The Transfer of Undertakings (Protection of Employment)
Regulations 2006, better known as TUPE, were designed primarily to
protect workers whose companies change hands. TUPE makes sure that
their jobs transfer to the new business owner.
TUPE also applies, though, when one company takes over
responsibility for the provision of services previously done by
another. In those cases the liability for the people carrying out
the work transfers from the old service provider to the new
one.
The Regulations were at the heart of a case involving building
society Britannia. It switched law firms, taking its work from Lees
Lloyd Whitley to Barnetts.
An Employment Tribunal has ruled that some of the employees who
worked on Britannia jobs were entitled to employment at the new
firm under TUPE. The employees objected to the distance they would
have to travel to work there. They resigned and sued for unfair
dismissal.
The dispute is the first major case in which TUPE has been
applied to professional services firms and it could change the way
that companies deal with their external lawyers said Michael Ryley,
an employment law expert at Pinsent Masons, the law firm behind
OUT-LAW.COM, and author of the book TUPE: Law and Practice.
"TUPE has always applied to professional services, but a lot of
people hadn't realised that," said Ryley. "In fact when TUPE was
reviewed in 2006 there was a discussion about whether professional
services should be taken out of scope, but they weren't. It is that
decision that is coming home to roost."
The application of TUPE means that clients of law firms could
find themselves changing firms only to have the same lawyers as
before work on their accounts.
This can happen when employees of the outside firm are
considered to be 'assigned' to a single client.
"There is no definite answer on what that means. Generally the
risk of employees at a supplier being assigned to a client
arises if they spend more than half their time on that work and
increases the more they do," said Ryley. "However, you could be
assigned to work principally for one client, even though it only
takes up 30% of your time, if that work is the one you always do as
a matter of priority."
The Britannia case was complicated because press reports suggest
that the building society did not want the same people working on
its business, which is why it changed firms. Companies could find
themselves switching suppliers because of quality concerns only to
find the same people doing their work.
Ryley said that TUPE will not necessarily solve the problem and
that clients should make their requirements clear in any contract
with a new firm.
"Clients can deal with this by having a service level agreement
saying they want the right to ask that the people working on its
account are changed if it is not satisfied with the work," he said.
"This is easier said than done if the supplier is a small firm.
There may just not be other people to do the work."
Ryley said that companies hiring or changing their law or
accountancy firms might have to use the kinds of commercial
agreements that are used for other services in order to deal with
the change.
Firms bidding for work from potential clients may now want to
ask for the employment details of those currently working for the
company so that they can factor in the cost of any TUPE
transferees, he said.
"In commercial agreements this already takes place – the company
supplies information on who is working on their business and makes
sure in a new agreement that the new supplier commits to providing
that information at the end of the agreement for the next tendering
process," he said.
"This was not a problem for professional services companies in
the boom years where talent was at a premium and where, if a
contract was lost, there was other work for the employees; but in
the recession we might see more firms arguing that there has been a
TUPE transfer when they lose a contract, thereby offloading the
surplus staff." said Ryley.
Thank you to barrister Daniel Barnett for
bringing this case to OUT-LAW's attention.
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