One of the conditions for TUPE applying to a service provision change (such as an outsourcing or insourcing situation) is the requirement that the activities being contracted out are carried out other than in connection with a "single specific event or task of short term duration".
Until now there have been no notable cases on this point and only limited guidance on the practical meaning of the potential exclusion was given in the BIS guide to TUPE. The examples in the Government guidance were:
Contract A: a contract for the provision of security advice to the Olympic Games covering a period of years; and
Contract B: a contract for the provision of security staff to the Olympic Games itself.
The Government's view was that TUPE would still apply to Contract A but not to Contract B. Although the services in Contract A were for a specific event (the Olympics), they also needed to be of short term duration which was not the case.
Two cases in the last couple of months have provided some further incite into this potential exemption and how it may work in practice.
In one case (SNR Denton v Kirwan) a law firm argued that there was a "single specific event or task of short term duration" as it was only instructed to provide legal advice for the period of an administration (a maximum of 18 months). It had already been decided that TUPE did not apply for other reasons, so only "tentative observations" were given by the court:
- In line with Government's guidance it considered that both a "single specific event" and "task" need to be of "short term duration" for the exclusion to be available
- When deciding what "short term" means it should be considered in the context of:
- Time limits in the employment relationship as a whole (e.g. that, at the time , unfair dismissal rights were acquired after 12 months' service and statutory notice was a maximum of 12 weeks); andThe employee's perspective and the particular employment relationship
- A tribunal is unlikely to be wrong if it considers these points (which indicates it will be hard decision to appeal If a tribunal does not go your way) It is also necessary to consider whether the client intends for activities to be short term
A case later in November (Liddell's Coaches v Cook and others) actually applied the exclusion with the result that TUPE was avoided. Liddell's Coaches were engaged to provide transport to primary school children who were distributed to other local schools whilst their own school was being rebuilt (having been built over a mineshaft). Initially Liddell's had 5 contracts, each lasting a year, and Mr Cook worked on one of these. The 5 contracts were offered out to tender for a further year and Abbey Coaches Ltd took over the contract that Mr Cook worked on. Abbey did not accept that Mr Cook (or liability for his dismissal) transferred under TUPE arguing that this exemption applied.
The EAT agreed that the exclusion applied. However, it considered that "single specific event" spoke for itself and it was not necessary to qualify it with "short term duration" as events are likely to be short term. The EAT also did not agree that the exclusion could not apply to Contract A in the BIS guidance: the Olympic games was a "single specific event" and the fact that the security advice was provided over a number of years was irrelevant. The EAT thought that the transporting of the children while their school was rebuilt was a "task of short term duration". It agreed with the approach to determining "short term" suggested in the earlier case and found that the one year contract was "short term" here. This was because normal transport contracts were typically between 3 to 5 years in length. Consequently, TUPE was avoided.
The fact that there have been so few cases on this exclusion shows that it is not often relied upon. Ultimately, whether this, or any of the other potential exclusions and conditions of TUPE, are satisfied will depend on the factual background of each outsourcing situation. Over recent months the courts appear to have been following a trend to not stretch the meaning of TUPE and do not see it as necessary to try and achieve a transfer in as many service provision change situations as possible. However, unintended transfers still catch businesses out and can have expensive consequences. If you are facing a potential TUPE situation we would be very happy to talk through the issues with you and explore whether there are any exemptions that may apply.
Practical take away points:
Do not ignore TUPE: tendering for business without accounting for TUPE can be an expensive mistake and the additional staff costs and liabilities that are acquired as a result may impact profit margins for providing the service.
Do not make immediate assumptions: it is important to not assume that TUPE does or does not apply to outsourcing or in-sourcing situations without carefully analysing the factual situation.
Flag to those doing the commercial deal that TUPE may be an issue: There will be a number of commercial and legal issues to consider in an outsourcing situation and those managing the transaction in your business may not have considered or appreciated that there is a risk of TUPE applying or what this means in practice. Highlighting it to them at an early stage may help them to negotiate the deal accordingly.
Take legal advice: Take legal advice so you can understand the risks you may be taking on and how best to deal with them.
Can any exclusions help? There are a number of exclusions and conditions in TUPE. With legal advice you can look at whether there are exclusions that can help such as the example from the above cases "Are the services in connection with a "single specific event or task of short term duration?". What "event" or "task" are the activities connected to? Is it short term in the context of the employment relationship and the normal term for such contracts?
Even if there is not a "service provision change" is there a "business transfer"? There could still be a transfer of an undertaking with the effect that TUPE still applies.
Cover the risk off: deal with the risk that TUPE may apply by including appropriate indemnities and warranties in service contracts where this is commercially possible.
Check the contracts: are there are any contractual arrangements in place already that deal with the risk of TUPE applying?
If you have any queries in relation to the above case or the application of TUPE then please contact the employment team at Foot Anstey