The recent commotion triggered by changes to TUPE regulations is a storm in a teacup and will have little effect on lawyers, says David Gollancz

It is not often that the Transfer of Undertakings (Protection of Employment) Regulations (TUPE) trigger so much excitement that they find themselves on the front page (see [2006] Gazette, 9 March, 1). But the recent commotion is largely about nothing.


For the past 25 years or so, TUPE has been engaged when a business has changed hands. Where the common law would act to terminate the employment contracts of those working in the transferring business, the regulations effect a statutory novation to the transferee.


Jurisprudence in our own and the European courts has progressively extended the ambit of the relevant transfer to cover the great majority of cases, including most outsourcing, re-tendering or insourcing of services. So long as the business before and after the change looked sufficiently similar that it could be said that it had 'retained its identity' (and the courts have proved pretty adept at finding that undertakings have retained their identities), TUPE would apply.


When the Department of Trade and Industry published its proposed reformed regulations in March 2005, one of the highlights was the express recognition of such 'service provision changes' as relevant transfers. The provisions go farther than mere recognition - they set out a different test for such changes from that developed in the jurisprudence for traditional business transfers. There is no need for the business concerned to retain its identity. Instead, there are three tests.


The first two are contained in regulation 3, which deals with service provision changes: is there an organised grouping of employees providing the service primarily for the particular client before the change, and does the client intend that the new provider (which may be the client itself or a successor contractor) should provide the service other than in connection with a one-off task on a short-term basis?


The third test is in regulation 4: will the employment contracts of the employees 'be terminated by the transfer' if they do not transfer?


There are circumstances where this may bite. John McMullen, quoted in the Gazette, pointed out one such where an in-house legal service is to be closed down and the provision of legal services outsourced. But how likely is it that that will be done in a way that meets the other tests? How often does a corporate client outsource its legal services to a single provider, or even a group of providers, on an ongoing contractual basis?


Almost never. Indeed, they will practically always appoint a group of firms to a panel, usually with overlapping and competing skill-sets, without any guarantee of work to any of them and certainly not with the intention required by the regulations, to instruct those firms on other than a one-off, one-job-at-a-time basis.


The same goes, but even more emphatically, for panel reviews. The reality is that clients want to retain the flexibility to instruct anyone they choose and even if they do expect to have a continuing relationship with one firm, they will never make any sort of binding commitment to that effect.


It must be comparatively rare - although admittedly not unknown - that the loss of a single client will, of itself, result in solicitors losing their jobs, so that the regulation 4 test is failed. The reality is that, while it may be different for other professional services suppliers, particularly those big consultancies that second whole teams into client organisations, sometimes for years, the new TUPE rules will change very little for lawyers.


David Gollancz is a partner in the public sector group at City-based law firm Field Fisher Waterhouse, and formerly head of the TUPE task force and of procurement and commercial contracts team at the Treasury Solicitors