TUPE: When customers aren’t clients

12 Sep 2016

The provision of a near identical service by one contractor in place of another will often give rise to a service provision change (SPC) under TUPE. However, one recent case has emphasised the need to carefully analyse the parties’ contractual and commercial relations.

In CT Plus (Yorkshire) CIC v Stagecoach, Hull City Council agreed with CT Plus to operate a subsidised park-and-ride bus service. Stagecoach set up a rival service operating from the same location. Stagecoach were not engaged by the Council to do so and had no contractual relationship with the Council other than a licence to use the Council-owned bus station. Because of statutory regulations that prevent subsidised services running alongside unsubsidised services in this sector, the Council were obliged to close down the service run by CT Plus on the day that the Stagecoach service began. Employees of CT Plus claimed that a service provision change had occurred under TUPE.

However, both the Employment Tribunal and the EAT disagreed, emphasising the need to look closely at the precise wording of the regulation 3(b) of 2006 and the fact that the SPC provisions are built around the concept of there being an underlying client. That term referred to "an organisation that is in a position to carry out activities either itself or by commissioning them from others to carry out those activities on its behalf". They decided that Stagecoach’s institution of the rival operation could not be characterised as being a service provided to a ‘client’ because the Council and Stagecoach had no contractual relationship.

While logical in the context of the wording of the TUPE regulations, the decision in this case is in some respects a narrow and slightly artificial one as the Council knew when it permitted Stagecoach to set up its service that it would in all likelihood lead to the closure of the CT Plus service. Furthermore, the routes were essentially the same, and the customers were too.

However, the decision is consistent with other recent cases which have focused on the need for the continuity of a client relationship as an essential part of an SPC. In this case, there was no such relationship between the Council and Stagecoach.

For more information on how this ruling may affect your organisation, or to discuss any other employment law issue, please contact:

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