Recent Posts - TUPE

April 7, 2017
by Jeffrey
0 comments

ICAP Management Services Limited v Berry QBD – 3 March 2017

This case concerns an application for an interim injunction to enforce post termination restrictions (PTRs). To avoid those PTRs the employee sought to invoke TUPE in a creative and interesting way.

The Facts

B worked for ICAP in a senior role. He resigned giving the required 12 months’ notice on 22 July 2016. He was off to joint a competitor, BGC. ICAP reminded him of his PTRs and placed him on gardening leave. His employment was therefore due to terminate on 21 July 2017. So far as material, his PTRs provided, in summary;

(i) For 6 months following the date of termination [i.e. 21 July 2017] he would not work for a competitor.

(ii) For 9 months following the date of termination [i.e. 21 July 2017] he would not solicit business from any of ICAP’s clients with the purpose of providing them with the services that ICAP had provided, if he had been involved in providing such services in the 12 months before termination.

These periods would be reduced by any time spent on gardening leave. The effect would therefore be that they would have expired at the end of his gardening leave when he would be free to join BGC and solicit clients. ICAP presumably content that he had been kept away from their clients and competitors for 12 months.

B was no doubt happily digging his garden when he learned that ICAP had been acquired by TB with effect from the 30 December 2016. On 7 February 2017 his solicitors wrote to ICAP drawing attention to this and asserting it was a TUPE transfer and that B objected to the transfer. Reg 4(8) of course provides that where an employee so objects, the relevant transfer shall operate so as to terminate his contract of employment with the transferor. Therefore, if B was right and there was transfer, because of his objection to the transfer, the contract terminated on the transfer.

Of course his PTRs were still binding but because he had been on garden leave for over 6 months and because this time was set off against the period within the PTRs he was free to join BGC and free to solicit their clients from the 25 April 2017.

B joined BGC and ICAP applied for an injunction.

The judgment

Frustratingly for TUPE watchers there was insufficient evidence before the Court for the judge (O’Farrell J’) to determine whether or not there was a transfer, although all parties agreed that is was a serious issue to be tried (it appears to have been accepted that if there was a transfer then B’s argument was correct). The case was therefore decided on conventional injunction principles and and ICAP obtained an interim injunction, with a speedy trial listed for the end of April. (It is not known whether the case has been resolved).

Link to judgment

March 29, 2017
by Jeffrey
0 comments

Born London Limited v Spire Production Services Limited EAT – 28 March 2017

If a transferor provides inaccurate Employee Liability Information (ELI) to a transferee does the transferee have a right to compensation under Reg 12? Answer; not necessarily.

The Facts

Born took over a print finished contract from Spire. It was a Reg 3(1)(b) service provision change. The client was Sotheby’s. The print finishing contract contract had a term of 5 years. Born were told by Spire, as part of the Reg 11 ELI provided by Spire before the transfer, that the 30 + employees who were to transfer had a ‘non-contractual’ Christmas bonus of one week’s pay plus £7.50 per year of service payable each November. After the transfer the employees asserted that this entitlement was contractual and for the purposes of a strike out application this was assumed to correct. (Indeed in a separate and subsequent case between Born and some employees a different Employment Tribunal held this to be the case.)

The ET Judgment

Born brought a Reg 12 claim against Spire. Born’s case being, essentially, that because the bonus was non contractual it would have had a discretion not to pay it and would not have done so. It had therefore suffered loss which exceeded £100,000 over the life of the contract.

Its case was that Spire failed to comply with Reg 11(2)(b) which required Spire to provide: Those particulars of employment that an employer is obliged to give an employee pursuant to section 1 of the [ERA] (i.e. the Statement of Initial Particulars) . Section 1(4) of the ERA provides that the statement that the employer was obliged to provide the employee with was to contain particulars of: (a) the scale or rate of remuneration or the method of calculating remuneration, (b) the intervals at which remuneration is paid (that is, weekly, monthly or other specified intervals).

