A Legal Storm for Cloud Computing

Posted on October 25, 2010


The Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) – were updated in April 2010, http://www.legislation.gov.uk/uksi/2006/246/contents/made

One of the biggest changes is the introduction of a new type of transfer known as a ‘Service Provision Change’. This makes it clear that it covers cases where services are outsourced or assigned by a client to a new contractor.

The UK government review raises the spectre that this will result in the application of TUPE to up to 880 more organisations each year, providing protection to over 20,000 employees.

As usual it is likely to be the lower to middle end of the Small Medium Enterprise (SME) market that will represent the greatest surface area of risk and carry the brunt of this.

For IT Service companies and outsourcers this raises the bar of compliance and increases the Business awareness demands on traditionally IT centric organisational skills. The two key areas of concern are:

a) contracting out of services

b) changing contractors

Note that this works for both insourcing as well as outsourcing. If an organisation was to bring work ‘in-house’ (for example where a contract ends with the service being performed in-house by the client themselves).

Few IT organisations will have the in house skills to negotiate this minefield. It is recommended that a full review of all services offered that could fall within the above scope are at least given a ‘TUPE impact’ health check by a qualifying lawyer. A couple of hundred pounds would be well spent now putting together a tick list of does and don’ts to help navigate this are of the law in the context of your particular service offering(s) mitigating exposure to thousands in liability should a breach occur.

The impact to Cloud Computing projects, with the ramp up of the Cloud across the ICT industry is very much a storm front on the immediate horizon for the unaware.