The document discusses upcoming changes to TUPE (Transfer of Undertakings (Protection of Employment) Regulations) employment law in the UK. It provides: 1) A recap of key aspects of current TUPE law including the tests for business transfers and service provision changes, and employees' rights during a transfer. 2) An overview of recent case law that has eroded certainty around when service provision changes apply. 3) Details on the UK government's proposals to reform TUPE, including abolishing service provision changes and giving employers more flexibility around redundancy and changing terms and conditions. 4) Practical advice for businesses on preparing for the changes, such as reviewing contracts and redundancy obligations.

1. Employment Law Changes
TUPE
Russell Brimelow and Jonathan Carr
23 April 2013

2. What we will cover
• Quick recap of TUPE
• Recent case law – eroding the certainty of service provision
changes
• The Government‟s proposals for reform of TUPE – what is
likely to happen and when
• What practical steps should you be taking in readiness for
the changes to TUPE and in light of recent cases

3. Quick recap ...
• The Transfer of Undertakings (Protection of Employment)
Regulations 2006
• Implements the Acquired Rights Directive so similar laws
exist throughout the EU (but some important differences
apply)
• Main aim: ensure employment of employees assigned to a
particular business (or identifiable part) transfer
when that business is sold or taken over by
another employer.

4. TUPE 1981
• TUPE 1981 - a single test
 A transfer of an economic entity (an organised grouping of resources
which has the objective of pursuing an economic activity) which
retains its identity (“Old TUPE”);
 Focused on extent to which main assets of business had transferred
or been acquired
E.g. premises, clients, IP, equipment, people etc.
 Later cases suggested the transfer of people but little
or no other assets may be enough in labour intensive
undertakings
 Led to confusion and ambiguity over whether TUPE
applied in outsourcing situations – had the “identity” been
retained?

5. TUPE 2006
• TUPE 2006 – two alternative tests
Old 1981 test retained (applicable in business sales)
New service provision change (SPC) test added, where
“activities” carried on by an organised grouping of employees
are taken over by a third party.
SPC includes :
Contractor A Contractor B
Client

6. Key points
• Employees transfer with:
 continuity of service
 same terms and conditions (except pensions)
• Difficult to lawfully harmonise terms and conditions with an
existing workforce BUT unlikely to be an issue if the changes
overall are no less favourable
• Information and consultation obligations apply
• Transferor required to provide “employee liability information”
to Transferee pre transfer

7. Key points
• Automatic unfair dismissal of employee if dismissed by
reason of the transfer or for a reason connected with the
transfer that is not “an economic technical or organisation
reason entailing changes in the workforce” (ETO)
• Redundancy will usually be an ETO.
• Sometimes difficult to identify who is assigned to the
organised grouping of resources
• Transferee inherits any pre-transfer liabilities to transferring
employees and collective agreements

8. Service provision changes
• For a service provision change to apply
There must be an organised grouping of
employees situated in the UK
the principal purpose of the organised grouping
of employees must be to carry out the activities;
Activities must be services based – not wholly or mainly
supply of goods to the client; and
Intention must be for transferee to carry out activities other
than in connection with a single specific event or task of short
term duration (2012 Olympics held out as an example of the
SPC exemption)

9. Example Service Provision Change - Now
UK plc tenders its IT contract every 5 years. A is the incumbent
with 25 people on site. B wins the bid, promising a radically
different approach which will be better and cheaper – with the
work being done by its existing remote teams. B doesn‟t need
any of A‟s 25 people.
• Is this a Service Provision Change?
• Who picks up the liability for the 25 people?

10. Service provision changes
• Until 2009/10 prevailing view that SPC was a near
certainty in outsourcing cases.
• Relatively little case law scrutiny of the SPC
test pre 2009/10
• Activities need not be identical before and
after the transfer – just “fundamentally or
essentially the same” (Metropolitan Resources
Ltd v Churchill Dulwich Ltd)
• Case law has been unravelling the SPC test
ever since and it now looks set to go....

