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When is a change in provider not a TUPE transfer?

When is a change in provider not a TUPE transfer?

A case from the streets of Hull reminds us that even when things look like TUPE (and maybe even smell like TUPE?), they sometimes are not.

To explain further: Hull council built a park-and-ride car park and contracted with a charity to provide a subsidised bus service to the city centre.  A private bus company decided that it could run busses on the same route without a subsidy, so it set up a bus service in competition with the charity.  Under the relevant legislation, Hull council was required to withdraw its subsidy from the charity when the private company began operations on the same route.

The charity immediately shut down its bus route and alleged that the relevant employees should transfer to its competitor under TUPE (the UK’s automatic transfer legislation, which protects employees on business sales and outsourcings).  The private company disagreed, and the case has recently reached the Employment Appeal Tribunal.

The charity relied on TUPE’s service provision change (“SPC”) provisions, which will be familiar to outsourcing veterans as the UK’s development of the standard EU rules on the transfer of employees. The effect of the SPC provisions is that most first (and later) generation outsourcings and insourcings will be caught by TUPE, and employees will transfer to a new provider with their existing terms unless dismissed.

The powerful impact of the SPC can lead to a quick assumption that TUPE will apply in any outsourcing or change of provider scenario, but this case shows the dangers of that approach. Going back to the wording of the legislation reminds us that it is a requirement that the activities transferring (here, the provision of bus services) must be carried out for the same “client” before and after the alleged transfer.

Superficially, the scenario in Hull resembled a second-generation outsourcing: the council had commissioned a bus service from one provider and another provider then stepped in to provide a near-identical service.  From the perspective of the service users, there would be little difference save for the colour of the buses and the timetable.

However, the Employment Tribunal found that the council was no longer the “client” when the private provider started operations.  The private provider could decide its own timetable, its own fleet (e.g. the age / branding of the vehicles) and recruited its own drivers.  The only contract the private provider has with the council related to its use of the bus stop at the council-owned car park that formed one terminus of the route.  This was in stark contrast to the arrangements between the council and the charity.  In reality (although the Tribunal did not put it this way), the situation was more akin to an existing provider being driven out of business by a new competitor than an outsourcing.

The EAT upheld the Tribunal’s decision, meaning that none of the charity’s bus drivers or other employees engaged in the provision of the service transferred to the private company and the charity was responsible for redeploying them or dismissing them (with redundancy pay where appropriate).

The lesson for those of us outside the transport industry is not to assume that TUPE will always apply in any outsourcing or outsourcing-esque situation.  While a close analogue to Hull’s bus troubles is unlikely, the similar situation of a change of client coinciding with a change in provider can and does occur. The consequences of having to unexpectedly dismiss a workforce you expected to transfer could be enormous, so some careful analysis at the start of any such project is likely to be worthwhile.