonly known as “TUPE”. Where TUPE applies, in very general terms all the employees who are employed in a business which transfers from one company (say, company “A”) to another (company “B”), for example on a sale of a business, will transfer automatically from A to B. They therefore become employees of B, and retain all their contract terms and accrued rights and liabilities. TUPE can also apply when an in house function, such as IT, security or catering, is contracted out by a company to a third party. This is known as a “service provision change”. If therefore company A (referred to as the “client”) contracts out, say, its security function to company B (a “contractor”), then the individuals employed by the client in the security team will ordinarily transfer to the employment of the contractor. In addition, where the services subsequently move from the contractor to a second contractor (often called “second generation contracting out”), TUPE may apply to transfer the security team to the new incoming contractor. TUPE is designed to protect the employment of employees who are caught up in a service provision change such as in this example. This however can cause problems for the new incoming contractor, and often the client as a result of indemnities contained in contractual documents between the client and the new contractor. A recent case however called Horizon Security Services Limited-v-Ndeze and Another has provided confirmation that TUPE will only apply where the services to be provided by the new contractor are to be supplied to the same client. In this case, a local authority (the client) had appointed a contractor to manage a business centre on its behalf. The contractor had appointed a subcontractor to provide security at the business centre, but terminated that contract when the centre was due to be demolished. The local authority (i.e. not the original contractor) engaged a different security company to guard the site for an interim period. It was held that, for there to be a service provision change, the client had to be the same client before and after the change of service provider. However, in this case the new security company was engaged directly by the local authority, rather than by the original contractor. This case will be of help to businesses who may wish to try to limit their exposure to the operation of TUPE by the use of contractors and subcontractors. For more information, contact either Clare Waller at our Cambridge office on 01223 461155 or Nick Hall at our Northampton office on 01604 233233. You can also click here to email Clare Waller or click here to email Nick Hall. For more information on our employment services click here.