Facilities staff will not automatically transfer under TUPE if client changes at the same time as service provider, tribunal confirms

Out-Law News | 28 Jun 2012 | 10:25 am | 2 min. read

Regulations designed to protect employees when the company they work for is taken over by a new owner will not apply where the contractor providing business services changes at the same time as the client for whom those services are being carried out, the Employment Appeal Tribunal (EAT) has confirmed.

Its ruling, which overturned an earlier employment tribunal decision, meant that a security guard whose contract was terminated when his employer lost a contract to provide security services at a building could not rely on the Transfer of Undertakings (Protection of Employment) (TUPE) Regulations to raise an unfair dismissal claim against the new security service provider. This was because the owners of the building changed at the same time.

TUPE was expanded in 2006 to govern situations where work is outsourced, brought back in-house or the service provider is changed.

In a separate case heard last December the EAT was asked for the first time to decide whether a service provision change (SPC) could be said to have taken place if the client to whom services were being provided changed at the same time. In that case, called the 'Hunter case', it held that the regulations would only apply in this context if the activities carried out before and after an SPC were on behalf of the same client.

The Hunter case  involved  the employment of a property manager Mr McCarrick which was held not to have transferred to the new provider when the property portfolio's owner went into receivership. This case has been referred to the Court of Appeal. The appeal will be considered in October.

In the current case, the security guard, Mr Crofts, was employed by Reliance Security ("Reliance") at student accommodation called The Glasshouse. The property company which entered into a contract for security services with Reliance went into administration after which management of the site was taken over by another company which continued to pay Reliance for those services. However, when the site was later taken on by the Mansion Group, Reliance lost its contract to a new security services contractor, Taurus. Reliance  told Crofts that his contract had automatically transferred to the new security services contractor, Taurus, under TUPE, however Taurus disagreed.

Reliance, the original security service provider, had argued that its case could be distinguished from the decision in the December 'Hunter' case. As there was a slight delay between when the contract for the sale of the property was drawn up and when it was signed, the security guard, Mr Crofts, must have remained in his role as part of a duty on the part of the seller to "maintain the property in a reasonable state of preservation" before the Mansion Group moved in.

However, Mr Justice Richardson said in his ruling that this duty did not necessarily make the Mansion Group a "client" of Reliance's.

"I have no doubt that I should follow Hunter," said Mr Justice Richardson in his ruling. "It does not follow that, because the vendor owes a duty to the purchaser to maintain the property in a reasonable state of preservation, the purchaser is the client of those whom the vendor engages to perform the duty. On any normal use of language, the vendor is their client."

He added that it was not up to him to decide whether the judge in the Hunter case had decided the issues wrongly since "as a general rule the Appeal Tribunal will follow its own decisions, particularly where they are considered decisions after argument on the point, and where there are no conflicting appellate decisions".

Croft must therefore pursue Reliance rather than Taurus for potential unfair dismissal, he said.

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