HM Insights

Taking the TUPE: The ability to judge employment law liabilities

When a public body changes its service provider, there may well be a transfer of staff for TUPE (Transfer of Undertakings (Protection of Employment)) purposes. Staff from the incumbent supplier may in some circumstances transfer to the new supplier - this happens as a matter of law, regardless of the intentions of the incumbent supplier, the new supplier, the staff concerned and the public body.

For the new supplier, taking on staff as a result of a TUPE transfer can be a significant liability, particularly as the existing claims of transferring employees transfer with them. It is of huge commercial importance for suppliers thinking of bidding for a contract to know what employment law liabilities they will acquire and what any costs of redundancy might be - these matters may affect a potential bidder's decision to bid at all or affect the price at which they are willing to tender.

Although TUPE legislation obliges the incumbent supplier to provide to the new supplier certain specified information about employees, this obligation only arises close to the time of actual transfer, by which point it will almost certainly be too late for tender prices to be changed and the new supplier may not even be able to withdraw its tender if it discovers at this point that the employment law liabilities it is to acquire are greater than it anticipated. Can you ensure you don't get more than you bargained for?

A public body will want to ensure a level playing field when conducting a procurement process and an important part of this is ensuring that bidders have access to information about the employment law liabilities they will acquire in the event that they are successful. Obtaining that information from the incumbent at an appropriate point in time will depend largely on the terms of the public body's contract with the incumbent. It is important therefore that the public body's contracts with its suppliers are drafted carefully. When providing information about the incumbent's staff to bidders, the public body will want to limit its liability for the accuracy and completeness of the information and the public body must also, of course, comply with data protection legislation.

TUPE will also be a relevant consideration when a public body outsources a service which it has previously provided in-house (staff of the public body may transfer to the new supplier) or where the public body is taking a service back in-house where it was previously provided by a third party (staff from the third party supplier may transfer to the public body). Given the potentially large employment law liabilities which may transfer with employees, TUPE is an issue which public bodies ignore at their peril.

Jill is an associate with Harper Macleod LLP and can be contacted at jill.fryer@harpermacleod.co.uk.