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EAT adopts 'pragmatic' approach to service provider TUPE transfers

Employees have the same rights when a company changes service provider as when work is outsourced in the first place even if the new service is not identical to the old, the Employment Appeals Tribunal has ruled.29 Jun 2009

The Transfer of Undertakings (Protection of Employment) Regulations (TUPE) protect the rights of employees whose companies are taken over by new owners. In 2006 they were expanded to govern situations where work is outsourced, brought back in-house or the service provider is changed. The ruling is the first to look at the meaning of a service provision change in the law.

The Employment Appeals Tribunal (EAT) has ruled in a case involving service providers in which it found that the employees did have TUPE rights when work was transferred from one location to another and from one service provider to another.

The employees of one provider argued that their employment had been transferred to the new provider, and the EAT agreed, saying that it was the first case to be heard at EAT level that involved a TUPE dispute relating to service providers.

In the ruling, the EAT said that workers were transferred from one employer to the next if "the activities previously carried out by client or contractor have ceased to be so carried out and, instead, are carried out by a contractor or a new contractor or by the client".

The case centred on accommodation provided for asylum seekers. The body responsible for providing the accommodation moved it from its existing supplier in London to a location and new supplier outside London.

The workers in London claimed that their employment had been transferred, and the EAT agreed. It said that the important thing for employers to consider when trying to understand if TUPE rights existed was whether the service provided after the change was essentially the same as before it. If it was, the employees had the right to transfer to the new provider, it said.

Ben Doherty, an employment law specialist at Pinsent Masons, the law firm behind OUT-LAW.COM, said that the ruling extends to 'type B' TUPE claims relating to outsourced work the approach tribunals have taken to in-house work in 'type A' claims.

"This is helpful guidance from the EAT in deciding whether a service provision change exists. The drafting in the Regulations is fairly detailed and the EAT reminds us not to take too legalistic an approach," he said.

It had been argued that the services carried out by the new provider were not exactly the same as those provided by the old one, but the EAT said that claims can be made when services provided are not identical.

"It cannot, in my judgment, have been the intention of the introduction of the new concept of service provision change that that concept should not apply because of some minor difference or differences between the nature of the tasks carried on after what is said to have been a service provision change as compared with before it," said the ruling. "A commonsense and pragmatic approach is required to enable a case in which problems of this nature arise to be appropriately decided."

"The Tribunal needs to ask itself whether the activities carried on by the alleged transferee are fundamentally or essentially the same as those carried out by the alleged transferor. The answer to that question will be one of fact and degree, to be assessed by the Tribunal on the evidence in the individual case before it," it said.

It said that the Employment Tribunal hearing the original case noted the differences between the services provided by the old and new companies but was right to conclude that the services provided were basically the same.

"This ruling shows that tribunals will take a broad, pragmatic approach that is not concerned with getting overly legalistic," said Doherty.

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