Teal blue graphic

Change of contractor: who decides which employees transfer under TUPE?

A recent EAT decision has confirmed that the client cannot unilaterally change who works on an outsourced contract to avoid the effects of TUPE. Only the contractor (as the employer), or those whom the contractor has authorised, are able to do so.

If you are a client involved in an outsourcing or are an incoming contractor, this case highlights the potential legal risks of TUPE. Below we look at the impact of this case, and what it might mean in practice.

Background

Ms J was a care manager at Saga Care (Saga) and primarily worked on a contract for the London Borough of Enfield (Enfield). Following a disagreement with her line manager she was suspended and Enfield requested that she be removed from their contract. Enfield was entitled to make such a request under its contract with Saga.

Saga protested against the instruction from Enfield and did not re-assign her. The contract with Enfield then expired and Westminster Homecare Ltd (Westminster) took over providing the relevant services for Enfield. This was a service provision change for the purposes of the Transfer of Undertakings (Protection of Employees) Regulations 2006 (TUPE), meaning that any employees of Saga assigned to the contract with Enfield would automatically transfer to Westminster. 


Following the change of contractor, the parties were confused about whether Ms J had actually transferred to Westminster. Saga continued to pay her until it eventually dismissed her on grounds of redundancy. Ms J brought a claim for unfair dismissal arguing that her employment had transferred to Westminster under TUPE.

The employment tribunal held that the effect of Enfield’s request was to remove Ms J from the contract. As she was no longer assigned to it, she had not transferred to Westminster.

EAT’s decision

Ms J appealed to the Employment Appeal Tribunal (EAT). It held that she was still assigned to the Enfield contract and had therefore transferred to Westminster.

The fact that Enfield had the right to make the request under its contract with Saga did not mean that it had the unilateral effect of re-assigning Ms J. Only Saga, as her employer (or those whom the employer has authorised), had the authority to do so. As Saga had not complied with Enfield’s request, Ms J had remained assigned to the Enfield contract. As a result, when the contract was taken on by Westminster, she transferred to them.

The outcome would have been different if Saga had followed Enfield's instruction and removed Ms J from the contract.  In these circumstances she would not have transferred to Westminster.

The EAT also confirmed that Ms J’s suspension had no effect on whether she was assigned to the Enfield contract in the same way that holiday or sick leave has no such effect.

Implications for incoming contractors

This case reiterates that incoming contractors cannot pick and choose which employees they take on. They will automatically inherit any employees principally assigned to the contract.

As was seen here, the TUPE automatic transfer principle means that outgoing contractors have been known to “dump” their less favourable employees onto a contract that is coming to an end (or in this case, leave them on it) so as to transfer their employment elsewhere.

Clients and contractors need to be alive to this risk. They should check the terms of the outsourcing agreement to see if such behaviour would amount to a breach of contract and if there are any indemnities in place to protect them in such a situation.

If these issues affect your organisation and you would like to discuss your situation in more detail, please do not hesitate to contact us.

For more on the decision, click here.

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at June 2015. Specific advice should be sought for specific cases. For more information see our terms & conditions on www.TLTsolicitors.com

Insights & events View all