Recent Posts - TUPE

May 28, 2013
by Jeffrey
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McCarrick v Hunter CA

The issue in this case was whether there could be a Service Provision Change if both the client and the service provider change. The Court of Appeal held that there could not be.

The Facts

The facts are complex but simplified they are as follows: M was employed by WCP. WCP managed a property portfolio for Waterbridge. That portfolio was taken over by receivers. The receivers appointed a new property management company, KS, and the property management services ceased to be carried out by WCP. M, with two of his colleagues, then became employed personally by H. They were made available by H to assist KS in the management of the properties but they were not employed by KS, nor by the receivers. Subsequently M was dismissed and claimed that his dismissal was unfair.

M contended that there was a Reg 3(1)(b) transfer of a service provision effectively from WCP to H when he and his two colleagues left WCP to become employed by H and were allocated the property management work. It being argued that the property management function had ceased to be carried out by WCP and was now carried out by H on behalf of a client.

M’s alternative case was that even if that was not a service provision, the employment by H of the three individuals constituted the transfer of a business from WCP within Reg 3(1)(a) TUPE Regulations.

It was necessary for M to establish a TUPE transfer because without this he had insuffiicient continuity of service with H to bring an unfair dismissal claim.

The ET held there was a Service Provision Change but not an old style transfer.

The Court of Appeal

The EAT and the Court of Appeal held; that in order for there to be a Service Provision Change the client must stay the same. Here the client did not stay the same. As Reg 3(1)(b) was domestic legislation and did not result from the Acquired Rights Directive a purposive construction of ‘client’ was not permissible even if it was warranted.

Comment

It will be interesting to see if this decision heralds creative structuring of group companies so that the client changes when a service is brought back in house or retendered and if it does whether that would be permitted.

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May 28, 2013
by Jeffrey
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OCS Group UK Ltd v Jones EAT

This case is an example of a Service Provision Change which was not a transfer to which TUPE applied because different activities were carried out before and after the transfer (Reg 3(1)(b)).

The Facts

OCS operates a number of fully managed service contracts including catering. At a BMW plant OCS provided a restaurant and deli bar supported by satellites and a general shop. The Respondents were chef/supervisors working in those satellites and much of their time was spent in the preparation of hot meals. The contract was losing money and ultimately OCS lost the contract to MIS. Under the MIS contract, the satellites did not sell hot fool, only pre-prepared salads and sandwiches. Ms Jones was dismissed and brought a claim against OCS which raised the issue of whether Reg 3 TUPE applied. OCS argued that there had been a Service Provision Change and Ms Jones’ contract had transferred to MIS.

The ET held that TUPE did not apply because the MIS contract provided a substantially reduced service which was “materially different to that operated by [OCS]“. In particular, the satellites did not prepare hot food. OCS appealed on the basis that the ET had concentrated too much on the change of activities rather than the continuation of overall service.

The EAT

The EAT dismissed the appeal. The correct approach in determining whether there has been a service change provision within the meaning of Reg 3(1)(b) TUPE, is to ask whether the activities which ceased to be carried out by the first contractor are carried out instead by the next contractor.

In reaching its decision the EAT took into account the schedules to each contract. The schedule to the OCS contract was very detailed in terms of its requirement both in relation to food provision and management structure. The schedule to the MIS contract contained one brief paragraph setting out requirements under the new contract. The EAT stated that the Tribunal had correctly identified the activity of the first contractor as a full catering service, not merely the provision of food for staff.

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May 28, 2013
by Jeffrey
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Metropolitan Resources Ltd v Churchill Dulwich Ltd EAT

In this case HHJ Burke QC emphasised that a Reg 3(1)(b) Service Provision Change was an entirely new concept in which prior authority on issue of whether there was a Reg 3(1)(a) transfer was not relevant.

He gave the following guidance (para 30) as to the approach to be taken by the ET (numbers in square brackets added for ease of reading):

[1] The statutory words require the Employment Tribunal to concentrate upon the relevant activities;

[2] and tribunals will inevitably be faced, as in this case, with arguments that the activities carried on by the alleged transferee are not identical to the activities carried on by the alleged transferor because there are detailed differences between what the former does and what the latter did or in the manner in which the former performs and the latter performed the relevant tasks.