Spire applied to strike out Born’s case as having no reasonable prospect of success. Spire’s case was, quite simply, that it had provided the section 1(4) details in relation to the Christmas bonus, (as it had) and that section 1(4) did not require it to state whether the bonus was contractual. As it had no obligation to state whether the bonus was contractual it was not in breach of Reg 11 when it stated a bonus was non contractual in circumstances when it was in law contractual.

The Employment Judge acceded to Spire’s application. Born appealed.

The EAT judgment

Born’s case was that it was implicit in section 1(4) that the employer was required to state whether remuneration was contractual and, if it was not, then it was required by Council Directive 91/533/EU (on an employer’s obligation to inform employees of the conditions applicable to the contract or employment relationship; (the 1991 Directive) and Acquired Rights Directive (the ARD). Consequently, Spire was required to accurately inform Born on the transfer that the bonus was contractual.

The EAT (HHJ Eady QC) dismissed the appeal for the following reasons:

(i) It was important to note that although section 1 of the ERA was incorporated into Reg 11 it had a much broader application.

(ii) Although section 1 is a right which pertains to employees the particulars provided are not a contract although the statement is persuasive (but not conclusive) evidence of a contract.

(iii) Although pay is likely to be an important part of the contract not all forms of remuneration are contractual the learned judge was not persuaded that non-contractual matters should be left out of the section 1 statement.

(iv) The reference in Article 2(1) of the 1991 Directive to the ‘contract or employment relationship’ envisages that there may be particulars provided which are not contractual. Further, the requirement in Art 2(2) that the employer notify the employee of the ‘essential aspects of the employment relationship‘ does not impose a requirement to identify the contractual nature of the entitlement.

(v) The requirement in Art 3(1) of the ARD for the transferor to notify the transferee of all the rights and obligations that will be transferred is not confined to contractual rights.

Link to Judgment

Comment

The remedy of a transferee is likely to lie either in any contractual indemnities (there were none in this case) or in an action for negligent misrepresentation.

March 8, 2017
by Jeffrey
0 comments

Tees Esk & Wear Valleys NHS Foundation Trust v Harland EAT – 3 March 2017

In Service Provision Change cases, after determining that there is an organised grouping it is necessary to consider under Reg 3(3)(a)(i) whether that grouping had as its ‘principal purpose the carrying out of the activities concerned on behalf of the client’. This case considers the correct approach to this issue.

The facts

The case concerned care for a seriously disabled person, CE, provided by the NHS Trust for a period of 10 years. Over time, and very gradually, CE’s condition improved. Before 2011 he had required seven to one care. From 2011 he required four to one care. As a result CE moved to a new facility in 2012 in which there were number of other service users requiring specialist care but housed in separate flats. At that time four to one 24 hour care translated into 10 full time equivalent posts (or 11 employees). CE’s condition continued to improve further, such that by February 2014 he required only one to one care during the day and two to one care for six hours on a Friday. He rarely required care at night. As a result of the improvement in CE’s condition the carers engaged to look after him were required to work flexibly and to look after other service users in the same building. In 2015 there was transfer to DH Ltd who had successfully won the contract for the care of CE. The NHS Trust, prior to the transfer, told DH Ltd there was an organised grouping of 11 employees who’s principal purpose was caring for CE. During consultation it reduced this to 7 employees who had been engaged in 2014 as spending more than 75 per cent of their time in caring for CE.

The ET judgment

The ET held there was a consciously organised grouping. A team had been deliberately put together to look after CE. Further that all 11 employees had been assigned to the organised grouping. On the issue of principal purpose however the ET held that the organised grouping was too large and as a consequence the the principal purpose was no longer the care of CE, rather it had become diluted. The purpose had fallen away and was no longer the dominant purpose of the group but by the date of transfer had become a subsidiary purpose. Had the group gradually reduced as CE’s condition improved then the outcome may have been different but it did not and the principal purpose no longer existed immediately before the transfer. Consequently there was no transfer of any employee.

