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Good Service (Provision Change)

4th October 2013

Your organisation has won two new contracts for work outsourced by new clients and you need to know whether the employees currently providing the service for the existing contractor will transfer to you under the TUPE Regulations.

Contract A is presently serviced by Contractor A using a single employee who carries out 100% of her work providing the service for your new Client A. She was specifically assigned by Contractor A do so. Although she may be a single individual, the fact that Contractor A made a conscious decision to service Client A in this way (rather than it being “accidental, coincidental or simply a matter of happenstance”) means that she is by herself “assigned to the organised grouping” of employees whose “principal purpose” is to service Client A and she will have the right to transfer to you. This was the situation in the recent case of Rynda (UK) Ltd v Rhijnsburger.

Contract B is presently serviced by Contractor B using employees X and Y, both of whom spend 100% of their working time providing the service to Client B. However, employees X and Y are “floaters”, could be asked to carry out work for any number of Contractor B’s clients and are therefore not specifically dedicated to Client B, even though they happen to have been doing so for at least the last year. In this case, there has been no conscious decision to organise employees X and Y to service Client B (it being “a matter of happenstance”) and they are therefore unlikely to have the right to transfer to you. This was the situation in the case of Seawell v Ceva Freight (UK) Ltd.

We can see from the above examples that a service provider must decide between workforce flexibility and workforce dedication. Although the former would allow you to move staff around to meet business needs, it would also mean that such staff would not transfer to a new contractor in the event that you lost the contract and you might then be saddled with redundancy costs in the absence of suitable alternative employment.

Finally, following the Government’s consultation on its proposal to repeal the “service provision change” rules from the TUPE Regulations, it recently announced that it would not do so and thus has listened to the 67% of respondents who said that removing the rules would create significant uncertainty as to whether the TUPE Regulations applied in any particular case.

The contents of this update are intended as guidance for readers. It can be no substitute for specific advice. Consequently we cannot accept responsibility for this information, errors or matters affected by subsequent changes in the law, or the content of any website referred to in this update. © Mundays LLP 2013.

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