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What constitutes a service provision change?

14 September 2016

The latest Employment Appeal Tribunal (EAT) decision on The Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) is a useful reminder that even if there is a change in the provision of services, that does not mean it is a service provision change for the purposes of TUPE and you have to go back to the details of the definition.

The latest Employment Appeal Tribunal (EAT) decision on The Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) is a useful reminder that even if there is a change in the provision of services, that does not mean it is a service provision change for the purposes of TUPE and you have to go back to the details of the definition.

Under the TUPE Regulations a service provision change takes place where a client outsources services to a contractor for the first time, where a client transfers services from one contractor to a new contractor and where a client brings services back “in-house” from a contractor.

For TUPE to apply to each category of service provision change the activity must continue to be carried out ‘on the client’s behalf’. In the recent case of C T Plus (Yorkshire) CIC v Stagecoach, the EAT examined this element of the definition of service provision change under Regulation 3 of TUPE.

Background

A park and ride car park had been developed by Kingston-upon-Hull City council. The contract to operate the park and ride with a subsidy provided by the council was successfully won by CT Plus Ltd (CT) in 2009. CT’s relationship with the council was governed by a detailed two year contract covering issues such as timetabling requirements, vehicle type and branding.

In 2013 the council again invited tenders for the contract and a company trading as ‘Stagecoach’ tendered. Following delays to the tender process Stagecoach proposed that it could run the contract as a commercial enterprise (albeit with a reduced service outside peak hours) and without a need for the subsidy provided by the council. As a result the council withdrew the tender process, gave notice to CT to terminate their contract and Stagecoach began to operate the park and ride service.

Stagecoach declined to take on any employees from CT on the basis that there had been no transfer under TUPE. CT disagreed and the drivers previously employed by CT brought tribunal proceedings to establish which party was responsible for compensation.

Decision

The Employment Tribunal held that whilst the activity of running the park and ride service carried out by CT was now being carried out by Stagecoach, the key element required by Regulation 3 of carrying out the activity ‘on the client’s behalf’ was not satisfied; Stagecoach was not carrying out the park and ride service on behalf of the council but in its own commercial interests and the council were no more than “an interested bystander”.

On appeal the EAT stated that a “common sense and pragmatic approach” should be taken and that the word ‘client’ means “…an organisation that is in a position to carry out activities either itself or by commissioning them from others to carry out those activities on its behalf”. It confirmed the decision of the Tribunal that Stagecoach was not carrying out the service on behalf of the council and therefore there was no service provision change.

Key factors taken into account:

  • There was no contract between Stagecoach and the council or subsidy provided by the council.
  • Despite the council’s reservations Stagecoach still chose to run a reduced service in off peak times and was essentially left free to run the service as it wished.
  • The park and ride service was purely for the benefit of Stagecoach and was run as a commercial venture.
  • The right to run the park and ride service was not exclusive to Stagecoach and the council were free to allow another operator to run the service.

Comment

Service provision cases often focus on questions around whether there is an organised grouping of employees and if the same or similar activity is being carried out post transfer. This is a useful decision for organisations involved in the outsourcing or insourcing of services and a reminder of the fact that even where the activity is continuing it must still be carried out ‘on the client’s behalf’ in order to satisfy the requirements of the definition of service provision change under Regulation 3.

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