The EAT judgment

The EAT (HHJ Eady QC) held that the ET was correct to focus on the position in 2015. Reg 3(3)(a)(i) requires an assessment of the position immediately before the transfer. The ET made a clear finding that the principal purpose had changed over time so by the date of the transfer that it was not predominantly the care of CE.

The central issue was whether the ET were entitled to look at the facts on the ground rather than the original intention. HHJ Eady QC held that there was no ‘bright line’ which meant excluding either of these factors. Rather the words of the regulation should be applied. Adopting that approach, it is apparent that it is not simply the carrying out of the activities that means that the existence of the organised grouping meets the relevant condition; the carrying out of those activities has to be the principal purpose of that grouping, whether or not it is in fact carrying them out at any particular time. If the grouping in fact carries out other work, that might well point to its organisation being for a purpose other than the activities relevant to the service provision change. Similarly, if the grouping comprises far too many employees than would be necessary for the activities in question, that might suggest either that not all the staff concerned were in fact assigned to it or that the real purpose behind the organisation of the group was other than the carrying out of the relevant activities for the client. These are possibilities that an ET might properly consider relevant to its assessment, but it would not be sufficient to identify the actual activities being carried out by the organised grouping without determining its principal purpose.

Reg 3(3)(a)(i) does not ask what was the transferor’s intention (although this will be relevant to determining whether or not there is an organised grouping and may suggest its purpose) but what was the principal purpose of the organised grouping of employees. Addressing this question the ET found that, at the relevant time, this was the carrying out of activities other than those which were to be the subject of the service provision change.

Link to judgment

Comment

The failure to reduce the size of the team caring for CE had the effect that there was no transfer of any member of the team. Had the NHS Trust reduced the team over time as CE’s care needs reduced, then those engaged in his care at the time of transfer would have transferred.

There are two ways to avoid what occurred here. The first (which is likely to more successful than the second) is to reduce the size of the team over time so that it matches the requirements of the service as those requirements change. The second is, when the service is coming up for retender, to consciously reorganise the team so as to reduce it in size.

February 13, 2017
by Jeffrey
0 comments

Asklepios Kliniken Langen-Seligenstadt GmbH Felja ECJ AG – 19 January 2017

The Advocate General has provided an opinion in two joined cases referred from the German Labour Court on the issue of whether a transferee can be compelled to apply the provisions of a collective agreement adopted after the transfer. Essentially a revisiting of the static/dynamic issues in Alemo-Herron.

Arts 3(1) and 3(3) provides:

1. The transferor’s rights and obligations arising from a contract of employment or from an employment relationship existing on the date of a transfer shall, by reason of such transfer, be transferred to the transferee.

Member States may provide that, after the date of transfer, the transferor and the transferee shall be jointly and severally liable in respect of obligations which arose before the date of transfer from a contract of employment or an employment relationship existing on the date of the transfer.

3. Following the transfer, the transferee shall continue to observe the terms and conditions agreed in any collective agreement on the same terms applicable to the transferor under that agreement, until the date of termination or expiry of the collective agreement or the entry into force or application of another collective agreement.

The Facts

The employees were employed by a public authority until 1997 when they transferred to a private company, KLS. KLS ageed that the employees employment would continue to be governed by a collective agreement (known as the BMT-G II) to which it was not a party and by any subsequent collective agreements that supplemented, amended or replaced it.

In 2008 the business of KLS was transferred to another company in the same group, Asklepios. Asklepios is also not party to the BMT G II agreement or to the collective agreement that replaced it (the TVöD) or another collective agreement that supplemented the TVöD (the TVÜ-VKA).

The employees sought a declaration that Asklepios was was bound by the terms of the two collective agreements (TVöD and TVÜ-VKA). Asklepios on the other hand argued that having regard to the Directive and to Article 16 of the Charter of Fundamental Rights of the European Union.

The AG’s Opinion

The AG first revisited Werhof and Alemo-Herron. The AG observed that although the end result was the same in both cases (rights under collective agreements remained static) the reasoning was different in each case. In Werhof the ECJ applied Art 3(1) and held that the provisons of the collective agreement transferred and are to be observed after the transfer. However, this is only the position until there is a new collective agreement. The transferee is not bound by a new agreement to which he was not a party. In Alemo-Herron this reasoning was built on by the application of Article 16 of the Charter, which provided for the freedom to conduct a business, one component of which is the freedom of contract.

