THE EFFECT OF TUPE 2006 REGULATIONS ON CONTRACT OUTSOURCING

The Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) apply when a business is sold. TUPE applies to asset transfers, where the business is sold from one company to another. TUPE means that all employees working for the business carry with them the same employment rights based on contracts and length of service, from the seller of the business to the buyer of the business. Employees’ employment rights remain the same after the sale.

TUPE Regulations 2006 replace similar regulations dating from 1981. The Rules are broadly similar but by current TUPE there is clarification that the TUPE rules do apply to contracting and outsourcing. This was previously unclear. Some examples are as follows:

• A company has an in-house IT department which manages all of its IT functions. It decides to outsource that function to a contracting IT company. TUPE applies to all of the company’s IT staff.

• After 2 years contracting out, the company feels it is not getting value for money and puts the contract out to competitive tender. Another contracting company wins the tender and takes over the outsourced IT work. TUPE applies to staff working for the first contractor who were working completely or mainly on the business of the company.

• 2 years further on the company is still unhappy that it is still not getting value for money and decides to take back in-house the IT services. TUPE applies to employees of the second contractor working mainly or completely on the company’s business. Some of the employees may now be going back to their original employer – having transferred under TUPE to the first contractor, then to the second contractor, and now back to the company.

There has now been the first employment tribunal decision reported concerning the effect of TUPE upon contracting. In Hunt –v- Storm Communications, Mrs Hunt was an account manager employed by Storm who provided PR services. Storm had a contract with Brown Brothers for the provision of PR services and Mrs H spent 70% of her time working on the Brown Brothers account. In 2006 Brown Brothers re-tendered its PR contract. Storm pitched for it but was unsuccessful and shortly after the new supplier started providing PR services.

The Employment Tribunal found that there had been a TUPE transfer and that Mrs Hunt’s employment transferred by reason of the TUPE Regulations to the new supplier who had taken on the PR contract.

This shows how TUPE applies in contracting cases, even where the employee does not spend his entire time working for the particular client.

If you want advice about how the law has an impact on your contracts, please contact Nick Crook.

Filed: 16/11/2007 08:55:44