Service provision changes

The service provision change regulations became law in 2006 to address a particular limitation of the Acquired Rights Directive in the context of service intensive industries, where the business transferring was made up mostly of people, and few assets. Typical examples include office cleaning, workplace catering, security guarding, refuse collection and machinery maintenance, but there are many others. The Directive’s focus on the search for an economic entity which retained its identity left many transfers outside its scope. As well as leaving employees unprotected, there was also widespread uncertainty as to whether TUPE applied, leading to extensive litigation.

Some employers tried to avoid TUPE altogether by taking over service contracts but refusing to take on the staff, arguing that this meant TUPE did not apply (ATOS Origin UK Limited v Amicus [2004] EAT/0566/03). This background led to new provisions designed to regulate outsourcing. The then Labour government wanted the new regulations to produce “a position in which service provision changes would be comprehensively covered by the legislation, subject to certain specified exceptions.”

In general, the new regulations succeeded in eliminating uncertainty, making it much harder for new employers to argue that TUPE does not apply. However, much of the case law since 2006 has documented efforts by employers to find new ways of avoiding TUPE.

The Conservatives have always been hostile to the service provision regulations and before the 2010 election they pledged to remove them. However, in an unexpected U-turn, the coalition government has agreed to retain the regulations, subject to one amendment explained on page 16..