Companies which tender for, or operate contracts involving, the provision of services to clients other than for a one-off or very short period, need to take note of the requirements of an important change in the law from 6 April. The new law will affect bids for contracts for facilities management services and building maintenance services, for example. The new service provider may find that it inherits all the employees of the outgoing provider and must employ them on their existing terms, with full continuity of employment and with the same rights and liabilities against the new provider as they had against the old provider.

The Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE 2006) will come into force on 6 April 2006. The main changes to be brought in are:

• Widening the scope of TUPE 1981 to cover cases where services are outsourced, brought in-house or transferred by a client to a new contractor.

• Requiring the transferor to provide the transferee with certain information about the transferring employees, including their identity.

• Enabling employers and employees to agree changes to the terms of employment in certain circumstances where there is a transfer.

• Making it clear when it is unfair for employers to dismiss employees for reasons connected to a transfer.

• Making the transferor and transferee jointly and severally liable for any failure to inform and consult with the transferring employees.

The Department of Trade and Industry (DTI) has issued guidance to explain the new regulations.

What is a transfer?

Changes in a service provider arise where a new contractor successfully tenders for a contract previously carried out either in-house or by another provider. These situations have proved to be difficult issues of interpretation for Employment Tribunals and Courts. TUPE 2006 aims to clarify the position.

TUPE 2006 will extend the definition of a ‘relevant transfer’, which will now cover:

• A client engaging a contractor to do work on its behalf, reassigning such a contract or bringing the work ‘in-house’ (a service provision change).

However, there will not be a service provision change where:

• The contract is wholly or mainly for the supply of goods for the client's use: according to the DTI Guidance, this would cover, for example, the regular supply of sandwiches and drinks for the client's canteen, but not a contract to operate the canteen.

• The activities are carried out in connection with a single specific event or a task of short-term duration.

Changes to employment terms

Under TUPE 1981, any changes to the transferring employees' terms of employment for a reason connected to the transfer are void and cannot be enforced. The position is different under TUPE 2006 Changes to employment terms will only be void if the sole or principal reason is:

• The transfer itself.

• A reason connected with a transfer which is not an economic, technical or organisational reason entailing changes in the workforce.

This is quite a technical area and if you do plan to change terms, you should take professional legal advice.

Need to provide information

Under the old regulations, there was no obligation on a transferor to provide data about employees. This all changes under TUPE 2006. For transfers from 6 April, the transferor must provide certain information to the transferee about the transferring employees before the relevant transfer takes place, as follows:

• The identity and age of the employees who will transfer.

• Information contained in those employees' written particulars of employment.

• Information on any collective agreements (i.e. agreements with trade unions) affecting those employees which will still apply after the transfer.

• Any disciplinary proceedings taken against an employee or grievance brought by an employee in the previous two years to which the statutory disciplinary, dismissal and grievance procedures applied.

• Any legal actions taken by those employees against the transferor in the previous two years, and any such potential legal actions where the transferor has reasonable grounds to believe such actions might occur.

The information must be provided in writing or in ‘other forms which are accessible to the transferee’. The information should be given not less than 14 days before the transfer or, if special circumstances make this not reasonably practicable, as soon as is reasonably practicable.

The DTI Guidance states that whether it was reasonably practicable to provide the information in time would depend on the circumstances. However, it suggests that it would not be reasonably practicable to provide the information in time, if the transferor did not know the identity of the transferee until very late in the process, as might occur when service contracts are re-assigned from one contractor to another by a client, or, more generally, when the transfer takes place at very short notice.

It is not possible to contract out of the obligation to provide this information, but it would presumably be possible for the parties to indemnify each other in the transfer agreement.

Obligations

The present position is that where a TUPE transfer is to take place, the employer must arrange for the employees to elect representatives and must give certain written notification to the representatives. If there are measures to be taken which will affect the employees, there must be a process of consultation with the representatives about those measures.

Until TUPE 2006 it has not been clear as to whether it is the transferor or transferee who is liable for a failure to notify and consult with employee representatives before a transfer. TUPE 2006 makes the transferor and transferee jointly and severally liable.

Action points

Where you are looking to tender for a contract to provide services, you should:

• Try to find out how many employees already work on the contract in providing the services and their terms of employment and length of service.

If you win the tender, you should:

• Request full details of all employees working on the contract and expect to receive the details specified above. This applies whether the present provider is in-house with the client or a separate organisation.

• Ask the transferor to arrange for the employees to elect representatives.

• Inform the transferor what measures you are proposing which will affect the employees after transfer.

• Ask the transferor to let you have a copy of the notification letter to employee representatives and check with your legal advisers that it contains the information as required by TUPE.

• Make sure that the letter is sent to the transferring employees in good time so as to allow consultation to take place.

• If there will be measures which will affect the employees, arrange with the transferor for your company and the transferor to jointly consult with the transferring employees about those measures.

• If you will need to reduce the size of the workforce after the transfer, consult with your existing employees before the transfer if they are likely to be within the pool of potential candidates for selection for redundancy.

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