Recent Posts - TUPE

May 28, 2013
by Jeffrey
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Tapere v South London and Maudsley NHS Trust EAT

(9) Subject to regulation 9, where a relevant transfer involves or would involve a substantial change in working conditions to the material detriment of a person whose contract of employment is or would be transferred under paragraph (1), such an employee may treat the contract of employment as having been terminated, and the employee shall be treated for any purpose as having been dismissed by the employer.

This case considered what is meant by “substantial change” and “material detriment“.

The Facts

The employee, worked for Lewisham Primary Care Trust (‘PCT’). She was transferred to the South London and Maudsley NHS Trust (‘the Trust’). During the course of the consultation process, which preceded the transfer, there had been discussions as to the employee’s terms and conditions of employment and that her place of work would move to the Trust’s premises at Bethlem Hospital, Beckenham. Her contract contained a clause which provided “Location There may be occasions when you are required to perform your duties either temporarily or permanently at other locations within the [PCT]”. The move of the employee’s place of work involved her in a longer commute. Although not substantially longer, it did interfere with her childcare arrangements. After negotiations came to nothing the employee resigned and claimed constructive dismissal.

The employee lost before the ET who held that the clause set out above meant that the employee could be transferred to other locations of the transferee. Furthermore, because her commute was not significantly increased there was no repudiatory breach of contract. Finally, there was objectively no material change to her detriment within Reg 4(9).

The EAT

In allowing the appeal the EAT held: The ET’s approach to the mobility clause was wrong: the words restricting the clause to locations within the PCT were not superfluous, but were vital to defining the ambit of the clause; the Trust’s argument that the doctrine of “substantial equivalence” should be applied so as to apply the clause to the Trust’s area rather than the PCT’s was misplaced.

As for Reg 4(9); the relocation had been a change of working conditions. Whether there was material detriment was not an objective test in which the interests of the employer and employee had to be weighed together, rather , what had to be considered was the impact on the employee and if she considered the change to be detrimental, and ET should then have judged whether it was reasonable position for her to take.

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May 28, 2013
by Jeffrey
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Brookes v Borough Care Services EAT

This case is authority for the proposition that a share transfer is not a transfer within the meaning of Reg 3 of TUPE. Thus if the shares in a corporate employer are purchased by another party who then, having purchased those shares, changes the composition of the Board and the employees’ terms and conditions are subsequently changed as a consequence, then those employees have no recourse to the protection afforded by TUPE.

The Facts

Before 1992, Wigan Metropolitan Borough Council (‘Wigan MBC’) managed a number of care homes for the elderly in the Wigan area. All the employees in the appeal were employed by Wigan MBC in that undertaking. In 1992, Borough Care Services Ltd (‘BCS’), was set up by Wigan MBC. It was a company limited by guarantee. In that same year, the care homes were transferred by Wigan MBC to BCS. That was a relevant transfer falling within TUPE. The employees’ employment was accordingly transferred to BCS who became their employer.

CLS Care Services Ltd (‘CLS’) learned of the intention of Wigan MBC and BCS to transfer the undertaking of the Wigan homes to the voluntary sector. CLS made a formal bid on 8th February 1996. The bid envisaged that CLS “would create a new statutory entity contract with the staff of BCS and with Wigan MBC”. What that amounted to was the intention to form CLS (Wigan) Ltd, a new industrial and provident society, to which the undertaking of the Wigan homes would be transferred. It was envisaged that it would be a relevant TUPE transfer. Before this decsion could be implemented the EAT gave judgment in Wilson v St Helen’s Borough Council [1996] ICR 711 in which it was decided that a transferee could not make even a consensual variation of an employee’s terms and conditions. (This was necessary to put the homes on a sound financial footing. ) It was therefore decided to follow a “share transfer” route. The members and directors of BCS would resign, CLS would become the sole member of BCS and the members of CLS would become directors of BCS. On 25th July 1996, the existing members of BCS resigned. CLS became the member of BCS. The existing directors of BCS resigned (save for the nominee of Wigan MBC). The members of CLS became the directors of BCS.

Although, because of the personality of BCS, it was not strictly a share transfer, that is the way it was treated before the ET and EAT.

The employees argued that there was for all practical purposes a change in employer and TUPE should be given a purposive construction to reflect the realities of the position. In doing so it was argued that CLS and BCS should be treated as a single economic entity. Furthermore it was admitted that the reason for the arrangements between CLS and BCS was to avoid the effects of TUPE and that this was impermissible.