[3] However it cannot, in my judgment, have been the intention of the introduction of the new concept of service provision change that that concept should not apply because of some minor difference or differences between the nature of the tasks carried on after what is said to have been a service provision change as compared with before it or in the way in which they are performed as compared with the nature or mode of performance of those tasks in the hands of the alleged transferor.

[4] A commonsense and pragmatic approach is required to enable a case in which problems of this nature arise to be appropriately decided, as was adopted by the Tribunal in the present case.

[5] The Tribunal needs to ask itself whether the activities carried on by the alleged transferee are fundamentally or essentially the same as those carried out by the alleged transferor.

[6] The answer to that question will be one of fact and degree, to be assessed by the Tribunal on the evidence in the individual case before it.

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May 28, 2013
by Jeffrey
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Holis Metal Industries v GMB

This is one of the few cases in which cross border transfers have been considered. The EAT held that TUPE may apply where a business is transferred to another jurisdiction, including one outside the EU.

Facts

A curtain manufacturing business with 180 employees was sold to Hollis Metal Industries. The employees were then informed by letter that the factory would close, manufacturing would be transferred to Israel and the employees would be made redundant unless they wished to move to Israel. The employees were then dismissed. The GMB brought a claim on behalf of the employees for failure to inform and consult under Reg 13 TUPE and s. 188 of the Trade Union and Labour Relations (Consolidation) Act 1992. Hollis sought to strike out the claim on the basis that TUPE did not apply where a business is transferred to another jurisdiction.

The EAT hearing the appeal against strike out

The EAT stated that the wording of Reg 3 of TUPE and the Directive are precise in setting the application of the regulation of transfers of undertakings situated immediately before the transfer in the UK. A purposeful approach to the legislation meant that employees should be protected even if the transfer is to be across borders outside the EU. The critical point is the pre-transfer requirement of location in the UK. The EAT considered and confirmed the body of academic opinion in this area.

While enforcement in such cases may prove problematic the EAT observed that it can be difficult even within the EU.

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May 28, 2013
by Jeffrey
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Kimberley Group Housing Ltd v Hambley EAT

This was the one first cases in which the EAT considered the Service Provision Changes provisions in Reg 3(1)(b). At issue is what happens to the employees when a contractor loses a contract and the client appoints two (or more) contractors to undertake the service.

Facts

L Ltd provided services to the Home Office by accommodating asylum seekers pending the outcome of their applications for asylum. In 2006 Ltd lost the contract and the Home Office awarded two new contracts to K Ltd and A Ltd to supply the services. L dismissed its employees (18 in total) prior to the transfer of services to K and A, and some of the dismissed employees brought claims for unfair dismissal.

The ET decision

The ET first considered whether TUPE 2006 applied at all. The ET held that there had been no Reg 3(1)(a) (old style) transfer but there had been a Service Provision Change under Reg 3(1)(b) as the activities that had previously been carried out by L were subsequently performed in part by K and in part by A. There was therefore a TUPE transfer and the liability for the dismissals passed to the transferees.

The ET then had to decide which of the two transferees, K and/or A, were liable for the dismissals. It considered that there were four available interpretations:

1) TUPE 2006 does not protect employees where there is a service provision change to two or more transferees; or

2) The ET should make an arbitrary allocation of employees between the two transferees; or

3) the transferee who inherits the greater part of the activities transferred should accept liability for all the employees who were subject to the transfer; or

4) the liabilities under the employees’ contracts could be split between the transferees.

The ET with some hesitation decided that 4) represented the correct approach, and that it was possible to split the rights and obligations of the employer between K and A on the basis of the proportion of the activities they had each inherited from L.

Decision of the EAT

Both K and A appealed on various grounds. The EAT (Langstaff P) held that the fact that there are two or more ‘transferees’ does not prevent TUPE from applying.

