TUPE takeaways: when is there a business transfer or service provision change?

The purpose of TUPE is to safeguard employee rights if there is a “relevant transfer”.  So, let’s go back to basics – a relevant transfer is either a service provision change or a business transfer.  Let’s look at these a little closer…

Service provision change

A service provision change happens when:

• a service is contracted out to a contractor for the first time (outsourcing);
• a service is moved from one contractor to a new contractor (second generation outsourcing); or
• the service is brought back “in house” by the client.

For TUPE to apply, there must be an “organised grouping” of employees, based in Great Britain, whose principal purpose is to provide the service. Only employees who are permanently assigned to the service will transfer.

Business transfer

This is a transfer of an economic entity from one employer to another. The “economic entity” is defined as an organised grouping of resources which has the objective of pursuing an economic activity. For example, in a sale of a hotel where furniture, kitchen equipment, customers/guests, and staff are transferred. 

For TUPE to apply in this context, the economic entity must retain its identity after the transfer. Usually, if the activities are the same, the customers are the same and staff are still required (even if the work is carried out by different people) then the identity is retained.

What happened in this case?

This case involved a residential nursing home called Adamwood which was owned by Rollandene Limited.  It had 29 staff members who cared for a maximum of 13 residents.  Some of the residents were privately funded while others were funded by the local authority. 

The owners of Adamwood decided to sell the business to Mansfield Care Limited, who had multiple care homes in its portfolio. The owners spoke with the Adamwood staff and explained that the home would close, and that the residents would be supported to move to two of the Mansfield Care homes.  No TUPE or redundancy consultation was had with the staff of Adamwood and, when concerns were raised by a Unison representative, the owner explained that - although she didn’t have Mansfield’s precise intentions - she understood that all staff would be offered positions there. Later, Mansfield Care reassured the staff that they would all transfer to one of two of their homes. However, when Adamwood finally closed and all the residents were re-located, just six staff were told that they would be transferring.

The staff brought various claims against the owners of Adamwood. A key question in the case was whether there had been a TUPE transfer.

Was there a TUPE transfer?

The Employment Tribunal found that there was both a business transfer in respect of the residents who were privately funded and also a service provision change for the local authority residents. This creative decision, however, was overruled by the Employment Appeal Tribunal. The main problem with this finding, as far as the EAT was concerned, was that the tribunal had not explained or recorded its rationale for deciding that the Adamwood staff were split into two organised groupings. For the local authority residents, the tribunal had not identified the client, the service, or how there was an organised grouping of staff dedicated to providing this service. For the privately funded residents, the tribunal had not explained how they could be carved out as a distinct economic entity which retained its identity after the transfer. The case was sent back to the Tribunal for reconsideration. 

TUPE takeaways

This case shows that the analysis of whether or not there is a TUPE transfer can be challenging.  Although the broad purpose of TUPE is to make sure that employees “go with the work”, TUPE is not this straightforward. This is an excellent reminder of the need to go back to the fundamental tests that guide us through the TUPE jungle and get legal advice to avoid getting in a TUPE tangle.

Mansfield Care Limited v Newman – download the full judgment here