The Judgment

The EAT disagreed it held:

That the employees’ argument was contrary to the fundamental principle that a company is a separate legal person with its own identity, distinct from its members. Further, it led to other fundamental difficulties. For example, did the argument extend not just to a 100% transfer of shares but to a simple majority transfer?

Further, the Regulations and the Directive refer quite specifically to the change of employer and to a transfer and transferee being any natural or legal person. They could have addressed, but did not, the circumstance in which there was no transfer from a legal person to another legal person, but the shareholding membership of the legal person changed though its separate legal identity remained untouched.

For those reasons the employees’ employer throughout was BCS. This had not changed. There was no transfer.

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May 28, 2013
by Jeffrey
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Enterprise Management Services Ltd v Connect-Up Ltd EAT

In this case HHJ Clark crystallised the approach to be taken on the issue of whether the ‘activity’ that is carried out before a transfer is also carried out after a transfer for the purposes of a Service Provision Change.

The Facts

The essential facts can be shortly stated. Enterprise provided IT support services to LCC schools. When the agreement came to an end LCC invited tenders for a new agreement. The new agreement was different in a number of respects but in one significant respect, the new proposed contract excluded any service cover providing for curriculum systems. This represented 15 per cent of the work of the Enterprise staff assigned to the Leeds service. The ET held that this difference was such that the activity did not remain the same. (Unhelpfully for Enterprise in an email explaining why they were not going to tender for the new contract a, senior manager gave the reason that the new contract had quite different requirements).

The EAT

The EAT dismissed Enterprise’s appeal. in doing so some useful guidance was given by HHJ Clark which is reproduced below (case references omitted):

(1) The prospective SPC in this case arises under Reg 3(1)(b)(ii), that is where ‘activities’ cease to be carried on by a contractor on a client’s behalf and are carried on instead by a subsequent contractor.

(2) The expression ‘activities’ is not defined in the Regulations. Thus the first task for the ET is to identify the relevant activities carried out by the original contractor.

(3) The next (critical) question for present purposes is whether the activities carried on by the subsequent contractor after the relevant date are fundamentally or essentially the same as those carried on by the original contractor. Minor differences may properly be disregarded. This is essentially a question of fact and degree for the ET.

(4) Cases may arise where the division of services after the relevant date, known as fragmentation, amongst a number of different contractors means that the case falls outside the SPC regime.

(5) Even where the activities remain essentially the same before and after the putative transfer date as performed by the original and subsequent contractors an SPC will only take place if the following conditions are satisfied:

(i) there is an organised grouping of employees in Great Britain which has as its principal purpose the carrying out of the activities concerned on behalf of the client;

(ii) the client intends that the transferee, post-SPC, will not carry out the activities in connection with a single event of short-term duration;

(iii) the activities are not wholly or mainly the supply of goods (rather than services) for the client’s use.

(6) Finally, by Reg 4(1) the ET must decide whether each Claimant was assigned to the organised grouping of employees.

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May 28, 2013
by Jeffrey
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Pannu v Geo W King Ltd EAT

In the case of a Service Provision Change under Reg 3(1)(b) there is an express exclusion in Reg 3(3)(b) that provides that a relevant transfer will only take place where the activities concerned “do not consist wholly or mainly of the supply of goods for use by the client“. This case considered what is meant by the expression “wholly or mainly of the supply of goods“.

The facts

The employees were employed GWK and worked on an assembly line assembling axle components. GWK sold the assembled parts to IBC. GWK became insolvent, ceased production and the employees were made redundant. IBC then entered into a contract with Premier for Premier to assemble parts formerly manufactured by GWK at IBC’s premises. The ET held there was no transfer to either Premier or IBC.

The EAT

The employees argued that they provided a service of assembling the component parts and this service transferred. The EAT held that whilst the employees did indeed provide such a service that service was provided to their employer, GWK, and not to the client IBC. So far as the client was concerned it was purchasing the assembled component.

The EAT found the following example in the BIS Guidance useful and apposite: A contractor engaged to supply sandwiches and drinks to a client’s canteen for sale by the client’s own staff. That would not give rise to an SPC when the contract is awarded elsewhere, even where the first contractor has a dedicated team assigned to making the sandwiches for that particular contract. It may be otherwise where the contractor provides not only the sandwiches and drink (the goods) but also the canteen staff to dispense it at the client’s premises.