The AG then held:

The starting point is that as at the date of transfer the employee should work for the transferee on the same terms and conditions as with the transferor. There can be no derogation from this principle and in effect the transferee is subrogated to the transferor’s rights and obligations.

The AG then addressed the argument that where a contractual clause contains a dynamic provision to the effect that the parties agree to be bound by future collective agreements then it must follow that the employee is entitled after the transfer to the rights contained in any future collective agreement. In his opinion this did not follow because Art 3(3) has a limiting effect. Arts 3(1) and (3) represent the interaction of two rules. First, the general rule that the rights and obligations arising from a contract of employment in existence on the date of transfer within the meaning of that directive must be transferred to the transferee. Second, the degree to which the transferee remains bound by terms and conditions agreed under a collective agreement applicable to the transferor on the date of the transfer.

So far as terms and conditions provided for in a collective agreement are concerned, Art 3(3) operates to limit the scope of the obligations on the transferee . It follows from that provision that it is only the terms and conditions provided for in the collective agreement in force on the date of transfer that must continue to be observed by the transferee.

Art 3(3) provides a compromise intended to reconcile the interests of the transferee and those of the employees affected by the transfer of the undertaking. It strikes a balance between competing interests: on the one hand, the employee has a right to benefit from the specific terms and conditions previously agreed with the transferor, while, on the other hand, the transferee has a legitimate right to know the extent of its future obligations and, therefore, not to be bound by new terms and conditions defined at the end of a collective bargaining process in which it will not or cannot participate.

The AG opined that:

the dynamic reference clause ceases to have effect in the situations provided for in Article 3(3) that is to say where [the collective agreement] expires, terminates or is replaced and, if the Member State has so provided, where at least one year has passed since the undertaking was transferred. Those clauses do not therefore apply to collective agreements concluded after the date of transfer, unless the new employer expresses a different wish.

The AG did not feel it necessary to consider Art 16 of the Charter because the issue could readily be resolved by a proper application of Arts 3(1) and 3(3).

Link to Judgment

February 13, 2017
by Jeffrey
0 comments

Unionen v Almega Tjänsteförbunden ISS Facility Services AB ECJ AG – 01 February 2017

In this case the Advocate General of the ECJ has handed down an opinion on the issue of whether a transferee is required to take into account service with the transferor when calculating notice periods. This was a referral from the Swedish Labour Court.

The Facts

Four employees with long service transferred from two transferors to ISS. After some years of service with ISS they were all made redundant. At the date of redundancy all had total service with the transferor and ISS in excess of 10 years. (In two cases over 40 years.) However they had all only been employed for periods between 2 and 6 years with ISS (the transferee) since they transferred.

Both the transferor and transferee were parties to collective agreements which gave different periods of notice depending on the length of service of the particular employee. Of significance, the transferor and transferee had separate collective agreement with the same trade union but each collective agreement had the same provision relating to length of service and notice. This provided for extended notice in cases where length of service exceeded 10 years and the employee was aged over 55 years as was the case here if length of service with the transferor was taken into account..

In accordance with the discretion afforded by Art 3(3) of the Acquired Rights Directive, Swedish law only required compliance with collective agreements entered into by the transferee for one-year after the transfer. The employees had all been employed for well in excess of one year after the transfer.

The Issue

The central question was whether when applying the notice provisions in the transferee’s collective agreement, service with the transferor, before the date of transfer, counted.

