What is a ‘relevant transfer’ under TUPE?

A ‘business transfer’ takes place if a business or undertaking or part of it (which is an economic entity) changes hands and retains its identity. The business or undertaking must also be situated in the UK before the transfer takes place.

Thus for a business transfer there must be:

• an economic entity;
• that transfers; and
• which retains its identity.

In many cases there will be little doubt that a TUPE related business transfer will exist.

For example, the sale of a convenience store owned by Mr A to Company B, provided it continues to be operated as a convenience store by Company B, will be a business transfer.

Likewise if Mr A’s store also had a separate area dedicated to providing dry clearing services and Mr A sells this part of his business including any stock, outstanding customer orders and customer details this will also be a business transfer of part of a business.

The situation may well be different if however Mr A sells his store and it becomes a flower shop or say a restaurant after the sale. Here it is likely that the convenience store has not retained its original identity and there would be no business transfer and the employees employed by the Mr A would all be at risk of being dismissed for redundancy and would probably have no claims of unfair dismissal to bring.

Service provision changes are a feature now of most out sourcing contracts, for example a contract to clean a school. The relevant TUPE regulations are not easy and considerable case law has tried to clarify when and how a service provision change will take place.

A service provision change applies to an initial (or ‘first generation’) outsourcing, a subsequent (or ‘second generation’) outsourcing or an in-sourcing of a contract. It does not apply to the supply of goods or a ‘one-off’ contract, say, to install a piece of computer software.

In simple terms, there will be a ‘service provision change’ when contractor A is engaged to do work on behalf of a client, who later engages a new contractor B to carry out the same work, or when the client brings the work in-house. In all three events the employees who are employed to do the work will have their contracts of employment automatically transfer to contractor B or to the client, if the work is brought in-house.

So, taking the school cleaning example: the school has decided to change its cleaning contractor to a new contractor because the school is unhappy about the standards of cleaning being done. When the contract and work is taken on by the new contractor the existing cleaning staff automatically transfers to the new contractor’s employment on the same rate of pay and on the same terms and conditions of employment. This means of course the school still has the same staff doing the cleaning but the new contractor will no doubt be expected to exercise greater supervision over them to improve the standard of cleaning!

A service provision change can apply to one or more employees working on the contract but they and the work must be situated in Great Britain. Generally speaking, for there to be a service provision change, there must be a group of employees who mainly or solely work on the contract that is transferred. Again, there can be difficulties if the contract is split between one or more contractors.

Deciding if there has been a relevant transfer can be complicated. It is also worth remembering that employment tribunals must interpret the provisions of TUPE with a view to protecting employees and their employment. There have been, however, some very unusual decisions so you would be well advised to take legal advice from the TUPE experts at Quantrills if you are facing a TUPE related problem.