Open-access content Wednesday 22nd February 2012 — updated 3.30pm, Tuesday 26th May 2020
How can facilities management suppliers mitigate the risk of falling foul of the TUPE regulations?
23 February 2012
The broad effect of the Transfer of Undertakings (Protection of Employment) regulations (TUPE) is to preserve the continuity of employment and the terms and conditions of those employees who are transferred to a new employer. It also contains a number of obligations upon the transferring employer (the transferor) and the receiving employer (the transferee) to inform and consult with affected employees.
How it applies
Briefly, for there to be a transfer under TUPE there must be:
- a business or "undertaking" capable of transfer that does in fact transfer from one employer to another, retaining its identity; and/or
- a change in contractor where services carried out by one service provider cease and are carried out instead by another (in other words, a "service provision change").
Thus, for example, when outsourcing a service for the first time, FM must ensure that their businesses fulfil their obligations and responsibilities to any transferring employees and fully disclose all necessary information to any new employer in accordance with TUPE.
Whether employees are within scope will always involve an assessment of the individual circumstances, but it is important to note that even though employees might not be operational or might be employed by a different entity, TUPE may nevertheless apply to them. For an FM, the question of exactly when TUPE does and does not apply can be challenging. This is why it is imperative to engage specialist legal and HR teams prior to any change of service provision or transfer of employees.
Key point: Failure to spot a TUPE risk is at the very nub of most TUPE disputes. It is safer to assume TUPE will apply even if in doubt as to whether TUPE does in fact apply.
Often in the rush to transfer services to a new service provider, time is limited. At contract transition, commercial and operational mobilisation due diligence exercises must work in synergy with the HR due diligence process to discharge legal duties, protecting contractual terms by way of obtaining the right employee information, identifying risks and liabilities early on.
More often than not, customers and suppliers will supplement the fundamental position under TUPE by agreeing warranties and indemnities that go to (among other things) the conduct of the parties and the apportioning of liability, both on entry and exit. It is not a case of leaving the due diligence process solely for HR to sort out on their own; FMs need to initiate early discussion between all parties involved so as to indentify the commercial/monetary impact of TUPE on their organisation.
Key point: Seek a warranty when you want the other party to confirm that certain information they are giving you is correct.
For example, you will want to ensure that the information about the pay and benefits of transferring employees is accurate. If it turns out that it was inaccurate you will have a claim for damages against them, although this will be subject to an obligation to mitigate the ?loss suffered.
Seek an indemnity where you want a guaranteed remedy of reimbursement in respect of a particular liability. For example, if an employee has a claim that arose prior to their transfer. In such instance and under the indemnity, the client will reimburse the service provider's costs of dealing with ?this claim and any compensation ?it has to pay.
With any change of service provision there is frequently the likelihood of it affecting staff and their roles. Change does not come without a cost but the cost can be minimised when dealing with staffing issues related to outsourcing by managing this professionally and with the input of professional advisors to assist you during the process.
The mistake many firms make is at the very beginning by not explaining to staff that they are looking at ways to minimise costs which "may" result in changes to the way a process or function is run. By leaving this to the end of the process, it can potentially take longer to deal with and end up costing your organisation more.
For example, when pitching for a new bid ask yourself:
- are the services being provided for a single client
- is there going to be a designated team focusing mainly on that client's work; and/or
- are we taking the services back from an external provider, or moving them out to a new provider, or transferring between outside providers?
1. Effective communication, due diligence and legal advice is vital at any stage of the TUPE process.
2. TUPE often presents significant uncertainties on exit, so it is best to deal with it at the outset. Ensure you do your due diligence (both legal and HR) and that you have secured (or provided only those) indemnities that are absolutely necessary in order to protect your legal and contractual position in the event ?of any claim.
Tony Thiaray is a commercial lawyer at Cushman ?& Wakefield facilities management