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TUPE in Part Transfers or not TUPE

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The Transfer of Undertaking (Protection of Employment) Regulations, commonly known as ‘TUPE’ is a frustratingly complex area. We have analysed a recent case which has provided some clarification in the law.

The TUPE Regulations protect and preserve employee rights when their employment ‘transfers’, such as when businesses are bought and sold. TUPE protects employees where there is a relevant transfer, which can occur in two differing situations; (1) a ‘business transfer’ or (2) a ‘service provision change’. But what do these terms mean?

The term ‘business transfer’ is fairly self-explanatory. It is defined as a transfer of ‘all or part of a business or undertaking’ and generally covers situations when businesses are bought or sold.

A ‘service provision change’ takes place when a third party contractor is hired to provide services, such as a cleaning service, and then the contract is taken off the contractor and reassigned to another contractor, or where the service is brought in-house.

The definition of business transfer specifically refers to part of a business, but there is no equivalent in the definition of a service provision change. 

The Employment Appeal Tribunal’s (EAT) recent decision in Arch Initiatives v Greater Manchester West Mental Health NHS Foundation Trust & Others has confirmed that part transfers are contained within the definition of service provision transfers under TUPE also.

In this case, services were restructured during a retendering exercise. As part of that exercise the services were spilt into two functions: case management services and delivery of interventions. Each function was assigned to a different contractor, with Arch Initiatives performing the case management services and Lifeline Project Ltd delivering the interventions. Arch Initiatives did not transfer any of the NHS employees who had performed the case management services, and instead they were all dismissed. These employees successfully argued that their employment should have transferred to Arch Initiatives in the Employment Tribunal, and thus there had been a breach of TUPE.

When Arch Initiatives appealed the Employment Tribunal’s decision, their main argument was that there had been an error in law. They relied on the definition of a service provision change, which did not refer to part transfers. The appeal failed and the EAT upheld the previous decision.

This provides some clarity to the area, but the EAT’s decision is not entirely bullet proof. The EAT looked at the TUPE Regulations as a whole and determined that nothing within the Regulations expressly stated that a part transfer was not a relevant activity capable of transferring. The Regulations expressly refer to ‘part of a business or undertaking’ within the definition of a business transfer. It can be assumed that this was intentional and those drafting the Regulations intended a part transfer to be included within the definition of a business transfer. Therefore it follows that the absence of this wording within the definition of a service provision change was intentional, and so it could not take place - as argued by Arch Initiatives. 

Whilst Arch Initiatives failed in their arguments, the EAT judgment does not adequately explain why, given the lack of express wording in the Regulations. So, although we now have clarity on this point, the reasoning for this decision is still not clear, which could in itself be a pre-cursor to further appeals and litigation on this point.