Homelessness charity, the 700 Club, is facing a bill of up to £250,000 after an employment tribunal ruled that it must adhere to Tupe regulations after beating the Salvation Army in a tender bid to provide beds in Darlington.

When Darlington Borough Council announced in July that it would severely reduce funding via Supporting People for homelessness services in the area, the Salvation Army and local charity the 700 Club separately applied to a tender to secure their contracts and ensure their facilities would remain open.

But when the 700 Club won the bid it was held to account under Transfer of Undertakings (Tupe) regulations for the 18 Salvation Army employees from its Tom Raine Court facility which was forced to close. A ruling this week confirmed that the 700 Club must now either employ the staff, or pay their redundancy fees.

But Reverend Dr John Ellison, the 700 Club's founder, advised Civil Society the ruling would result in further job losses:

"We are anticipating a bill of about £250,000. We will not be employing more people - indeed, we will have to make redundancies of our own in order to make savings necessary to pay the Salvation Army staff redundancy," he said.  

Winning bid equates to a "significant" loss

The contract with the council was worth £190,000, meaning the charity stands to lose £60,000 by winning the tender. But Ellison advised the cost would be significantly larger:

"The tender was for £190,000 which is significantly less than we were receiving previously for the same work due to government cuts and efficiency savings.

"It is less than half the money required to actually deliver our services. In winning the tender, and for being the best service provider, we are actually going to end up significantly worse off."

The 700 Club employs 27 of its own staff and has provided beds for hundreds of people over the past ten years. A hearing early next month will decide how much the charity will have to pay each member of Salvation Army staff. The 700 Club reported an income of £828,000 last year and if the estimate of £250,000 is correct, the charity will lose more than 30 per cent of a year's income.

Council response

Darlington Borough Council defended the tender advising that it contained "clear indications of the responsibilities that would be taken on by any successful organisation tendering for contracts". 

Ellison admitted that while he had consulted several legal sources, "No lawyer was prepared to say with 100 per cent certainty that Tupe would not apply". But, he advised, two matters are pertinent:

"We were bidding for work we were already doing for the council, and, if we had not bid (and won) we would have been out of business.

"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. The local authority did not require the capacity of two providers, and we were successful in retaining funding, the Salvation Army were not."

Letter to David Cameron

The charity now feels so strongly that an injustice has taken place that they are preparing to take the case to the Prime Minister:

"I think the implications of this judgement for the third sector and for the notion of the Big Society are immense," said Ellison.

"We have prepared a letter that will be hand-delivered to David Cameron at the weekend."

A spokesperson for the Salvation Army said: "We are grateful for the careful consideration that the tribunal has given to the case. We are pleased that our view throughout that our former employees transferred to the 700 Club has been vindicated by the tribunal."

Tupe regulations are designed to protect employees' terms and conditions of employment when a business is transfered from one owner to another.