Government refuses to repeal service provision change elements of TUPE legislation

We previously reported on the Government’s consultation on the TUPE Regulations and their expressed desire to repeal the service provision change (SPC) provisions.  The Government’s response to the consultation has now been published.  For those that were hoping that the SPC elements would be repealed (as previously indicated by the government) there is disappointment.  The Government has decided to retain the SPC elements of the TUPE Regulations.

For background, in 2006 the government created a new ‘form’ of TUPE transfer known as service provision changes.  This type of TUPE transfer occurs where services are contracted out to another company (either from the main contractor who used to do the particular work themselves or where one company takes over the contracted out services from another).  Where there is a service provision change the staff that were engaged in the provision of a particular service will transfer over to the new service provider.  In order for an SPC to occur the following factors need to be satisfied:

  1. An organised grouping of employees situated in Great Britain
  2. which had as its principal purpose
  3. the carrying out of the activities concerned
  4. on behalf of the client and
  5. the client intends that the activities will
  6. be carried out by the transferee.

An SPC transfer clearly has a significant impact on employment agencies and potentially umbrella companies and significantly extended the scope and effect of the TUPE Regulations.  The government had given the impression that they would repeal this particular element which would have provided a greater deal of flexibility to businesses particularly when negotiating or tendering for new business.  However, following the aforementioned consultation the government has decided to retain the provisions.

In favour of retaining the SPC provisions the government cited the belief that retaining the provisions ensures certainty for all parties, that it avoids potentially ruinous liabilities for transferors in terms of redundancy payments and that the SPC provisions are necessary gold plating which are not burdensome for business.  This is of course a disappointment for many of our clients and in our opinion does not increase certainty for those tendering for service contracts.  What it does do is ensure that technical and lengthy litigation on what constitutes an SPC will continue.

One change that the government is looking to make to the SPC provisions is to formalise in statute a particular body of case law that has developed around part ‘c’ of the outline above.  The case law has centred on the idea that a SPC cannot occur where the activities being undertaken by the transferee fundamentally or essentially change from those provided by the transferor.  The government proposes to amend the current SPC Regulations to include an exemption where the activities fundamentally or essentially change.  When we have draft legislation we will of course provide guidance.

In breaking news and emphasising the impact that the SPC provisions can have the EAT have just set out a judgment where one person was found to be an ‘organised grouping’ for the purposes of TUPE (Rynda v Rhijnsburger).  With repeal just a distant memory the SPC provisions will continue to cause confusion.  If you require any advice on this specialist area contact Chartergates Legal now and we can guide you through the minefield.

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Published: 09.13.13 - Posted In: Latest News