Having established that TUPE applied, the EAT then considered how it should decide where the liability for the employees lay. The EAT endorsed the approach set out in Botzen [1985] applied in Duncan Web Duncan Webb Offset (Maidstone) Ltd v Cooper [1995]:

an employment relationship is characterised by the link between the employee and the part of the undertaking or business to which the employee was assigned to carry out their duties; and
that in order to decide whether the rights and obligations under an employment relationship are transferred, it is sufficient to establish to which part of the undertaking or business the employee was assigned.

On this basis, the EAT concluded that liability for the dismissed employees should have passed to K because K had inherited the majority of the services previously provided by L and to which those dismissed employees had been assigned.

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May 28, 2013
by Jeffrey
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Smith v Trustees of Brooklands College EAT

This case restates the correct approach to determining whether the sole or principal reason for a variation of terms and conditions is the transfer or a reason connected to the transfer (Reg 4(5)). It was held by the EAT that the test to be applied was not a “but for” test. The question was, what was the reason for variation; what caused it? Because of the materially identical wording the same approach will be taken in dismissal cases under Reg 7.

Facts

The employees worked part time at Spelthorne College but were paid a full time salary. A transfer to Brooklands College took place in 2007 after which the employer sought to lower the employees’ rates of pay and in 2010 the employees agreed reluctantly to variation of their contracts.

The employees argued that the transfer was the reason or principal reason or a reason for variation. The employer argued that the decision was independent of the transfer. The ET accepted that employers; case that the Head of HR had looked at the way in which part timers were paid, noticed that the Claimant employees were not paid in accordance with that, concluded that this was the result of a mistake and decided to vary their contracts. Accordingly ET found that the agreed variations in 2010 were valid and effective.

The EAT

The EAT dismissed the Appeal. The test to be applied was not a “but for” test. The question was, what was the reason for variation; what caused the employer to do it?

The Claimants had agreed their salaries with Spelthorne so the Head of HR of Brooklands was wrong to conclude there had been a mistake. Even so, there was no doubt that her reason for variation was the fact that the Claimants were not paid in accordance with standard practice. This was not a reason falling within Reg 4(4).

HHJ McMullen QC held (at para 30):

Applying the European Court’s approach to the Directive in Martin, where the sole reason is what is effectively a wish to harmonise, regulation 4(4), is engaged, but where the sole or principal reason is not connected with the transfer the variation may take effect. The purpose of the regulations is to give effect to the purpose of the Directive. Both of these have as their core, as it is variously put, the safeguarding of employee rights, the protection of employee rights. None of these, however, gives an employee additional rights, and the domestic legal position is correctly summarised by this very case. A variation in the terms and conditions of employment relating to the pay of these part time workers can be effected by an employer by agreement; alternatively by terminating the contract. In this case we need focus only on consensual variation, which was achieved. That respects the workers’ rights within the context of the Directive and the regulations. What would avoid that effective agreement is the connection with a TUPE transfer.

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May 28, 2013
by Jeffrey
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Whitewater Leisure Management Ltd v Barnes EAT

This case and the case of Cheesman v R Brewster Contracts Ltd set out the approach that should be taken to determine whether or not there is a Reg 3(1)(a) (old style) TUPE transfer.

The EAT upheld a tribunal’s conclusion that there was no transfer of an undertaking within TUPE when there was a change in the contractor managing a leisure centre, but no transfer of assets and no transfer of the majority of the workforce either in number or in skills.

The EAT provided the following guidance in determining whether there has been a TUPE transfer:

(para 7) “It will normally be best and clearest for an employment tribunal to deal first with the question of whether there was a relevant and sufficiently identifiable economic entity, and then proceed, whatever be the answer to that question, to ask and answer whether there was (or would have been, if such hypothetical question can be answered, in the event of a conclusion that there was no such entity) a relevant transfer of any such entity.”

Relevant and sufficiently identifiable economic entity?

The tribunal should consider whether there is a ‘stable and discrete economic entity’ or whether the entity is ‘sufficiently structured and autonomous’. Consideration of whether there is a ‘distinct cost centre’ may be helpful.

