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Employment Law - Transfer of Undertakings

The TUPE Regulations (*) continue to provide surprises for employers, employees and money for their lawyers. The regulations protect employees when the business in which they are employed is transferred from one company to another. The general effect is that the new employer must take on the existing staff, and can be sued for unfair dismissal, if he does not. As a set of regulations they have consistently produced unexpected and surprising results.

The case of ECM (Vehicle Delivery Service) Limited v Cox and Others (Times 10 June 1998) in the Employment Appeal Tribunal breaks significant new ground. One company had a contract with a larger company to deliver new vehicles for them and also associated services. In order to fulfil the contract they had a group of employees who worked on little else but that contract. The company lost the contract to provide these services, and the contract was instead awarded by the large company to a new company (ECM). There appeared to be no transfer of anything between the company which had lost the contract and the company which had one it - except the contract itself.

The new company anticipated and planned on entirely new arrangement with new facilities, equipment, and, of course, new staff. The staff from the original company thought differently. They applied to the industrial tribunal, and were proved correct. The law held that the withdrawal of the contract from one firm and the offer of what was in reality the same contract to another firm constituted a transfer of the original undertaking, the unit, which provided the service. Their failure to take on the staff employed by the previous company was, therefore, an unfair, and accordingly expensive, dismissal.

Again the regulations can be criticised for the uncertainty produced. in this case it was found that the people employed under the contract by the first company, were employed only for the provision of services under that contract, and that, in practice, it is a question of fact from case to case, as to whether such activities constitute an identifiable undertaking for the purposes of the TUPE regulations. In this case it was concluded that they did.

The move to such contractual arrangements, in a large number of situations, from legal services provided to the Legal Aid Board (solicitors hoist by their own petard?), to services provided to computer companies and local authorities, must all pay heed to the case. Managers concerned with such cases, may be quaking in their boots as union representatives, and more particularly, lawyers, lick their lips. In future, those taking on such contracts anew, must ask about the internal arrangements of any previous contract holder. Did this company employ people to work on that contract and little else (and how little, and how little is enough). How is a company to discover such things, and will the company offering such contract agree to indemnify those who take on such contracts against claims of this sort? The case is likely to cause widespread confusion.

* Transfers of Undertakings (Protection of Employment) Regulations 1981 No.1794

This case has now been appealed.

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18 October 2013 169 18 October 2013