Big Brother is otherwise engaged – When is a Service Transfer not a TUPE Transfer?

So many of the businesses I work with provide “services” under contracts and need to grapple with the application of TUPE when they enter or exit contracts. Incoming and outgoing contractors often argue about whether TUPE applies or not, leading to arguments, disputes, legal costs and potential liabilities (or settlements) to employees – resulting in often unnecessary costs for one or both sides. If this resonates with you, then you should read on.

I don’t normally write articles on legal cases or legislation changes, but I am making an exception on this occasion because an interesting and potentially impactful TUPE case recently went before the EAT, and which is relevant to disputed TUPE transfers (which are all too common, in my experience).

It was about CCTV monitoring, and it could have potentially significant implications for the Security and FMS sectors, and perhaps outsourcing more generally, specifically in relation to how incoming and outgoing contractors approach the question of if and how TUPE (Transfer of Undertakings Protection of Employment Regulations) applies.

We are talking here about TUPE “Service Provision Changes” (SPCs) here, and the law hasn’t changed; but the way in which it has been interpreted could have quite interesting implications, especially in disputed TUPE transfers.

It is established law that the question of whether a TUPE SPC arises depends on the “activities” being “fundamentally the same” (both before and after the change), and this is a question of fact and degree.

In this recent case (Tuitt v Richmond Upon Thames, link below), the ET decided that the activities undertaken by the respondent were fundamentally different, so there was no TUPE transfer.

There were a number of factors considered, but the one that stood out to me (as perhaps the most crucial), was that the type of CCTV monitoring that was undertaken had changed considerably. The change was from proactive, full-time hours, CCTV monitoring, which employees were dedicated to; to a reactive support service, which was secondary to the employees’ other duties. As the ET and the EAT put it, the “Proactive support, which played such a large part of the Claimant’s role, had disappeared over night”.

The result. No TUPE transfer.

What is interesting here is the identification of the activities to be assessed, and the separation of function/purpose/responsibility from what is actually done by the employees. Both the old and new contractors had responsibility for monitoring CCTV. The old contractor was dedicated to it, whereas the new contractor merged it with their other (more substantial) existing services.

The ET chose not to characterise the activities as “the provision of a CCTV monitoring service”, which it felt would be superficial and inadequate. Instead the activities were characterised on a more granular level, the result of which was that although both contractors were providing the CCTV monitoring service, the way it was done was materially different. To oversimplify things, the ET seemed to distinguish between a proactive CCTV monitoring service, versus a reactive CCTV monitoring function, as being fundamentally different activities.

I think that would surprise a lot of people.

In my experience, employment tribunals tend to take a purposive approach to TUPE and try to find a way of interpreting the circumstances to protect the employee (TUPE is, after all, the “Protection of Employment” Regulations). But that is definitely not what has happened here, and it does make me wonder whether this is the start of a sea change, perhaps off the back of post-Brexit changing attitudes to European-derived regulations (which is what TUPE is).

Personally, if I had looked at this situation I might have said that there would have been a TUPE transfer, and that the new contractors decision to change the way it performed the activities was a reorganisation of those activities following the transfer, albeit immediately following the transfer, rather than being the thing that prevented the transfer. The correspondence between the parties and the contractual documentation would have been highly relevant to that and there was very little reference to that in the EAT judgment, so I can’t be certain what I would have said.

Now, it is relevant in this case that the old contractor had terminated the service, and the client local authority had chosen not to formally engage a replacement. Rather, they had just moved the duty to the new contractor who was already providing other services of a somewhat related nature. This was due to budgetary constraints, and there was no deliberate engineering to evade the consequences of TUPE. But it is easy to see this coming up in other circumstances too.

It is worth saying at this point that any situation that is deliberately engineered to evade the consequences of TUPE, won’t work. There are, however, lots of legitimate other reasons why changes can be made, particularly in the world as it is today.

This case does not provide a definitive answer to the question of whether or not TUPE will apply, even in relation to CCTV cases, because each situation and service provision change turns on its on facts and circumstances; but it certainly opens up a many more opportunities for incoming and outgoing contractors to argue over whether TUPE applies at all.

In my opinion, that is a bad thing, because it leads to frustration, headaches and legal costs for everyone.

It reinforces the importance of any service provider ensuring that they have adequate (financial) protection in their contracts with their clients. Contractors should not rely on TUPE applying or working (or being interpreted) in a predictable way. And in any case, we may soon be seeing significant post-Brexit changes in the law in this area, which makes your contract even more important.

Ultimately, there is such thing as a bad contract, and if the potential risk associated with a contract outweighs the assured benefits to you, then you should seriously consider walking away from it. TUPE (or no TUPE) is just one of those potential risks.

(The content of this article is not intended to be legal advice)

Case Ref – Tuitt v London Borough of Richmond Upon Thames (2022 EAT 124)