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Published: December 06, 2006 |
Author: Michael Kay
Category: Legal | Total Views: 198 | Unrated
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The Transfer of Undertakings (Protection of Employment) Regulations 2006 revoked the 1981 Regulations in their entirety. The most significant change under the new regime is the extension of the definition of relevant transfer so that both standard business transfers and qualifying service provision changes are covered by TUPE 2006. The position in relation to standard business transfers is the same as under the 1981 regulations. However, TUPE 2006 now codifies some of the principles of standard business transfers which have evolved through case law. The government's rationale for implementing TUPE 2006 was that it would provide a ‘level playing field' by removing uncertainty as to whether or not the regulations apply upon an outsourcing or insourcing of services or a change of service provider. The certainty given will enable bids to be made for contracts on a true commercial basis, without the need for margins to be built-in to cover uncertainty.
Service Provision Change
A service provision change under the TUPE 2006 regulations means that employees will be entitled to transfer on the same terms and conditions as they enjoyed with their original employer. A service provision change occurs when a client who engages a contractor to do work on its behalf is either:
• reassigning such a contract, or
• bringing the work ‘in-house'.
There are two exceptions. It will not be a service provision change if:
• the contract is wholly or mainly for the supply of goods for the client's use, or
• the activities are carried out in connection with a single specific event or a task of short-term duration.
Under the 1981 TUPE regulations service provision changes could be relevant transfers if they also fell within the definition of a business transfer. In Ayse Suzen v Gebauderreinninging GMBH Krankenhausservice the ECJ established that upon a transfer in a labour intensive sector the regulations would only apply where the activity in question equalled a continuity of an economic entity. This would include a transfer of the majority of the workforce in terms of skills or numbers.
It is clear that some cases decided under the 1981 regulations would be decided differently under TUPE 2006. There may not have been a relevant transfer under the 1981 regulations if a replacement contractor took no employees or other assets from the old contractor and carried out the services in a different way, to the extent that no economic entity had transferred. Working out when a transfer had taken place in essentially service provision sectors was unpredictable and costly. TUPE 2006 is therefore welcome legal clarity.
Organised grouping of employees
TUPE 2006 will not apply to service provision change where employees are not working in a single economic grouping. The DTI guidance explains that the team should be ‘essentially dedicated to carrying out the activities that are to transfer (though they do not need to work exclusively on those activities)'. It then gives the example of a courier service serviced by various different couriers on an ad hoc basis (which would not qualify) in contrast to a service carried out by an identifiable team of employees (which would).
Nor will there be a service provision change if there is an organised grouping of employees but they do not have a principal purpose of carrying out activities for a particular client. For example, an IT telephone helpdesk may have a team of staff dedicated to providing a particular service but for 3 or 4 clients rather than one. There is no guidance as to the percentage of time spent by the employee, over what period, which is necessary to meet the ‘principal purpose' threshold. This is likely to be a fruitful area of dispute in the courts.
Maintaining identity not required for Service Provision changes
TUPE 2006 makes it clear that in order for there to be a relevant transfer an entity must retain its identity post transfer, but this is not a specific requirement under TUPE 2006 for service provision changes. One question that remains unanswered is whether a service provision change can occur even where the service does not retain its identity following the transfer because the incoming service provider changes fundamentally the way in which it provides the service.
Although TUPE 2006 offers welcome clarity there are also fairly obvious definitional problems that will keep the courts busy in the future. Indeed the case law that applied to TUPE 1981 will still to some extent prove useful. |
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