A relevant transfer?

In determining whether there was a transfer, the best and clearest guidelines are to be found in Spijkers (1986) ECR 1119. There can be a transfer even if there are no significant tangible or intangible assets. But if assets are transferred from the predecessor to a successor sub-contractor, that is a very likely indicator of a relevant transfer. In looking at an alleged transfer of a labour-intensive undertaking, the question is whether the staff is ‘substantially the same’. Although, in accordance with ECM (Vehicle Delivery) Service v Cox [1999], a tribunal is entitled to look at the reason why employees were not appointed by the transferee.

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May 28, 2013
by Jeffrey
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Beckmann v Dynamco Whicheloe Macfarlane Ltd ECJ

In this case the ECJ explored the extent of the of the exclusion for old-age, invalidity or survivors’ benefits under the Directive. (References to Articles in the Directive are to the current Directive]. This exclusion is set out in Reg 10 of TUPE

The Facts

Mrs Beckmann was employed as a quantity surveyor within the NHS. The body which employed her was transferred to DWM and her contract was taken over until she was dismissed for redundancy two years later. Whilst employed by the NHS Mrs Beckmann contributed to the NHS Superannuation Scheme and was entitled under Whitley Council terms to an early retirement lump sum and pension in the event of being made redundant. A dispute arose as to whether, having transferred, the transferee, DWM, was required to pay the early retirement benefits. DWM’s case was that these payments were old age payments and were within the exclusion.

Two questions were referred to the ECJ:

(1) Is the employee’s entitlement to early payment of pension and retirement lump sum and/or to the annual allowance and lump sum compensation, a right to an old-age, invalidity or survivors’ benefit within the meaning of [Article 3(4)(a)]?

(2) If and to the extent that the answer to Question 1 is no, is there an obligation of the transferor arising from the contract of employment, the employment relationship or the collective agreement within the meaning of [Article 3(4)] and/or [Article 3(3](requirement to honour collective agreements) which transfers by reason of the transfer of the undertaking and renders the transferee liable to pay the benefits to the employee upon dismissal?

The ECJ

The ECJ held that the exclusion of pension liabilities from a transfer under the Acquired Rights Directive did not apply to an early retirement pension payable in the event of redundancy. It answered the questions referred to it in this way:

Early retirement benefits and benefits intended to enhance the conditions of such retirement, paid in the event of dismissal to employees who have reached a certain age, such as the benefits at issue in the main proceedings, are not old-age, invalidity or survivors’ benefits under supplementary company or inter-company pension schemes within the meaning of [Article 3(3)] of the Directive.

On a proper construction of [Article 3], the obligations applicable in the event of the dismissal of an employee, arising from a contract of employment, an employment relationship or a collective agreement binding the transferor as regards that employee, are transferred to the transferee subject to the conditions and limitations laid down by that article, regardless of the fact that those obligations derive from statutory instruments or are implemented by such instruments and regardless of the practical arrangements adopted for such implementation.

It is clear from the judgment that exclusion for old-age, invalidity or survivors’ benefits is to be strictly interpreted.
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May 28, 2013
by Jeffrey
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Abellio London Ltd v Musse EAT

Following Tapere this is another useful case on “substantial change in working conditions to the material detriment of the [employee]” within Reg 4(9).

The facts

5 bus drivers resigned following a transfer when their place of work moved from Westbourne Park in northwest London to Battersea in south west London. This involved a significantly longer commute to work which extended the working day by 2 hours. The ET held the employees were entitled to resign as the change to their place of work was a substantial change to their material detriment.

The EAT

The Eat considered what was meant by ‘working conditions’ and observed that “this is a phrase that is wider than “contractual conditions”. It is capable of relating to contractual conditions; it is capable of relating to physical conditions. It is certainly capable of relating to matters such as the place of work”.

The EAT also agreed with the approach in Tapere that the question of detriment has to be looked at from the perspective of the employee.

