TUPE regulations
TUPE regulations and outsourcing of services overseas
The Transfer of Undertakings (Protection of Employment) Regulations 2006 have broadened the scope of the regulations and also extended them to cover situations where services are outsourced, insourced or assigned by a client to a new contractor. These are referred to as “service provision changes”.
The Regulations apply when subject to certain qualifications:
- A business or undertaking, or part of one, is transferred to a new employer; or
- A “service provision change” takes place (such as when a new contractor takes on a contract to provide a service to the client from the old contractor).
These two circumstances are jointly referred to as “relevant transfers”.
The effect of the regulations is to preserve the continuity of employment and the terms and conditions of employment when a “relevant transfer” takes place. The regulations contain specific provisions to prevent employees from dismissal either before or after a “relevant transfer”.
The representatives of the affected employees must be kept informed about a prospective transfer. The Regulations apply regardless of the size of the business transferred.
The contractor must be vigilant that there is no “business transfer” (identity of the employer changes through re-organisation etc) at the same time as the “service provision changes”.
Service provision changes
The key test is whether before the relevant transfer there was an “organized grouping of employees” who were performing the activities that are subject to transfer. If there was no “organized grouping of employees” performing the activities subject to transfer then the Regulations do not apply. This is because it would be unclear which employees would transfer because of a contractor change if there was no grouping. An “organized grouping of employees” can consist of just one person.
Summary
- Ascertain whether there was a “business transfer” at the same time as the service provision changes.
- Find out whether there was a change of contractor.
- Most importantly ascertain whether there was “an organized grouping of employees” performing the activities subject to transfer and the outsourcing of these activities affects these employees.
If condition 3 is not satisfied it is unlikely the TUPE regulations will apply in the situation of outsourcing IT services to India.