The AG’s opinion

The AG was of the opinion that service with the transferor should be counted in the application of the calculation in the notice provisions. In reaching this opinion the AG made the following observations:

Although length of service does not as such constitute a right that transfers it is used to determine other financial rights which do transfer such as termination payments. Here the length of service had a direct impact on the notice payment payable to the employee.
Here the reason for the change in entitlement was necessarily the transfer (and therefore void) where there had been no independent negotiation of the notice provisions after the transfer. Moreover, had the employees not transferred they would have been entitled to have the notice periods calculated on the basis of their full service.
The purpose of the Directive is to prevent employees being placed in a less favourable position solely because of the transfer and to ensure their rights are safeguarded.
As for Art 3(3), this cannot have the aim or effect of imposing on the employees conditions which are, overall, less favourable than those applicable before the transfer. (see Scattolon, C‑108/10, paragraph 76). The same must necessarily be the case with respect to the one year option when the relevant terms of the pertinent collective agreements are identically worded.

Link to AG’s Opinion

November 23, 2016
by Jeffrey
0 comments

Osborne v Capita Business Services Ltd EAT – 10 November 2016

This case concerns the ETO defence in Reg 7 (before the 2014 amendment of Reg 7 and the introduction of Reg 7(3A)). The EAT provides a useful reminder of the approach to ETO issues.

The Facts

The Council, by way of a service provision change, outsourced; pensions, customer services, HR and, benefits support and control services to C from 1 September 2013. Some thirty staff were made dismissed. It was claimed that the dismissals were unfair because they were for a reason related to the transfer. C defended the case on the basis that the dismissals were for an ETO reason, namely; savings arising from economies of scale, sharing services and accommodation with others, automating processes and introducing customer self-service. Nine lead claims were selected to be reflective of the varying circumstances giving rise to the dismissals.

The ET judgment

In respect of seven claimants the ET held that they were dismissed because their roles had moved to different locations and the functions of their roles had been split. In respect of the other two claimants (O and L) the position was as follows. As regards O, the reason for his dismissal was because his role had moved from Barnet to Coventry. As regards L, her role had moved to Darlington and, whilst there were some differences between her role and the new role, these were not significant. She was dismissed because she refused to move to Darlington.

The ET held that the principal reason for the dismissal of the claimants was a reason related to the transfer. The ET then considered each of the nine claimants separately and whether the ETO defence was made out in their cases. In respect of O the ET held that the principal reason for the dismissal was relocation of the role and that this was not (as the Regulations then provided) a valid ETO reason. In respect of the group of seven claimants referred to above, the ET held that the reason was because the jobs were split between various functions and because of the relocation of those functions to various towns and cities. This was an ETO reason entailing changes in the workforce. In respect of L it was held that because the intention was to reduce numbers she was affected by this and even though her role had not changed much this was nevertheless a valid ETO reason.

The EAT judgment

The eight unsuccessful claimants appealed. In respect of the group of seven the primary ground of appeal was that the ET had failed to have regard to an undertaking given by C at the time of the transfer that any employee who wished to move to the new location would be entitled to do so and would not have to undergo any competitive process. The argument on behalf of the claimants was that this clearly demonstrated that the reason for the dismissal was the change in job location. However, C had not said that the claimants would retain their existing roles but simply that they would be given a role.

The EAT, Langstaff J, dealt shortly with this ground of appeal – the ET did not have to deal with every point raised before it. What was important was that a party knew why they had won or lost and here the reason was clear. The group of seven claimants were dismissed because their roles had been divided up and redistributed and because the locations had changed. The change in functions was sufficient to establish the ETO defence. The undertaking that was given may be relevant to the fairness of the dismissals but was not relevant to the ETO defence. The EAT accepted the position of L was different and because there was no change to her role the ET ought not to have held the ETO defence was established in her case.

The usefulness of this EAT decision lies in Langstaff’s J reminder of the principles of the ETO defence: A structured approach to ETO reasons as set out in Manchester College v Hazel should be applied.

Establish the reason for the dismissal;
Determine whether the dismissal is because of the transfer itself or reason connected to it. If the former, the dismissal is automatically unfair. If the latter, is there an ETO reason?
As regards ETO:
1. is the reason an economic, technical or organisational reason;
2. does it entail changes in the workforce?

(As will be appreciated (a) and (b) are apposite for dismissals before 31 January 2014. For dismissals after that date Reg 7 no longer refers to ‘a reason connected to the transfer’ (see comment below)).

