Does outsourcing trigger TUPE?
 

Does winning an outsourced contract have TUPE implications?

Are there TUPE implications for the incumbent contractor, if the business has been outsourced before, when they lose the contract to another contractor?

In Ireland, the transfer of undertakings is governed by the European Communities (Protection of Employees’ Rights on Transfer of Undertakings) Regulations 2003 (TUPE).

TUPE regulations protect the terms and conditions of employment of employees when transferring from one employer to another employer. In a TUPE situation, the employees of a business which is being transferred must transfer to the new employer with their accrued years of service, their existing terms and conditions of employment, and also with the benefit of any collective agreement which already exists.

Many people think of TUPE in the context of a change of ownership of a business, for example, when a business is sold as a ‘going concern’ from one employer to a new employer. However, it’s important to think of the implications of TUPE when outsourcing a service e.g. catering, cleaning, security, IT, technical support, etc. It’s equally important that the winning contractor, and the incumbent contractor, if the contract has been outsourced before, think through the implications of a TUPE for their business.

TUPE can apply to outsourcing, however, TUPE does not automatically apply to every outsourcing situation in Ireland.

Similarly, a changeover of contractors is not automatically a TUPE.

Unlike in the UK, where TUPE applies in every outsourcing situation, the Irish TUPE Regulations are not as clear cut. Whether TUPE applies depends on the facts of each individual outsourcing situation.

In order to trigger TUPE, an outsourcing or changeover of contractors must involve the transfer of an economic entity which retains its identity.

In an outsourcing situation, there must be an associated and related transfer of significant tangible or intangible assets or the transfer of the major part of the workforce in terms of numbers or skill. Thus, for example, the transfer of a major part of the workforce in, for example, a catering, security, cleaning, or IT situation, would involve a TUPE. However, in the absence of a transfer of assets or a major part of the workforce in terms of skills or numbers, there is no transfer and TUPE will not be triggered.

In labour intensive businesses, such as cleaning, the deciding factor will be whether the new contractor accepts into its employment a major part of the workforce, in terms of their numbers or skills. Case law strongly suggests that in the context of an outsourcing where there is no transfer of assets and the new contractor refuses to accept any of the employees into its employment, then the regulations do not apply and a TUPE is not triggered. Where the new contractor does accept a major part of the workforce from the original employer, the regulations do apply and a TUPE is triggered.

Thus, it is really important that the parties in a potential transfer situation should be aware that their very own actions can impact on whether TUPE is or is not triggered.

What happens if an employee refuses to transfer in a TUPE ?

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