A large property will generally require provision of services such as security and cleaning. What happens to the services and, particularly, to the employees carrying out the service, when a purchaser buys the property? Will the purchaser, or the service providers it appoints to provide these services, inherit these employees under TUPE?
This was the issue considered in Taurus v Crofts.
Mr Crofts was employed by Reliance as a security officer at student accommodation, known as the Glasshouse. Ownership of the Glasshouse passed to the Mansion Group and Reliance lost the security contract to Taurus. Reliance told Mr Crofts his employment had transferred under TUPE, but Taurus disputed this and Mr Crofts brought claims against both for unfair dismissal. The Tribunal held that TUPE applied, because otherwise facilities staff, such as security guards or cleaners, would lose the protection of TUPE on a change of contractor every time there was a change of ownership of a building or a change in the managing agents.
However, on appeal the Employment Appeal Tribunal found that, under the Service Provider Change ("SPC") provisions within TUPE, the "client" needs to retain its identity before and after the SPC. In this case, as there had been a change in ownership of the building, the client was not the same before and after and the SPC provisions did not, therefore, apply. The liability for the employees therefore remained with the outgoing security contractor.
Potential scenarios on purchase of a property
It may be that a purchaser wishes to continue to use the same service providers as used by the seller. In this scenario, the contracts in place between the seller and the existing service providers will either be assigned or novated to the purchaser. Alternatively, the purchaser could enter into new contracts with the service providers. In any event, however, provided there is no gap in the provision of the services by the existing service providers, there will not be TUPE transfers as the same parties will continue to provide the services.
Alternatively, it may be that the seller terminates the contracts it has in place with the existing service providers and the purchaser appoints new service providers. In this scenario, there is a potential TUPE issue as there will be a change in the parties providing the services. On the basis of the decision in Taurus, there will be no SPC transfer as the requirement of the service being provided for the same client will not be met. There will still, however, be a risk of there being found to be a TUPE transfer, on the basis of an argument that, even if there is no SPC transfer, there is a business transfer under the original business transfer provisions, as there is a transfer of an economic entity which retains its business identity, when the new service provider takes on the service from the old.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