HHJ Clark observed (para 22): “Similarly, in this case, although GWK employed an organised group of workers on the X83 assembly line dedicated to producing axles, struts and corners for use in IBC’s van manufacturing process, GWK’s activity was the supply of those finished goods to IBC. Whether the position materially changed after the relevant date under the terms of the Agreement between IBC and Premier is nothing to the point; either the nature of the activities changed, in which case the requirements in Reg 3(1)(b) are not met, or they remain the same, in which case a permissible finding that the GWK activities involved wholly or mainly the supply of goods rather than services to IBC takes the case outside the SPC regime by virtue of Reg 3(3)(b).”

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May 28, 2013
by Jeffrey
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MITIE Managed Services Ltd v French EAT

What is the extent of the obligaiton of a transferee to honour an employee benefit provided by a transferor when it does not itself offer that benefit? The answer is that it has to provide a benefit which substantially equivalent to that provided by the transferor.

Facts

This case concerned a profit sharing scheme. Ms French and others were employed by Sainsburys and contractually entitled to benefit from its bonus scheme offering either cash payment or the grant of shares. Sainsbury’s transferred its interest to Pitney Bowes Management Services Ltd which then transferred it to MITIE Management Services. A practical difficulty arose in that neither Pitney Bowes nor MITIE could issue Sainsbury’s shares.

The matter came before the ET on the employees’ application under section 11 of the Employment Rights Act 1996 to determine what particulars ought to have been included in or referred to in a statement of particulars so as to comply with the Act.

The ET decided that the profit sharing scheme had transferred to the transferee as a result of the operation of Reg 5(2)(a) of TUPE 1981 (now Reg 4(2)(a) of TUPE 2006).

The EAT

The EAT reversed the tribunal’s decision. A broad approach was required.Kay J held (para 16) “the entitlement of the transferred employees in such a case is to participation in a scheme of substantial equivalence but one which is free from unjust, absurd or impossible features.”

The effect of this is that transferee employers owe a duty to provide a scheme equivalent to that enjoyed by the employees when contracted by the transferor even if it did not operate such a scheme or any scheme before the transfer.

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May 28, 2013
by Jeffrey
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Fairhurst Ward Abbotts Ltd v Botes Building Ltd CA

This case addresses the issue of whether the undertaking or part of an undertaking must exist as an economic entity before the transfer or whether it is sufficient that it becomes an economic entity on transfer.

The facts

Southwark LB engaged B as building contractors in its area from April 1996 to April 1999. In April 1999 it put the works out to tender and in doing so partitioned the area into Area 1 and Area 2. F won the tender for Area 2. There was no transfer of assets by B to F. The activity of F in Area 2 continued to be the same as the activity previously carried out by B under the contract prior to April 1999. F refused to take the employees of B on, contending that there was no relevant transfer of an undertaking and that TUPE did not apply. B contended that TUPE did apply to Area 2 and therefore refused to accept that any of the claimant employees continued to work for it after 8 April 1999. The ET held there was a transfer of part of an undertaking.

Court of Appeal

F contended that the subject matter of the relevant transfer must be, in the hands of the transferor, an identifiable, pre-existing “stable economic entity”. An economic entity is a concept distinct from (a) the activity actually carried out by the undertaking and (b) the undertaking, which may comprise more than one identifiable economic entity. It is necessary to identify the “economic entity” in the hands of the transferor, which is capable of being transferred, before it can be determined whether that entity has
retained its identity in the hands of the transferee and has been transferred. If the undertaking, or part of the undertaking, does not amount to a stable, identifiable “economic entity,” then there is nothing capable of being transferred within the meaning of the Directive or TUPE.

Mummery LJ disagreed. He held that the Directive and TUPE are capable of applying to the transfer of “part of an undertaking,” as well as to the transfer of an entire undertaking. A part of an undertaking is simply something less than the whole of an undertaking. Neither the legislation nor the case law expressly requires that the particular part transferred should itself, before the date of the transfer, exist as a discrete and identifiable stable economic entity.It was sufficient if a part of the larger stable economic entity became identified for the first time as a separate economic entity on the occasion of the transfer separating a part from the whole.

