Plans to replace Tupe with more comprehensive coverage in respect of the contracting-out of services will have a big impact on facilities managers, says Sarah Lamont
29 April 2005
The government has published a consultation paper and draft regulations designed to replace the existing Transfer of Undertakings (Protection of Employment) Regulations 1981 (Tupe) which safeguard employees' rights when the business in which they work changes hands. Responses are requested by 7 June and the intention is that the final version of the revised regulations will come into effect on 1 October.
The government's proposal to provide more comprehensive coverage in respect of contracting-out of services, such as cleaning, catering and security, is of particular relevance to FMs and FM providers. In 1997 the European Court of Justice in Süzen v Zehnacker Gebäudereinigung GmbH Krankenhausservice held that, for there to be a transfer of an undertaking when a service contract changes hands, there must be a transfer of significant tangible or intangible assets or the new employer must take on a major part of the workforce in terms of their numbers and skills.
The effect of the Süzen decision was that, if a service relied on the skills of employees and used very few assets (for example, cleaning), the fact that no employees were taken on by the new contractor would be, at the very least, a relevant factor suggesting that Tupe did not apply. The case gave rise to much uncertainty in practice, with the UK courts and tribunals attaching varying degrees of significance to a failure to take on all or part of the outgoing contractor's workforce.
In an attempt to resolve this confusion, the draft regulations provide that employees will be protected when a service is contracted out, when there is a change of contractor or when the service is brought back in-house. The only condition is that, immediately before the change in provider, there must have been an organised grouping of employees which had the principal purpose of carrying out the service for a particular client. Whether or not the existing workforce is taken on by the incoming contractor is then irrelevant in assessing whether this condition is satisfied. In this respect, the draft regulations go further than the European Acquired Rights Directive requires.
The purpose behind this change is to create a level playing field for contractors, so that in the majority of cases it can be assumed that Tupe will apply when a service contract changes hands. There will, however, be some situations in which changes of service provider are not covered by the new wording.
In a departure from the government's original proposals, the new provisions will apply even when the incoming contractor envisages providing the services in a new or innovative manner. For example, instead of cooking food on the premises, a new catering contractor might decide to prepare meals centrally and then transport them to the site and reheat them. Provided the outgoing contractor had an organised team of staff whose main purpose was to provide the service, the draft Tupe regulations will cover this situation.
The supply of goods for a client's use is specifically excluded from the scope of the new rules on changes of service provider. An example given in the government's consultation document is where a client engages a contractor to supply sandwiches to its staff canteen. In this situation there will be no transfer if the contract is later switched to a different supplier.
One-off buying-in of services is also excluded. Even if the client engages a particular contractor on a number of separate occasions, the government intends that Tupe should not apply if this is simply coincidental or fortuitous. But if the parties' intention is that the arrangement should be ongoing, this exclusion will not apply. To take an extreme example, it would not be possible to side step the extended coverage of Tupe by entering into a succession of weekly contracts for the cleaning of an office building.
But, it is important to bear in mind that, in addition to the specific provisions on changes of service provider, the draft regulations also contain a 'general' definition of a Tupe transfer (which is very similar to the current law). This potentially applies when any type of business undertaking changes hands and requires the transfer of an economic identity which retains its identity after the transfer. So, if the specific provisions on changes of service provider do not apply in a particular case, it will still be necessary to consider whether the general definition is satisfied. This has the potential to blur some of the apparent clarity given by the new regulations.
The draft regulations also clarify and amend the effect of the existing rules in relation to transfer-related dismissals and changes to terms and conditions of employment. In particular, where there is an "economic, technical or organisational reason entailing changes in the workforce", it will be open to the parties to agree transfer-related contractual changes. At present, any changes to employees' terms and conditions are void if they are connected with the transfer of an undertaking.
There will be a new statutory requirement on the old employer (the transferor) to notify the new employer (the transferee) of the identities of the employees who will be transferred and of the associated rights and obligations that will transfer with them. A breach of this requirement may result in a complaint to the High Court and a fine of up to £75,000.
Where there is a failure to inform and consult employee representatives about the transfer of an undertaking, the transferor and transferee will be jointly liable for any award of compensation made by an employment tribunal. This means that employees can choose whether to take action against the transferor, the transferee or both.
Sarah Lamont is a partner in the employment department at Bevan Brittan Solicitors