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Case Update – Service Provision Change under TUPE
In the recent case of CT Plus (Yorkshire) CIC v Black and others, the Employment Appeal Tribunal (EAT) upheld the employment tribunal’s decision that there had not been a service provision change in a situation where a service continued to be provided, but not on behalf of the original client.
CT Plus (Yorkshire) CIC (‘CT’) was a bus company contracted with, and subsidised by, Hull City Council (‘the Council’) to provide a park-and-ride service. The route was not exclusive and it was agreed that the subsidies would continue unless and until another bus company started a commercial service on the same route. A competitor company, Stagecoach, started its own bus service in direct competition with CT and this led to the Council cancelling its contract with CT from the day that the Stagecoach service started.
The Transfer of Undertakings (Protection of Employment) Regulations 2006 (‘TUPE’) apply where there has been a “relevant transfer”. This is defined as a “business transfer” or a “service provision change”. A service provision change will apply in any of the following circumstances:
- A client ceases to carry out activities on its own behalf and assigns them to another person to carry out on the client’s behalf;
- The activities cease to be carried out by a contractor on a client’s behalf and are reassigned to another person to carry out on the client’s behalf;
- The activities cease to be carried out by a contractor or a subsequent contractor on a client’s behalf and are instead carried out by the client on its own behalf.
The Employment Tribunal Decision
The tribunal rejected the argument that there had been a service provision change. It held that Stagecoach was not carrying out activities on behalf of a client and therefore there was no TUPE transfer of staff to Stagecoach when CT ceased operating.
The Appeal Decision
The EAT dismissed the appeal and upheld the tribunal’s decision that TUPE did not apply here. It noted that in order for TUPE to apply, it is essential that the client before and after the service provision change remains the same. Here, Stagecoach was carrying out a service on its own behalf, and not on behalf of the Council. It followed that the Council could not be considered a ‘client’ of Stagecoach but was merely an “interested bystander”.
What does this mean for employers?
It is easy to see how the change in bus operator might have appeared to be a service provision change protected by TUPE. However the decision highlights the importance of carefully reviewing the contractual agreements between the parties and establishing whether the client is the same before and after a service provision change. At a time when councils are increasingly expected to cut costs, there may well be more cases such as this where subsidised services are replaced by commercial competitors and this could mean that employees are left without any rights to transfer to the subsequent provider.
For any advice, contact our specialist employment team on 01392 207020 or e-mail email@example.com.