Further, the following principles also apply:

In any dismissal (and TUPE dismissals are no different) the focus is on the contract the employee is working under. Therefore, even if the employee continues working for the employer, if he does so under a different contract imposed on him, there will have been a dismissal.
The identification of an economic, technical or organisation reason usually causes little difficulty, however the qualifying phrase, ‘entailing changes in the workforce’ often does.
Each claimant must be considered separately, Miles v Insitu Cleaning Co Ltd.
Any change in role must be significant, Green v Elan Care Ltd.
A mere change in location will not amount to change in the workforce, RR Donnelly Global Document Solutions Group ltd v Besagni.

Comment

Although not addressed by the EAT, the removal of the reference to a ‘reason connected to the transfer’ in the amended Reg 7 leaves potentially three possibilities when identifying the principal reason for the dismissal:

The transfer itself – automatically unfair.
An ETO reason (which now includes a change in place of employment) – potentially fair.
A reason connected to the transfer which is not the transfer itself and is not an ETO reason – either fair or unfair depending on the reason.

Link to EAT judgment

October 10, 2016
by Jeffrey
0 comments

The Salvation Army Trustee Co v Bahi EAT – 1 September 2016

This case concerns whether activities in a Reg 3(1)(b) were fundamentally the same before and after the transfer as required by Reg 3(2A).

The Facts

The Claimants were employed by a charity, CCL. They formed a team working in adult services for Coventry Council in connection with two contracts between CCL and the Council for the provision of accommodation support for homeless people. CCL’s work involved: Making an assessment of potential service users; allocating a support worker to those accepted to the service; developing a tailored support plan to the service user and supporting them in accordance with the plan; providing a floating support service once the service user moved on from CCL’s accommodation to other accommodation.

The Council provided its services to the homeless under 22 separate contracts with different providers. It wished to merge these services and those for ex offenders into one single point of contact. SAT were awarded this contract. Initially CCL were intended to be a sub contractor but this did not happen. SAT utilised its own hostel and acquired another hostel in order to service the contract.

SAT operated the service in a different manner to CCL. It had an assessment centre where service users were assessed and those with low or medium needs were found private rented accommodation. Those with high need were admitted to an assessment unit with a support care plan. The user would then go into accommodation which, if it was to be supported, would be in one of SAT’s hostels. The service was provided to those over the age of 25 rather than 18 as previously, and the time spent in supported accommodation was markedly shorter than before. The support workers hours of work were also different.

The ET Judgment

The key issue in the case was whether the activities remained fundamentally the same before and after the transfer. Whilst there were the differences summarised above, the EJ held that the fundamental activity was the provision of accommodation and the input of a support worker to facilitate the individual returning to mainstream private accommodation. He did not consider that the 24 hour concierge attendance compared with the on call 24 hour support was a fundamental difference between the two activities. Nor was the fact that dispersed accommodation was offered before and hostel accommodation was offered afterwards, constituted a fundamental difference in activity. The outcomes by which the Council measured the provision of the service were identical both before and after the change.

The EAT Judgment

SAT appealed and, in essence, argued that the activities before and after the transfer were not fundamentally the same. The EJ approached the matter too generally and in a simplistic way and that the activities should have been more clearly defined.

The EAT (HHJ Richardson) held at [22] to [23]

The EJ was correct. A pedantic and excessively detailed definition of “activities” would risk defeating the purpose of the SPC provisions. Arch Initiatives v Greater Manchester West Mental Health NHS Trust applied.
In this case the EJ had steered a correct course between the twin dangers of over generalisation and pedantry.
An argument that the EJ had erred by referring to fundamental differences rather than the activities being fundamentally the same was rejected. He had used the language of “fundamental difference” in antithesis, in direct opposition, to the phrase “fundamentally the same” and in doing so was rejecting the contentions of SAT that the features in question were such that the activities were not fundamentally the same.

