The HR Manager of a cleaning company has been informed that they have lost a contract with a key client, who has appointed a new cleaning company to take over the cleaning services. The HR Manager is seeking advice on whether TUPE applies in this case and how they should manage the outcome of the imminent change of contract.
Practically speaking, the HR Manager should, first and foremost, check the provisions of the contract for services with the client, as that will set out obligations that they and the incoming contractor will have towards each other, in the event that a transfer of services does apply and will also likely set out the terms of any indemnities.
In this case, it sounds like the provisions of the Service Provision Change (Protection of Employment) Regulations (Northern Ireland) 2006 (the "SPC Regulations") may apply. A service provision can occur in any one of the following three scenarios:
- Outsourcing - where activities cease to be carried out by a person (a client) on its own behalf and are carried out instead by another person on the client's behalf (a contractor);
- A change of contract - where activities cease to be carried out by a contractor on a client's behalf (whether or not those activities had previously been carried out by the client on its own behalf) and are carried out instead by another person (a subsequent contractor) on the client's behalf; or
- Insourcing - where activities cease to be carried out by a contractor or a subsequent contractor on a client's behalf (whether or not those activities have previously been carried out by the client on its own behalf) and are carried out instead by the client on its own behalf.
In this instance, it is likely that the second scenario may apply, where there will be a change of contract. It is important to note, that for there to be a service provision change, the services in question must be carried out on behalf of the same client, before and after the transfer. There will not be a service provision change where, in addition to a change in a contractor providing the services, the identity of the client on whose behalf the services were performed also changes.
To identify whether a service provision change may apply, you will need to carry out an assessment of whether, immediately before you stop providing cleaning services to your client, there are employees, situated in Northern Ireland who constitute an "organised grouping" which has as its principal purpose the carrying out of the cleaning activities on behalf of the client. There is lots of case law on what this actually means and is a complex area. You should closely consider which employees are "assigned" to the organised grouping of employees and unfortunately, there is no clear answer to the question of how you determine which employees are assigned. A lot will depend on a number of factors, such as the percentage of the employees' time spent on the cleaning services for this particular client. It is therefore recommended that you obtain legal advice, so that you can obtain assistance on the likelihood of the SPC Regulations applying or not, depending on the specific facts.
If, after your analysis, you decide that the SPC Regulations are likely to apply, then in that scenario, you would be the Transferor and will have certain obligations under the legislation towards your own employees, around informing and consulting them about the forthcoming transfer. You will also have certain obligations towards the incoming contractor, the Transferee, where you must provide certain employee liability information ("ELI") to them. As the transferring employees will transfer across on their existing terms and conditions of employment, it is therefore important that the correct ELI is provided to the Transferee. Failure to comply with these obligations could lead to employment tribunal claims from the transferring employees, for failure to inform and consult and from the incoming contractor for failure to provide ELI. Those claims would be in addition to any further claims which may arise, such as automatic unfair dismissal, should you dismiss any of the employees before the transfer and/or any other claims, such as discrimination claims. In summary therefore, it is advisable that as soon as you believe that the SPC Regulations may apply, that you take all of the above factors into consideration and seek legal advice on next steps.
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.
