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TUPE and service provision changes

Outsource iStock 000007727531XSmall 146x219The Employment Appeal Tribunal has ruled that a service provision change can occur under TUPE where there is more than one client. Simon Lambert reports.

The EAT has considered for the first time whether the references to "a client" and "the client" in the TUPE Regulations (which defines a service provision change) cover "clients" in the plural or only a single legal entity.

In Ottimo Property Services Ltd v Duncan & Anor (Transfer of Undertakings : Service Provision Change) [2015] UKEAT 0321_14_0901 Mr Duncan was employed by Chainbow Limited (Chainbow) as a Site Maintenance Manager based at Britannia Village (BV), an estate made up of a number of blocks of residential housing.

Each block had its own residents' management company, which was a separate legal entity, and there was also a general management company for the common parts of the estate. 12 out of the 13 management companies entered into property management services contracts with Chainbow.

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Over a period of years, Chainbow lost six of these contracts and, in February 2012, it sub-contracted the remaining six contracts to Ottimo Property Services (Ottimo). Mr Duncan was treated as having transferred from Chainbow to Ottimo under TUPE.

Between May and August 2012, these six contracts were assigned to Warwick Estate Properties Limited (Warwick). Warwick did not consider that TUPE applied to the transfer and employed its own on-site Property Manager at BV. Mr Duncan was subsequently dismissed by Ottimo in July 2012. Mr Duncan brought tribunal proceedings claiming that his employment had transferred to Warwick.

The tribunal decided that the service provision rules only apply where there is a single client. It found that there had not been a business transfer under regulation 3(1)(a) of TUPE, because there was no transfer of an economic entity which retained its identity after the transfer. Even if an economic entity could be identified, which was questionable, it had effectively been fragmented over time, due to the progressive transfer of contracts from Chainbow to different contractors. It also found that there was no service provision change under regulation 3(1)(b)(ii) of TUPE (second generation outsourcing) on the basis that, construed literally the regulations require a single client. The tribunal considered that it was not permissible for a number of contracts with different clients to be aggregated to make one overall service provision change. 

Mr Duncan appealed to the EAT who upheld the appeal. It held that a service provision change can, in principle, involve a group of clients, provided that they remain the same after the transfer and they share a common intention.

What this means for employers

This appears to be the first time that the EAT has considered whether the service provision change rules can apply where there is more than one client or service user. However, there will need to be a sufficient link between the clients and retention of identity after the transfer in order for a single service provision change to occur (rather than potentially a number of separate service provision changes in respect of the activities being provided to each client).

The EAT also pointed out that it may be more difficult to demonstrate a common intention where there are separate contracts, but indicated that this would not be an absolute bar to the operation of TUPE.

Simon Lambert is a partner at DAC Beachcroft. He can be contacted on 0117 918 2085 or This email address is being protected from spambots. You need JavaScript enabled to view it..


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