Mummery LJ also made the point that if it is possible to identify part of an undertaking as a discrete economic entity before the transfer takes place, the claimant will find it easier to satisfy both the “transfer” test that the part transferred retains its identity in the hands of the transferee, and the requirement that he was employed, immediately before the transfer, in the part transferred. But he did not agree that, in the absence of a part which is identifiable as a discrete economic entity before the transfer takes place, there can be no transfer of a part or that it will be impossible for the claimant to establish that there was a transfer of the part of the undertaking in which he was employed

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May 28, 2013
by Jeffrey
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Todd v Strain EAT

The employer called about 18 out of about 64 staff to a meeting. She told them that the care home where they worked was being sold. No date for the sale was given and no details of the new employer were given although the staff were told there jobs were safe and there would be no change. There was no election of employee representatives. The ET made the maximum award for failure to consult but declined to make the award joint and several between transfer or and transferee as it was required to do under Reg 15(9). The interesting point in this case concerns the reasoning of the EAT in reducing compensation but for the sake of completeness I first set out the rather hopeless arguments on liability.

Liability

On the face of it there were was a clear breach of Reg 13(2) (failure to consult with employee representatives on: the the fact that the transfer is to take place, the date or proposed date of the transfer and the reasons for it; the legal, economic and social implications of the transfer for any affected employees; the measures the measures, in connection with the transfer, which he envisages the transferee will take in relation to any affected employees who will become employees of the transferee if he envisages that no measures will be so taken, that fact). There was also a clear breach of Reg 13(6) (Consultation about measures the employer envisages/intends to take).

The argument run by the employer that they were not liable was as follows:

(a) The employer did not envisage taking any “measures” in relation to any affected employee in connection with the transfer: it was her expectation simply that the entire workforce would transfer to the transferee without any alteration to the status quo. Accordingly, no obligation to consult arose under para. (6) of Reg 13.

(b) An obligation to inform under para. (2) only arose if there was an obligation to consult under para. (6). of Reg 13 The provision in para. (2) that the employer shall convey the relevant information long enough before the transfer “to enable the employer … to consult the appropriate representatives”. It was submitted that this demonstrated that the purpose of the duty to inform was, and was only, to enable consultation under para. (6) to take place, and accordingly that in a case where no such consultation was required no duty to inform arose.

An argument on similar lines had been rejected in two previous cases: Institution of Professional Civil Servants v Secretary of State for Defence [1987] and Cable Realisations Ltd. v GMB Northern [2010]. Unsurprisingly it was rejected again. In addition to the reasons already given in previous cases Underhill P added 3 others:

(1) If the employers were correct, it would mean that in a case where the employer did not envisage taking measures that would engage the obligation under Reg 13(6) he would be under no obligation to give employees, via their representatives, even the basic information that the transfer is to take place or its date. As the effect of the transfer is, by virtue of TUPE, to change the identity of their employer, a matter of fundamental importance, it would be surprising if that was something of which they were not entitled to have any advance notice.

(2) The effect of Reg. 13 (10) is that if, notwithstanding the employer having complied with his obligation to arrange for the election of representatives, no representatives are in fact elected, he is in practice discharged from his obligations under Reg 13(2) and (6). However, in that case Reg 13(11) requires him to give the information required by para. (2) to the affected employees individually. That is hard to reconcile with a submission that the only purpose of the duty to inform is to enable consultation to take place.

(3) Article 7.1 of the Directive does not contain the words that are contained in Reg 13(2) that were relied on in limb (b) of the employer’s argument.

Compensation

The employer had more success on this aspect of the appeal. Although there had been a wholesale failure to comply with the requirements to elect representatives this was not a case where no information had been given to the workforce at all. On the contrary, the employer had addressed a meeting of staff several weeks before the transfer, and had given them at least some basic information and – importantly – a reassurance that the transferee would be making no changes in staffing or terms and conditions following the transfer: The employer clearly, and realistically, understood and intended that that information would come to the attention of those not attending the meeting. The position therefore cannot be compared with that in a case like Sweetin, where the first that the employees knew about the transfer was when the representative of the new owners announced himself at the premises on the day that it took place: Furthermore, the measures in question were not of any great significance, and the broad picture was that the transferee was not expected to introduce any substantial changes in working conditions. The award was reduced to 7 weeks (the employer had contended for 3).

Finally the EAT also ordered that both the transferee and transferor were joint and severally liable as required by Reg 15(9).

Comment

When looking at a failure to consult it is important to look at the substance of what the employees were actually told. If there has been a wholesale failure to comply with the technical requirements of Regs 13 and/ 14 but the employees have, nevertheless been given some information and have some knowledge of what is going to happen then a maximum ward of 13 weeks will be excessive.

