Categories
Employment Law

Changing Service Providers and TUPE-Does TUPE Apply?

Whether the change of service providers is covered by the TUPE regulations will depend on the particular facts of the situation.

Firstly, it is worth remembering that TUPE covers the transfer of undertakings.

To be a transfer of an undertaking it must relate to a stable economic entity whose activity is not limited to performing one specific works contract.

Such a transfer would only come within the terms of TUPE if it included the transfer of a significant body of assets to the new contractor or a transfer of a ‘major part of the employees’ performing the function.

The mere loss of a service contract to a competitor cannot by itself indicate the transfer comes within the meaning of the TUPE directive. Because the original undertaking does not cease to exist and has merely lost an asset

Each case will be judged on the particular circumstances but factors to be considered would be:

  • Whether assets or resources are taken over by the new contractor
  • Whether employees have been taken over by the new contractor.

The European Court of Justice has held in the Suzen case that a contract for a service provided by an old contractor being transferred to a new contractor does not necessarily mean that an economic entity has been transferred.

The findings in the Suzen case have been generally applied in Ireland by the Employment Appeals Tribunal (EAT).

Irish Cases re Changing Service Providers and TUPE

Cannon v Noonan Cleaning Ltd and CPS Cleaning Services Limited [1997]

This case concerned the contract for the cleaning of Balbriggan Garda Station. The cleaning contract was lost to CPS Cleaning Services Limited.

No tangible assets were transferred between Noonan Cleaning and CPS Cleaning.

Cannon turned up for work with CPS cleaning who sent her away and did not employ her.

The EAT held that there was no transfer of undertaking as it applied the principles of Suzen.

Shiels and Others v Noonan Cleaning and ISS Contract Cleaners Ltd [1997]

Sheils and the other claimants were employed by ISS Contract Cleaners ltd. ISS lost the cleaning contract which was won by Noonan Cleaning.

Noonan cleaning refused to employ the claimants.

ISS Contract Cleaners Limited accepted that the employees had no right to transfer to Noonan because no assets had transferred between the two companies and were entitled to redundancy from ISS. The EAT agreed.

Collins v Excel Property Services Limited [1998]

Mrs. Collins was employed by Excel Property Services Limited who were awarded the contract for cleaning the school by the Board of Management of the school.

The Board put the contract out to tender and Excel Property Services Limited were unsuccessful.

Mrs. Collins and four other employees transferred to the new cleaning contractor. However, they felt that the machines provided by the new contractor were not of the same standard as previously provided with Excel.

They terminated their employment and Mrs. Collins claimed redundancy from Excel.

Excel claimed there was no liability as it was a transfer of undertaking and the liability lay with the new contractor.

The question was: was this a transfer of undertaking?

The Court recognised that there would not be a transfer of undertaking if there was no transfer of significant tangible or intangible assets.

However, in this case Mrs. Collins was held to have transferred under the Acquired Rights Directive and as a result there was no case against Excel.

In addition, the EAT held that there was not a redundancy situation as the school still needed to be cleaned.

Digan v Sheehan Security Corporation Limited [2003]

This case involved the transfer of a security contract at the Athlone Accommodation Service.

The EAT again held, inter alia, that a changeover of contractors per se does not amount to a transfer of undertaking unless there is also a transfer of significant tangible or intangible assets.

Categories
Employment Law

TUPE Regulations -What You Should Know About the Transfer of Undertakings Directive

tupe-regulations
TUPE regulations are supposed to protect employees

TUPE.

The Transfer of Undertakings Directive of 1977, which became part of Irish law by the European Communities (Safeguarding of Employees’ Rights on Transfer of Undertakings) Regulations, 1980, protects the rights of employees where the business in which they are employed is transferred to a new owner.

It is a significant piece of legislation if you are selling your business or if you are working in a business which is being taken over.

What is an undertaking?