11. Recent case law – SPCs
• Several different themes in cases over last 3-4 years have
significantly eroded the number of cases in which SPCs are
found to apply:
Do the activities remain the same?
Is there an organised grouping, organised by reference to the
client?
Fragmentation of activities between multiple providers
Is it the same client?
Meaning of “single specific event or task of short term
duration”
• Presumption of SPC in outsourcing cases is now dangerous

12. Do the activities remain the same?
• Metropolitan Resources (2009) - minor differences not
significant but...
• Scrutinise the nature of the activity
OCS v Jones (2010) – change of food service from prepared
hot food to selling packaged sandwiches. Required different
types of staff, different facilities etc, so not same activity even
though at high level summary was still providing lunchtime
food service at car plant
Notts Healthcare NHS Trust (2011) – residential care homes
closed, activity switched to home based care – not the same

13. Do the activities remain the same?
• Scrutinise nature of the activity (continued)
Johnson Controls (2012) – secretaries took over booking
cabs, not the same as centrally coordinated „middle-man‟
service. Look at way work is done, not just tick box approach
of what is done
Ward Hadaway (2009) – relevant activities defined as work in
progress not expectation of future work so no activity
transferred
Enterprise Management (2012) – two activities pre transfer,
only one of which continued post transfer (resulted in 15%
reduction of work) – held to be significant to scope of activity

14. Do the activities remain the same?
• Still occasional cases leaning the other way:
Islington v Bannon (2012) – post transfer some aspects of
activity abandoned or neglected because of resourcing issues
– fact that could not provide the service to the same standard
not material, the activities were still fundamentally the same
• So difficult now to know how deeply you need to scrutinise
the activity to look for differences
• Prevailing trend in the cases effectively gives clients power
to reduce likelihood of an SPC by altering the nature of the
activity. Transferees may argue doing it a different way

15. Organised grouping
• Must be organised by reference to the client
Eddie Stobart (2012) – although employees exclusively
packed for a particular client by dint of shift pattern, there was
no deliberate planning or intent to organise them by reference
to this client. It was not their principal purpose (perhaps
surprising decision on the facts)
Seawell v Ceva (2012) – fact that an employee spends a
majority or even all of his time on a contract is not necessarily
enough. One person can be an organised grouping but in this
case the teams were organised by reference to outbound and
inbound freight not by reference to this client.

16. Fragmentation
• Where services are so fragmented between multiple
providers that it effectively becomes impossible to determine
to which provider particular activities have transferred then
no SPC - Kimberely Housing (2007), Thomas-James v
Cornwall CC (2007) , Clearsprings Management (2008)
• Need to be able to identify specific activities and be able to
trace them to a specific transferee employer.

17. Other important recent cases
• McCarrick v Hunter (2012) so SPC where the activities
carried out by different contractors before and after the
change are not for the same client
• Liddell’s Coaches v Cook (2012) – a contract for a single
specific event need not necessarily be of short term duration.
One year contract to decant children temporarily to an
alternative school was a single specific event
• Spaceright Europe Ltd v Baillavoine (2011) A pre-transfer
dismissal can be "connected with the transfer“ regardless of
whether the identity of the transferee was known at the time

18. Govt AnnouncesTUPE Reforms
Key Themes
Removing “gold plating”
where we go further than
European Directive requires -
SPC
Greater flexibility for
employers (timing of TUPE
related redundancies, and
greater freedom around
changes to terms and
conditions)
Addressing case law
anomalies (ability to claim
automatic unfair dismissal on
a detrimental change of
location)
Deregulation and
simplification (electing
employee representatives,
employer liability information)
Timeline
•“Call for evidence” began
November 2011
•Consultation on proposed
changes began January 2013
(just closed)
•Confirmation on detail of the
reforms awaited (summer
2013)
•Most changes expected to
come into force in October
2013 but SPC abolition may
be delayed
The Daily TUPEgraph
- Since 1981

19. Proposed reforms - SPCs
• SPCs – the big change
SPCs to be abolished – so back to the old 1981 test
May cause uncertainty in the short term in outsourcing cases
but not much certainty under current case law anyway!
Will be winners and losers – main losers will be incumbent
employers who may be left with staff or big redundancy bills
when they lose contracts
Implementation of this change may be delayed a few years for
this reason
Government considering over-ruling ECM v Cox (TUPE
deemed will still apply if transferee avoids taking on staff to try
to circumvent TUPE)

20. Example Service Provision Change –
After SPC‟s are abolished
UK plc tenders its IT contract every 5 years. A is the incumbent
with 25 people on site. B wins the bid, promising a radically
different approach which will be better and cheaper – with the
work being done by its existing remote teams. B doesn‟t need
any of A‟s 25 people
• Is this covered by TUPE?
• Who picks up the liability for the 25 people?