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May 28, 2013
by Jeffrey
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Key2Law (Surrey) LLP v De’Antiquis CA

The Background

The Claimant was employed by Drummonds Kirkwood LLP (‘DK’), solicitors. On 21 July 2008 DK dismissed her and several other employees on the grounds of redundancy. On 25 July 2008 it entered administration. On 28 July 2008, DK, acting by its joint administrators, entered into a management contract with Key2Law. Ms De’Antiquis brought a claim in the ET alleging that Key2Law was liable to her under Reg 4 and Reg 7 of TUPE.

The Issue

The issue in whether a corporate entity or a limited liability partnership which is in administration is the

“subject of bankruptcy proceedings or any analogous insolvency proceedings which have been instituted with a view to the liquidation of the assets of the transferor …”

within Reg 8(7) . If it was then Regs 4 and Reg 7 do not apply with the effect would be that its employees would not transfer to any entity acquiring the business.

The argument for Key2Law was that although the Administration Procedure in Schedule B1 of the Insolvency Act 1986 provides that the primary objective of the Administrator is to rescue the Company as a going concern, in many cases this will not be achievable and will be known not to be achievable prior to the administration. The purpose is more often than not that of achieving a better result for the company’s creditors as a whole than would be likely if the company were wound up (without first being in administration).

The issue in this case first came before the EAT in Oakland v Wellswood (Yorkshire) Limited [2009] IRLR 250. HHJ Clark held that a fact based assessment should take place in each case to determine whether or not on the particular facts the administration has been instituted with a view to the liquidation of the assets of the transferor.

Judgment

The Court of Appeal eschewed the fact based approach. They held that in no case could administration proceedings fall within Reg 8(7) for the following reasons:

(1) It would be unsatisfactory in principle if an assessment of whether an administration order was made “with a view to” the liquidation of the transferor’s assets depended on the evidence leading up to the appointment of administrators, as that could well produce an uncertain picture of the predominant objective to be achieved.

(2) Further, it would be wrong in principle to identify the purpose of an appointment of administrators by reference to pre-appointment considerations as to the particular objectives that it was foreseen that an appointment was reasonably likely to achieve. An appointment made with the intention, hope or expectation of achieving a particular objective might not do so.

(3) The focus should be on the purpose of the procedure that was triggered by the making of a particular order, not on the reasons that led to its being made. The purpose of an administration order was explained in Sch.B1 para.3 of the 1986 Act and the administrator’s duties arose only upon, and not before, the making of the order. The administrator’s overriding legal obligation was to perform his functions with the objective of rescuing the company concerned.

Comment

The decision has the benefit of certainty. Whenever there is an administration TUPE will apply. Indeed the Government has indicated in its consultation on amendments to the Regulation that it considers the issue to have been clarified. However, it has to be recognised that in many cases, albeit that the purpose of the administration procedure is to rescue the company as a going concern, that is never likely to be an option and adminstration is merely a temporary staging post on the road to the intended liquidation.

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May 24, 2013
by Jeffrey
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Johnson Controls Ltd v Campbell EAT

In Metropolitan Resources Ltd and Kimberley Group Housing the importance of identifying the ‘activity’ in a Reg 3(1)(b) service provision change transfer was stressed. This case provides an example of this.

The facts

C was engaged by JC Ltd as a taxi administrator. His job, as it had evolved, comprised: takings bookings from members of staff of UKAEA; advising on the timings for the journeys they wished to undertake; reviewing booking data; combining jobs and pick-ups to ensure the best use of available transport; allocating jobs to subcontractors (two taxi companies were regularly used for the purpose); checking the invoices from those subcontractors against the orders of UKAEA; dealing with booking queries; entering the costs of the subcontractors onto a database; carrying out checks on suppliers, and; arranging for security passes for suppliers. In 2010 the UKAEA decided to discontinue this centralised taxi booking service with JC Ltd and instead secretaries at UKAEA would book taxis. UKAEA ended its contract with JC Ltd. JC Ltd claimed that UKAEA had taken the service in house and C should transfer to them. The ET disagreed. It held that there was no transfer because the ‘activity’ of centralised booking was not being carried out by anyone.

The EAT

The EAT upheld the ET’s decision. Whether or not an activity continues before and after transfer is a question of fact and degree. There was nothing perverse in the ET deciding that here the activity had not transferred. The centralised coordinated activity was no longer being undertaken albeit that component parts of it were.

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