It is important to note that the TUPE directive covers undertakings and businesses or parts of undertakings and businesses-this leads to the critical question of what an undertaking is and as there is no definition in the legislation it has led to much case law with each case being decided on it’s own particular facts.

The ECJ (European Court of Justice) interprets undertakings as economic entities and vice versa.

Key elements of the TUPE regulations

The key thrust of the TUPE directive is that the rights and obligations in respect of employment contracts of the transferring business are transferred to the new business.

  • There must be a change of employer-this is a fundamental criteria
  • A change of employer can occur where full ownership does not change (management responsibility may change and transfer to a subsidiary for example)
  • Pension entitlements are excluded insofar as they do not have to be continued by the new company
  • The parties to a transfer have an obligation to notify, inform and consult with employees or their representatives
  • If TUPE legislation is breached the problem rests with the new business (the transferee)
  • The TUPE directive does not apply where the reason for the transfer is the insolvency of the transferring business.
  • TUPE also does not apply where the business is transferred by a transfer of shares
  • TUPE may apply even where there is no agreement between the two businesses, for example where a lease or franchise is surrendered by operation of law.

(This is part of the employment law Ireland series)

NOTE: TUPE regulations do not apply where a business is transferred by way of the sale of shares as there is no transfer of business-only a change of shareholding.

Key Aspects of the TUPE Regulations

The key takeaways from the regulations are

  • The rights and obligations arising from an employment contract transfer to the new employer from the old
  • Employees’ pension rights do not transfer
  • An employee cannot be dismissed solely on the grounds of transfer of undertaking
  • If the working conditions arising from the transfer deteriorate significantly leads to a termination of employment the relevant employer will be held responsible for the deterioration.

Who does TUPE apply to?

Firstly employees but also persons having an employment relationship with the transferor. This may mean agency workers, depending on who pays them, for example and the Labour Court has held that agency workers can be covered by the directive, depending on the particular circumstances of the case.

The underlying philosophy is if similar activities are continued in different hands the identity of the undertaking remains, a transfer occurs, the employees follow the work and protection is enjoyed by the employees.

Transfer of Undertakings

There must be a transfer of an undertaking for TUPE to apply. It is the transfer which triggers the rights and obligations in the TUPE regulations.

If a transferor ceases trading and the transferee resumes the business some time later, it may still be covered by TUPE.

TUPE can also apply even where there is no change of ownership-it is sufficient that there is a change in the day to day operation/management of the undertaking.

The key criterion in deciding whether there is a transfer within the meaning of the regulations is whether the activity is seen to be continuing, even with some differences or even where all of the economic activity has not transferred.

So, transfer of a part of a business or undertaking is also covered by TUPE.

However a “mere activity” may not be covered if the activity is not an economic activity capable of being the subject matter of a transfer within the meaning of TUPE.

Spijkers v Gebroeders Benedik Abbatoir CV [1986]

This European case has led to what are referred to as “Spijkers Criteria” when it comes to deciding whether there has been a transfer of an undertaking or not.

They are

  1. was the undertaking a stable undertaking with an ongoing life of its own?
  2. has the entity retained its identity?
  3. have some or all of the staff been taken over by the new employer?
  4. has the customer base transferred?
  5. are the activities post transfer similar to those carried on before the transfer?
  6. whether there was an interruption of the activity will be a factor
  7. has there been a transfer of assets?

Conclusion

If you are thinking about purchasing a business in Ireland or the EU there is quite a lot of complex issues which you would be well advised to obtain legal advice for.
There is considerable body of decided case law which teases out many issues that have arisen in this area-matters like

  • the cessation and resumption of a business prior to transfer,
  • what is an undertaking,
  • who is covered by the legislation,
  • whether public bodies are undertakings,
  • questions surrounding dealerships and franchises,
  • transfer of part of an undertaking,
  • the difference between an “activity” and an undertaking and so forth.

For this reason do consult a solicitor if you feel that your rights have not been upheld in this potentially complex area.

Changing service providers-does TUPE apply?

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