TUPE and sub-contracting

Outsource iStock 000007727531XSmall 146x219Graham Richardson considers a recent ruling involving a local authority where the Employment Appeal Tribunal tackled the thorny issue of who is the client for the purpose of TUPE in a sub-contracting situation.

When does TUPE apply?

Under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (“TUPE”) there are two types of TUPE transfer – a transfer of an undertaking and a service provision change. A service provision change can potentially arise on the outsourcing of a service, the taking back in house of a service, or on the transfer of a service from one contractor (or sub-contractor) to another.

However, for a service provision change to take place, the client on whose behalf the service is being provided must be the same before and after the transfer – this was confirmed in the Court of Appeal’s decision in McCarrick v Hunter. 

The question of the identity of the client in respect of the service therefore becomes a very important one in determining whether or not a service provision change has taken place. This may be a simple question in a straightforward outsourcing situation, but potentially becomes more complex where a service which has been outsourced by the client to a contractor is subsequently sub-contracted to one or more sub-contractors. For the purposes of TUPE, who is the client of the sub-contractor providing the service? Is it the contractor with whom the sub-contractor has a contractual relationship, or is it the end user who is the client of the contractor, even though the sub-contractor has no contractual relationship with the end user, or could it be either of them?

The facts

This difficult question arose in the case of Jinks v London Borough of Havering [2015] UKEAT 0157_14_2302. The London Borough of Havering owns a site consisting of an ice skating rink and a car park. The council contracted out the management of the site to Saturn Leisure Ltd (“Saturn”). Saturn then sub-contracted the management of the car park to Regal Car Parks Ltd (“Regal”). Later the cCouncil took over control of the site, including the operation of the car park.

Mr Jinks had been engaged in the operation of the car park. He claimed that his employment had TUPE transferred from Regal to the council when the council took over the operation of the car park. This was denied by the council. Mr Jinks’ claim was initially struck out by the Employment Tribunal on the basis that there could not be a service provision change because there had been a change in the client on whose behalf the service had been provided. The ET took the view that because Regal’s contract had been with Saturn and not with the council, Regal’s client pre-transfer was Saturn. However, post transfer the client was the council, as the council was operating the car park on its own account. As in the ET’s view there had been a change in client from Saturn to the council, it considered that there could not be a service provision change.

Employment Appeal Tribunal decision

The Employment Appeal Tribunal (“EAT”) took the view that the fact that the council had no direct contractual relationship with Regal did not necessarily mean that the council could not be the client of Regal for the purposes of TUPE.

The EAT referred to the earlier EAT decision of Horizon Security Services Limited v Ndeze which, it believed, established a number of important principles:

1. the question of who is client for the purposes of TUPE is a question of fact and not a question of law, so each case needs to be determined on its own facts;

2. there could be more than one “client” in any given case; and

3. the fact that TUPE specifically provides in its definitions section that references to “contractor” in the relevant part of TUPE  “shall include a sub-contractor”  means that it is not necessarily the case that an end user cannot be a client of a sub-contractor. 

The EAT therefore upheld Mr Jinks’ appeal, and remitted the matter to the Employment Tribunal for reconsideration.

Conclusion

It is important when drawing lessons from this case not to replace one oversimplification with another. This case makes clear that it would be oversimplifying matters to take the view that just because there is no direct contractual relationship between the end user and the sub-contractor, the end user cannot be client of the sub-contractor for the purposes of TUPE. The end user could be the client of the sub-contractor in certain circumstances. However, it would equally be an oversimplification to take the view that the end user will always be the client of the sub-contractor for the purposes of TUPE. This will not always be the case – as Jinks makes clear, each case must be decided on its own facts. It is also worth remembering that on the facts of Jinks, the EAT did not go so far as to decide that the council was the client of Regal – it simply decided that the Employment Tribunal had been wrong to assume that it could not be the client, and asked the Tribunal to look at this again.

This leaves end users and sub-contractors alike in a rather unsatisfactory position, as it will not always be clear in any given situation of this type who is the client, and therefore whether or not there could be a service provision change. In determining who is the client for the purposes of TUPE, each case will depend on its own facts, and in sub-contracting cases there are no hard and fast rules as to how those facts should be applied. However, in the often complex world of TUPE, such uncertainty is not an altogether unusual experience. When in doubt, specialist legal advice should be taken.

Graham Richardson is a Legal Director at Bond Dickinson LLP. He can be contacted on 0191 279 9456 or This email address is being protected from spambots. You need JavaScript enabled to view it..