Parting: such sweet sorrow?

The Transfer of Undertakings (Protection of Employment) Regulations (TUPE) can strike fear into even the most experienced practitioner. Clients can easily get themselves in a mess over the provisions and turn to us to explain and untangle the resulting problems. Recently, though, the concept that the profession itself could become embroiled in TUPE’s consequences has been an increasing concern.

The extent of TUPE was significantly expanded in 2006 with “service transfers” being specifically included within its ambit. Initially there had been a suggestion that “professional” services would be exempt from this change, but this did not happen. TUPE could therefore apply in a situation involving a change in the provider of services, e.g. a client switching from one firm to another. As such, the employment of any employee who can be said to be “assigned to the organised grouping of resources or employees that is subject to the relevant transfer” (reg 4) will transfer to the new employer. Liabilities attaching to the employee also transfer. A dismissal (except in limited circumstances) of such an employee is prohibited if it is a result of the transfer.

The lawyer cases

When seeking business, particularly in the context of a tendering (or re-tendering) exercise, TUPE must be considered. This was seen in last year’s case of Royden v Barnetts Solicitors (ET/2103451/07), where two claimants successfully argued that TUPE applied following a re-tendering: see Journal, June 2009, 52. This year has already produced a further decision of interest to the profession on how the law is being interpreted and possible limitations on the effect of TUPE.

Ward Hadaway was part of a pool of legal firms who carried out work for the Nursing & Midwifery Council (NMC). The NMC sent cases to panel solicitors, although there was no obligation to allot cases to any particular firm and indeed there had been fallow periods during the contract. In 2007, the NMC sought a single provider of legal services and started a tender exercise in which Ward Hadaway was unsuccessful. Another firm, Capsticks, was selected. Ward Hadaway continued to work on pre-existing cases which they were handling. They did not however receive any new work.

As a result of losing the tender, two solicitors working for Ward Hadaway whose work had been principally for the NMC were dismissed on grounds of redundancy. They claimed unfair dismissal and the question arose, who would be liable for any compensation payable. Ward Hadaway argued that TUPE applied and so any liability fell on Capsticks, while Capsticks argued that TUPE had not been engaged and liability remained with Ward Hadaway.

Other side of the line

The employment tribunal was satisfied that the two solicitors constituted an “organised grouping”, but was unconvinced that there had been a “relevant transfer”. A key factor for the tribunal was that the existing work remained with Ward Hadaway; it therefore drew a distinction between work in progress and an expectation of new work. The existing work came within the definition of “activities” (for the purposes of TUPE) while the expectation of new work did not. A stream of work to Ward Hadaway had never been guaranteed as there had been no obligation on the NMC to provide cases to the firm. It also found that new work to Capsticks from the NMC differed in that a larger proportion of work involving advocacy was handled in-house.

It therefore found against Ward Hadaway, who appealed unsuccessfully to the employment appeal tribunal. The EAT held (UKEAT/0471/09) that the tribunal’s interpretation of the regulations was correct and that it had applied the right tests to assess whether or not a transfer had occurred in terms of the law.

This case is another important reminder of the potential effect of TUPE and highlights the importance of how a tendering exercise is structured. It is essential to consider how the work will be carried out in practice so that the situation of having certain people devoted solely or mainly to the work can be avoided if necessary. Fundamental to the Ward Hadaway case was also how the existing work (carried out by the previous provider) was to be handled (e.g. was it to be retained by the previous provider or was it to be taken on by the successful tenderer), and what obligation existed on the client to provide work to the firm in the first place. These are issues which should be addressed when the original tender contract is negotiated so that both parties know what is intended to happen in the future. The effect of a client retendering for work and how (if you were to be unsuccessful) a loss would be handled should be considered.

All providers of services, including the legal profession, should be alive to the issues highlighted in this case.

• Graeme Dickson, associate in the Employment Team, Morton Fraser LLP