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warning on Charity Project Tendering: Beware of TUPE!

By Kevin Russell | 4 January 2012

As churches and charities increasingly look to seek new opportunities for working in communities, including tendering for new contracts to deliver community benefit, they must do so with their eyes open to the legal realities. One of these ‘realities’ is the TUPE risk. ‘TUPE’ refers to the Transfer of Undertakings (Protection of Employment) Regulations.

In 2011, the 700 Club, a charity in the North East were caught out as they hadn't appreciated that TUPE would apply them. They, along with the Salvation Army, provided hostel accommodation for homeless people in Darlington and both charities were funded by the Local Authority. Due to funding cuts, the Council invited both to tender for one remaining available contract, which 700 Club won. The Salvation Army centre was closed.

According to reports, 700 Club did not change the service that they were providing and were not bidding to take over the Salvation Army contract, but rather to retain their funding. One report quotes Reverend Dr John Ellison, the 700 Club's founder as saying "We made it very clear that in tendering we were tendering for work we already had a contract for - in no sense were we taking over the work of the Salvation Army." However, the Tribunal stated that the charity was expected as a result of the tender to take on the services previously provided by the Salvation Army. As a result, they inherited a reported £250,000 liability in respect of  Salvation Army redundancy payments, on a contract worth only £190,000.

Where a charity takes over the provision of a service from a local authority or other provider, TUPE is likely to apply to transfer the employment of all staff who have spent the majority of their time working on the service.  This will mean the new provider picks up all employment liabilities for those staff.  In a transfer from a local authority this can include an obligation to match the employees existing final salary pension rights – which is a very significant cost by itself. If the church/charity is going to remodel the service they will need to honour any contractual redundancy entitlements and any attempts to "level down" employees’ contractual rights could well be unlawful.  

Matthew Wort, employment lawyer at Anthony Collins, warns that it is crucial that charities carry out a careful analysis of the employment information provided by the outgoing contractor before tendering for work and if they don't have sufficient information to ask more questions. If significant risks are identified it could sink the project. They should consider either not proceeding with the tender or alternatively negotiating with the organisation awarding the contract over a way to manage those risks.  

For the full article click here.

Matthew Wort is a senior associate at Anthony Collins Solicitors. He specialises in Employment Law with a focus on Equality and Diversity matters and has advised a number of charities on TUPE matters. He is Chair of Trustees of Oasis Church Trust, Birmingham.

Posted by Kevin Russell

Our Legal Eagle guru and Stewardship's Technical Director, Kevin constantly has his finger on the pulse of all things tax and charity law-related. His briefing papers for charities, churches and individuals are an invaluable resource on everything from VAT to Gift Aid. 


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