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Change of legal provider was not a TUPE transfer

11 May 2010

The Employment Appeal Tribunal (EAT) has recently ruled that TUPE did not apply when a client changed the lawyers on its legal panel.

This issue has been hotly debated in the legal community and the decision will no doubt be welcomed by clients.


Background

The Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) apply where there is a service provision change. This covers a change of contractor providing the services as well as an outsourcing or in-sourcing of services.

The activities carried out by the new contractor need not be identical to those performed by the out-going contractor, but they must be substantially the same (see Metropolitan Resources Ltd v Churchill Dulwich Ltd and Ors [2009] IRLR 700). 

Under the original proposals to amend TUPE, so called ‘white collar’ service provision changes (involving professionals such as accountants and lawyers) were specifically excluded from the scope of TUPE. However, this exclusion did not survive in the final version of the regulations and there has been debate ever since about the practical consequences of TUPE for white collar staff.

The effect of TUPE is to transfer automatically the contracts of employment of the employees engaged in providing the relevant services.  Clients feared that if they wanted to remove their business from professional advisers, under TUPE, the same team of employees would nevertheless transfer to the incoming service provider.

The case

Law firm Ward Hadaway was on the Nursing and Midwifery Council (NMC) legal panel with four other firms. Following a tendering exercise the NMC decided to appoint a single provider, Capsticks, for all its legal work.

The parties accepted that there was an existing ‘organised grouping of employees’ whose principal activity was performing work for the NMC (a crucial pre-requisite for TUPE applying to a service provision change).

However, the EAT upheld a tribunal's decision that there was no service provision change because the activities performed under the new arrangement were different to the previous arrangement.  A decisive factor in the decision was that no transfer of employees or work in progress between the out-going and in-coming law firm took place.

Although no new work was given to them after the tender, Ward Hadaway was involved in the run off of its workload: it continued to work on more than 100 existing cases for six months, but all new NMC work went to Capsticks.

In addition, much of the preparation and advocacy work previously undertaken by the panel firms was taken back in-house by the NMC.

Comment

This case does not mean professional service changes will never be caught by TUPE. It is still theoretically possible for such situations to be caught by TUPE where there is an organised grouping of employees dedicated to performing services for the client which continue in essentially the same form after the change of service provider.  All cases will be fact specific and decisions depend upon the individual circumstances.

However, the case does demonstrate that just because there is a change of contractor it would be unwise to assume TUPE will always apply. The crucial factor may be whether work is ‘run off’ and not transferred to the new contractor.

As the issue of professional service changes has been debated by many, it is helpful to have an appellate decision in what is still a relatively new area of law.

Source

Ward Hadaway Solicitors v Love and others

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