Regulations known as TUPE are designed to protect the rights of employees on the sale of a business or where there is a service provision change. Service provision changes most obviously occur where activities like cleaning or security are outsourced to a third party.
Some of the most contentious cases involve large commercial service contracts where the incumbent provider loses its contract to a competitor and wishes the incoming contractor to either take its personnel or bear the cost of lay-offs.
Amaryllis v McLeod (2016) is a decision of the EAT involving a specialist supplier to the MOD who renovated furniture. The MOD was its main customer and in 2012 it lost its contract to a competitor. The new supplier contended that TUPE did not apply and so it should not be responsible for the 370 employees who would otherwise have transferred to it.
For the employees to transfer:
In this case the EAT said the employment tribnal had got it wrong because it had looked at facts relevant to carrying out the activities in general rather than to carrying out such activites for the relevant client. It had not addressed the principal purpose of the organised grouping of workers at the relevant time.
In order to give commercial certainty, commercial parties will often contract on the basis that assumes that TUPE applies but it should not always be assumed that the commercial understanding reflects the facts on the ground.
When entering into commercial service contracts it is important to include appropriate TUPE exit provisions to ensure that employees transfer to a replacement provider.