Service provision changes and being “essentially dedicated”
TUPE applies when there is a “relevant transfer”, which includes service provision changes. In simple terms, there is a service provision change when one entity stops providing a service, and someone else provides it instead. This therefore covers outsourcing (including first and subsequent generation outsourcing) as well as insourcing, where:
immediately before the service provision change—
- there is an organised grouping of employees situated in Great Britain which has as its principal purpose the carrying out of the activities concerned on behalf of the client
- the client intends that the activities will, following the service provision change, be carried out by the transferee other than in connection with a single specific event or task of short-term duration
- the activities concerned do not consist wholly or mainly of the supply of goods for the client’s use.
The section of TUPE which deals with service provision changes is not directly derived from European legislation. As such, when determining whether or not there is a service provision change, a literal interpretation of the wording above is required.
What does “essentially dedicated” mean?
When dealing with service provision changes, you will often hear the phrase “essentially dedicated”. This is language which has developed over the years to simplify principal purpose the carrying out of the activities concerned on behalf of the client. As a business preparing for a service provision change, you may have been asked to work out the percentage of time that an employee spends working for a particular client. This is to determine whether or not they are “essentially dedicated” and accordingly, should be protected if that client decides to obtain that service elsewhere.
However, the wording of the legislation is “principal purpose”. This is arguably more than “essentially dedicated”. Case law dictates that the fact of someone spending 100% of their time working for one client is not determinative of whether or not it is their “principal purpose”. It has to be more organised, it can’t simply be “happenstance” (Eddie Stobart Ltd v Moreman and Others case).
By the same token, an employee who only (from a statistical perspective) spends 70% of their time working for a particular client can have this as their principal purpose on a more detailed review of the facts. In the case of Amaryllis v McLeod & Ors, employees would always prioritise work for a certain client, but if that work wasn’t there, they would pick up other jobs. This “skewed the figures” somewhat when looking at the percentage of time that the employees worked for the particular client, however the employees were deemed to be essentially dedicated to that client (NB this case was subsequently successfully appealed).
What is clear is that if the intention is for employees to be “essentially dedicated”, you have to be clear about having an organised grouping dedicated to that service, ideally from the outset of the relationship with the client.
This note is part of a series of notes on TUPE prepared by solicitors in our employment team. Please see the other notes for more information, or contact Claire, Rachael or Rebecca if you have any queries.