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TUPE Clarification: No Service Provision Change Where New Contractor Does Not Provide Service on Behalf of Client

TUPE 2006 applies to transfer the contracts of employment of employees from one employer to another where there is a “business transfer”, which usually occurs where the business for which the employees work is bought by another company. TUPE also applies to “service-provision changes”, that is:

•    Where a client outsources certain services to a contractor; or
•    The services which were carried out on the client’s behalf by one contractor are assigned to a different contractor; or
•    The client decides to bring the services back in-house.

In the recent case of CT Plus (Yorkshire) CIC v Black and others, the Employment Appeal Tribunal (EAT) held that there was no service-provision change where a new contractor started to provide a service for its own commercial purposes and not on behalf of the client. 

CT Plus Limited (CT) was a charity-owned company which operated a bus service from a car park on the outskirts of Hull, which was owned by Hull City Council, to the city centre. There was a contract in place between CT and the council and the council subsidised the bus service. CT had won the contract as part of a tender process. 

In 2013, the council invited other tenders. One of the companies which tendered was Stagecoach. For various reasons, the tendering process was delayed and Stagecoach decided to set up the bus service on a commercial basis without the council’s subsidies. CT ceased providing the bus service and Stagecoach began to provide its own service. 

Stagecoach did not take on any drivers from CT on the basis that there was no TUPE transfer or service-provision change. Some of CT’s employees brought a claim to establish whether TUPE did in fact apply. 

The Employment Tribunal (ET) and, on appeal, the EAT, held that there was no service-provision change because Stagecoach was not carrying out the activities on behalf of a client (the council, in this case); rather, it was carrying out the bus service on its own behalf. Stagecoach provided its own buses and did not receive a subsidy from the council. The EAT found that the council was “no more than an interested bystander”. 

Whilst on first glance it may appear that this was a case where there was a change of service-provider to which TUPE applied, the case serves as a useful reminder that there will only be a service-provision change where the client remains the same both before and after the change.

This bulletin is for general guidance purposes only and should not be used for any other purpose.