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May 28, 2013
by Jeffrey
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Cheesman v R Brewer Contracts Ltd EAT

This case and the case of Whitewater Leisure Management Ltd v Barnes set out the approach that should be taken to determine whether or not there is a Reg 3(1)(a) (old style) TUPE transfer.

There are two questions:

(a) Is there an undertaking , business or part of an undertaking or business?

(b) Is there a transfer of an economic entity that retains its identity

Linsdsay P drew together the relevant domestic and European authorities and provided the guidance which is set out in below (omitting references to cases):

Is there an undertaking?

(i) As to whether there is an undertaking, there needs to be found a stable economic entity whose activity is not limited to performing one specific works contract, an organised grouping of persons and of assets enabling (or facilitating) the exercise of an economic activity which pursues a specific objective. It has been held that the reference to “one specific works contract” is to be restricted to a contract for building works.

(ii) In order to be such an undertaking it must be sufficiently structured and autonomous but will not necessarily have significant assets, tangible or intangible.

(iii) In certain sectors such as cleaning and surveillance the assets are often reduced to their most basic and the activity is essentially based on manpower.

(iv) An organised grouping of wage-earners who are specifically and permanently assigned to a common task may in the absence of other factors of production, amount to an economic entity.

(v) An activity of itself is not an entity; the identity of an entity emerges from other factors such as its workforce, management staff, the way in which its work is organised, its operating methods and, where appropriate, the operational resources available to it.

As for whether there has been a transfer:

(i) As to whether there is any relevant sense a transfer, the decisive criterion for establishing the existence of a transfer is whether the entity in question retains its identity, as indicated, inter alia, by the fact that its operation is actually continued or resumed.

(ii) In a labour intensive sector it is to be recognised that an entity is capable of maintaining its identity after it has been transferred where the new employer does not merely pursue the activity in question but also takes over a major part, in terms of their numbers and skills, of the employees specially assigned by his predecessors to that task. That follows from the fact that in certain labour intensive sectors a group of workers engaged in the joint activity on a permanent basis may constitute an economic entity .

(iii) In considering whether the conditions for existence of a transfer are met it is necessary to consider all the factors characterising the transaction in question but each is a single factor and none is to be considered in isolation. However, whilst no authority so holds, it may, presumably, not be an error of law to consider “the decisive criterion” in (i) above in isolation; that, surely, is an aspect of its being “decisive”, although, as one sees from the “inter alia” in (i) above, “the decisive criterion” is not itself said to depend on a single factor.

(iv) Amongst the matters thus falling for consideration are the type of undertaking, whether or not its tangible assets are transferred, the value of its intangible assets at the time of transfer, whether or not the majority of its employees are taken over by the new company, whether or not its customers are transferred, the degree of similarity between the activities carried on before and after the transfer, and the period, if any, in which they are suspended.

(v) In determining whether or not there has been a transfer, account has to be taken, inter alia, of the type of undertaking or business in issue, and the degree of importance to be attached to the several criteria will necessarily vary according to the activity carried on.

(vi) Where an economic entity is able to function without any significant tangible or intangible assets, the maintenance of its identity following the transaction being examined cannot logically depend on the transfer of such assets.

(vii) Even where assets are owned and are required to run the undertaking, the fact that they do not pass does not preclude a transfer.

(viii) Where maintenance work is carried out by a cleaning firm and then next by the owner of the premises concerned, that mere fact does not justify the conclusion that there has been a transfer.

(ix) More broadly, the mere fact that the service provided by the old and new undertaking providing a contracted-out service or the old and new contract-holder are similar does not justify the conclusion that there has been a transfer of an economic entity between predecessor and successor.

(x) The absence of any contractual link between transferor and transferee may be evidence that there has been no relevant transfer but it is certainly not conclusive as there is no need for any such direct contractual relationship.

(xi) When no employees are transferred, the reasons why that is the case can be relevant as to whether or not there was a transfer.

(xii) The fact that the work is performed continuously with no interruption or change in the manner or performance is a normal feature of transfers of undertakings but there is no particular importance to be attached to a gap between the end of the work by one sub-contractor and the start by the successor.

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