Can TUPE apply when there is a change of client before and after the transfer?
The recent Employment Appeal Tribunal (‘EAT’) decision in Horizon Security Services Limited v Ndeze has endorsed the principle that there is no service provision change in these cases, and that TUPE does not apply.
In addition, the EAT held that where there is a task being performed by the incoming contractor in connection with a single specific event of short term duration then there will not be a service provision change either and therefore no TUPE transfer.
PCS, a security contractor, provided security services for Workspace plc looking after a business centre on a site owned by the London Borough of Waltham Forest (‘LBWF’). The site was taken back by LBWF and Horizon were engaged to look after the site for 8 to 9 months pending demolition work, allowing a supermarket to be erected. This meant that arrangements between PCS – the old security services employer – and Workspace were now between Horizon – the new security services employer – and LBWF.
The PCS staff argued there was a service provision change under TUPE and that they should therefore be employed by Horizon.
A fundamental rule in relation to service provision change is that the client for whom the services are provided must be the same. Therefore, despite Mr Ndeze having 17 years’ continuous employment ending with PCS, his employment did not transfer. There had been a change of client. The services provided by PCS had been to Workspace plc and therefore when the contract was terminated by Workplace plc, by their client (LBWF), the new client became LBWF. LBWF were therefore able to appoint their own security contractors without there being a TUPE transfer.
In addition, the EAT also found that the appointment of Horizon had been for a limited period and was therefore for a single specific event or task of short-term duration, i.e. security for the site pending the demolition of the building. As a result, TUPE did not apply to transfer the PCS staff to Horizon, even though the contract was due to last for 8-9 months.
Employers coming out of service contracts need to look carefully at what will happen at the end of their contract and not assume that TUPE will apply on exit, particularly where a site or property is being sold, as it was in this case.
Alternatively, the subsequent contract they are handing over to may be for a specific event of short-term duration, an exemption being used with increasing frequency to avoid TUPE.
In both scenarios, the exiting contractor cannot assume that its staff will automatically transfer over to the new contractor, and they may well be responsible for any redundancies themselves.
As a contractor entering into a service agreement with a new client, it would be prudent to seek indemnities or at least build into the cost of any tender the relevant redundancy costs arising from such an eventuality.
The full case can be read here.