21. Proposed reforms – ELI
• Requirement to provide employee liability information to be
scrapped
• Transferor and transferee left to sort out and agree what
information to be given, under threat of potential information
and consultation liabilities if they don‟t act sensibly. Fine for
business sales where parties have a contracting relationship
but will be a lottery with many outsourcing cases (where
competitors out to make life difficult for each other)

22. Proposed reforms – changing terms
• Government‟s hands are partly tied by EU law but reforms
will mirror continental approach of giving most freedom
permitted by the Directive
• TUPE 2006 went too far (probably by mistake) so this is
widely welcomed
• Variations by reason of the transfer will still be void (unless
the employer has an ETO) but not those for a reason
connected with the transfer
• Unlikely to make a massive difference in practice but many
businesses already adept at tip-toeing round this problem

23. Proposed reforms – location changes
• Technical problem currently exists that a change of
workplace location on a transfer:
May be a material detriment under 4(9)Current law
Often won‟t have a valid ETO defence because does not entail
“changes in the workforce”
So in theory can amount to an automatic unfair dismissal
without the transferee doing anything other than being based
in a different location
• Government will overrule this so a change in workplace
location in the context of a TUPE transfer is treated
consistently with an ordinary redundancy and on merit

24. Other Proposals for reform
• Rectifying case law anomalies:
Permitting consultation by the transferee with employee
representatives of the transferring employees before the
transfer date to count towards any collective redundancy
consultation obligations
transferor employers should be able to fairly dismiss
employees before the transfer date, relying on the transferee‟s
ETO reason
• Allowing small employers (<10 employees) to inform and
consult with employees directly and dispense with electing
representatives

25. The practical stuff....
• There will be winners and losers from the demise of SPCs
• The impact may partly depend on whether the Government
opts for a long lead in time before SPCs are abolished
• A long lead in time will allow for many contracts to expire
naturally under the current regime or at least give the parties
time to adjust their planning
• Given case law has eroded the application of SPCs anyway
and the Government is keen to be seen to help businesses
in the current climate, it may opt to make the change sooner

26. Are you an incumbent service provider?
• You probably entered many of your current client contracts in
the belief that assigned employees would transfer on at the
end of each contract. Now they may not
Think about whether you meet the test for an “organised
group” and can evidence they are organised by reference to
the client
Will you have a TUPE 1981 (old test) argument to fall back
on? Is the service labour intensive? Will a new provider
require some employees for continuity?
Review your contract terms – do any operate independently of
TUPE to share redundancy costs or protect you in other ways?

27. Are you an incumbent service provider?
Think about a contingency budget for redundancy costs
Can you redeploy staff in the latter stages of the contract or
not replace natural attrition to minimise potential redundancy
costs?
Consider now whether any applicable redundancy terms may
become prohibitively expensive if TUPE doesn‟t apply and you
are forced to make many more redundancies
Is there merit in having a proactive discussion with the client to
extend the contract to defer the issue and give longer term
certainty – exercise care until the date for SPC abolition is
confirmed

28. Are you a client?
• Do you want to alter the activities/services in some way to
reduce the likelihood of employees transferring back to you
or to a successor provider under the current regime?
• An outgoing service provider will soon not be required to
provide any employee liability information – make sure you
have a contractual right to require this in good time and can
share it with bidders and the eventual replacement
• You may be expecting the service provider‟s staff to transfer
at the end of the contract to you or a new provider. If they
don‟t is that a continuity problem?

29. Are you a prospective service provider?
• Factor into pricing the likelihood that staff will probably not
transfer on expiry/termination or negotiate some contribution
to any necessary future redundancy costs
• Ensure the contract addresses both possibilities of TUPE
applying and not applying at the end
• Scrutinise extra carefully any contractual redundancy terms
or long notice terms which apply to staff that will transfer to
you on the commencement of the services. This may
materially affect your costs on exit

30. Are you a prospective service provider?
• Don‟t accept that SPC will apply at the moment without
analysing whether the incumbent has an organised grouping
of employees organised by reference to the client and
whether the activities are essentially the same
• Ideally, ensure you have some contractual flexibility to
redeploy staff in the latter stages of a contract
• If the changes mean you are likely to carry staff or operate a
bench arrangement between contracts, look at employment
and remuneration structures to reduce unnecessary
overheads

31. Thank you