In its recent decision in Enterprise Management Services Ltd v Connect-Up Ltd & Ors, the EAT has provided an example of where a change in contractor will not fall within TUPE provisions, provided the activities carried out by the new contractor are not fundamentally the same services as those carried out previously.
In an arrangement which some schools will recognise, Enterprise Management Services Ltd provided IT services to Leeds County Council under a framework agreement. The agreement gave it preferred bid status amongst the Councils' schools. Enterprise offered two service levels; Option A was a complete managed service and Option B was support for the maintenance of one particular software system only.
Although Enterprise initially catered for all schools in the borough, by the time the contract was put out for re-tender this had dropped to 80%, with most schools only signing up for the second service level. The new contract was awarded to Connect-Up Ltd from 1 April 2009. After being awarded the contract, Connect-Up lost around 40% of the schools previously serviced by Enterprise to five other providers.
On 31 March 2009 Enterprise dismissed employees who had been working under the framework agreement and later argued that they had transferred under TUPE to Connect-Up. Connect-Up argued that no transfer had taken place as there were significant differences between the two contracts. It was argued that the main difference was that the new contract excluded any service in relation to curriculum matters (which represented around 15% of the work which had previously been carried out by the Enterprise staff).
The Tribunal found that there were significant differences between the activities carried out by Connect-Up when compared with Enterprise and therefore that the employees in question had not transferred to Connect-Up.
On appeal from Enterprise, the EAT upheld the Tribunal's decision, finding that the omission of the curriculum work from the new contracts and the further loss of significant schools by Connect-Up Ltd to five other contractors, meant that the activities were not essentially the same.
Best practice
Where there is a change in contractors providing a service, it is important to consider in detail the nature of the contract awarded and whether there will be a fundamental change to the service previously provided. If the activities carried out by the subsequent contractor are not fundamentally or essentially the same as those carried out previously, there will not be a transfer of employees under the TUPE provisions.
TUPE may also not apply where there is a fragmentation of the relevant services on re-tender. Again, it is important for both the out going and incoming contractors to consider what will happen to the services as a whole on re-tender.
For more information, please contact Victoria McMeel on 0117 314 5467.
This publication is for guidance only. Reliance should not be placed upon it and nor should action be taken, without obtaining advice in respect of the specific circumstances applicable. We will be pleased to provide such advice or assistance.
