TUPE 2006: Transfer of contract for legal services was not service provision change because of continuing relationship

24 May 2010

In Ward Hadaway Solicitors v Capsticks Solicitors LLP, Ward Hadaway lost a contract to provide legal advice to the Nursing and Midwifery Council (NMC). However, it continued to provide ongoing work for the NMC. The EAT held that there was no service provision change and no TUPE transfer.

Facts
Ward Hadaway was one of four panel firms providing legal services to the NMC. On 1 October 2007, Ward Hadaway’s NMC contract expired. The NMC awarded future work only to Capsticks. When the contract ended Ward Hadaway had approximately 140 files for the NMC; it retained these files until they were finished, this took up to six months.

Mr Love and Mrs Scott were employed by Ward Hadaway and worked exclusively on the NMC’s cases. They were dismissed following the termination of the NMC contract and brought claims including unfair dismissal. Ward Hadaway argued that there had been a TUPE transfer of Mr Love and Mrs Scott to Capsticks following a service provision change. Capsticks disagreed.

The law
The definition of a service provision change under TUPE 2006 is …

“ ... immediately before the service provision change –

(i) there is an organised grouping of employees … which has as its principal purpose the carrying out of the activities concerned on behalf of the client;

(ii) the client intends that the activities will, following the service provision change, be carried out by the transferee …”

The question to be determined was the definition of activities.

The decisions
The Employment Tribunal decided that the activity carried out by Ward Hadaway was the provision of legal advice to the NMC, in relation to the files referred to Ward Hadaway by the NMC. That activity remained with Ward Hadaway for at least six months after Captsticks commenced work for the NMC. Accordingly the activities carried out by Ward Hadaway had not transferred to Capsticks.

Ward Hadaway argued further that the definition of activities should include Ward Hadaway’s expectation of future work from the NMC. The Employment Tribunal disagreed and Ward Hadaway appealed. The EAT has concluded that the Employment Tribunal was entitled to reach its decision.

Comment
It remains to be seen how widely future Employment Tribunals will interpret this case. It could affect contract transfers in many sectors, not only legal services. Potentially, any contract transferred where there is a period of “run off” with the outgoing contractor, whilst new work is given to an incoming contractor, will be susceptible to the argument that there is no transfer.

That said, employers will also need to be alive to the possibility of a TUPE transfer under the test originally set out in the 1981 TUPE Regulations, namely whether there is an economic entity which has retained its identity upon transfer.

Furthermore, Public Sector Employers will need to bear in mind the guidance contained in the Cabinet Office Guidance on Staff Transfers in the Public Sector. Effectively, under this guidance, Public Sector Employers may be required to apply the Principles of TUPE even where, strictly speaking, as a matter of law, the TUPE Regulations do not apply.

Employers should, as far as possible, ensure that detailed termination arrangements are included within any contract for services so that all parties understand their obligations in advance.