Reminder of Key Principles – TUPE AND Service Provision Change Transfers

A recent case in the Employment Appeal Tribunal (Rynda (UK) Limited v Rhijnsburger) reminds us of the fundamental principles which apply to service provision change transfers. In this case, a single employee was held to constitute an organised grouping of employees that was the subject of a TUPE transfer.

To recap, where activities are outsourced, or where there is a change in contractor providing the activities, or where outsourced services are brought back in-house, the employment of anyone within an organised grouping of employees carrying out those activities transfers automatically. This is known as a service provision change and is a “relevant transfer” under TUPE. So, for example, where an organised grouping of IT people provide an IT service to a particular client and the client decides to transfer the work to a new contractor; upon the transfer, the IT workers move with the contract on their existing terms and conditions.

Rynda reminds us of the following key principles:-

1. A single employee can constitute an “organised grouping of employees”.

2. The tribunal’s starting point will always be to identify precisely the “activities” which were being performed by the grouping and which are transferring out to a new contractor. The next step is to identify whether an “organised grouping of employees” carried out those “activities” as its “principal purpose”.

3. In other words, there is a three stage approach:-

(a) What were the activities?
(b) Was there an organised grouping?
(c) Was its principal purpose the carrying out of the activities?

4. The key period for the Tribunal to focus upon is the stage immediately prior to the transfer. For instance, if the transfer takes place on 1 June 2014, the Tribunal should focus on what was happening during, say, March, April and May.

5. For there to be an organised grouping of employees, the arrangement must not be purely by chance or accident or without any deliberate planning or intent. The employer must consciously decide that certain employees are to work on a certain project.

6. The organised grouping of employees must have as its “principal purpose” the service in question. In other words, if various services are performed by the group for various clients that is unlikely to be sufficient. There must be a deliberate focus on a particular client/service.

7. Temporary arrangements are ignored (ie anything which is short term, finite or subject to review).

Stephen Hopkins, Employment Partner, comments: “There have been numerous cases on service provision changes and whether they amount to a relevant transfer under TUPE. This case is a useful reminder of the key principles that apply. Note that the Government decided in response to its recent consultation on TUPE reform not to remove the service provision change provisions, therefore these principles are highly relevant”.

If you would like to discuss any issue or query arising from this update please contact Stephen Hopkins or any member of the Employment team.


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