Concluding remarks of the EAT

At [27] HHJ Richardson expressed concern about the cost and expense of resolving an issue such as this and suggested that some form of speedy dispute resolution procedure was highly desirable.

Comment

Winning the argument as to the definition the activity is often critical in an SPC case. For the transferor this often means seeking a broad interpretation and for the transferee a more narrow and focused definition. A considerations of how to define this issue is something that needs to be addressed when giving advice at the outset and not left until the Tribunal hearing.

I will be writing a separate post on the suggestion of an early dispute resolution procedure.

Link to judgment

October 10, 2016
by Jeffrey
0 comments

Alno (UK) Ltd v Turner EAT – 2 September 2016

This case concerns a Reg 3(1)(a) transfer in the context of the termination of a franchise agreement and an employee who was on maternity leave. It restates the need to approach ‘old style’ transfers by applying a multifactorial approach.

The Facts

ALNO produced kitchens. It promoted its products by entering franchise agreements. One such franchisee was SJM. SJM was owned and operated by M. It operated out of leasehold showroom premises in Brighton. SJM displayed the kitchens and provided a design and installation service. C was employed as the the showroom manager, with M undertaking the installations. In mid 2014 SJM, by M, gave notice to terminate the franchise agreement with effect from December 2014. C went on maternity leave in July 2014. ALNO decided that it would take over the lease from SJM and refurbish the showroom. ALNO invited M and C to join it as employees and to operate the newly refurbished showroom. Although it initially looked like an agreement could be reached, in the end M and ALNO could not agree terms. Also it transpired that the premises had a serious defect and there was a significant delay such that by the ET hearing in October 2015 ALNO had not yet commenced trading from the refurbished premises. (The showroom did not open until May 2016.) M’s maternity leave ended in February 2015 and SJM and ALNO were unable to agree whether there was a transfer. C sued both.

The ET Judgment

The case was only argued on the basis of Reg 3(1)(a). It was also not argued by SJM that there was a two-stage transfer but rather a single transfer in December 2014. The ET held that there was a transfer. It did so principally on the basis that the parties intended, in late 2014, that the business would transfer from SJM to ALNO and that this business was an economic entity would retain its identity.

The EAT Judgment

ALNO appealed on the basis that the EJ had failed to undertake the multi factorial assessment that is required in Reg 3(1)(a) transfer (P Bork International A/S v Foreningen af Arbejdsledere I Danmark and Cheesman v R Brewer Contracts Ltd). Also that the judge treated as decisive the intention of the parties that a transfer should take place.

The EAT (HHJ Richardson) held, allowing the appeal:

(i) In a Reg 3(1)(a) transfer it is first necessary to identify an economic entity and to decide whether there is a transfer. In respect of the latter issue a multifactorial approach is required.

(ii) Whilst the EJ was entitled to have regard to the intention of the parties this was not decisive. In this case the EJ failed to consider the following: SJM were not selling kitchens retail from its showroom; M was not being taken on by ALNO; M probably owned the tools and equipment and a van, and; no goodwill transferred. Also in this case the show room ceased to operate for along period of time and the duration of any stoppage is highly material.

Link to Judgment

September 6, 2016
by Jeffrey
0 comments

CT Plus (Yorkshire) CIC v Black EAT – 3 August 2016

If a new service provider starts to operate a service causing the existing service provider who operated that service on behalf of the client to cease to do so, is there a service provision change?

The Facts

CT operated a park and ride service in Hull under a contract with the Council. The Council subsidised the service and had control over the timetable, the age and type of buses, the branding and logo used. Public sector transport legislation provides that a subsidised service cannot compete with one that is not subsidised. If a new provider wishes to operate a non subsidised, commercial, service, and it serves the requisite 56 days’ notice to do so, then the existing subsidised service must cease to operate. Stagecoach served such notice and commenced operation of a commercial park and ride service servicing the same route as that operated by CT. The Council therefore had no choice but to bring its contract with CT to an end, although it expressed concern about Stagecoach’s proposed service. Unlike CT, Stagecoach had no contract with the Council, it received no subsidy and offered a reduced service in off-peak hours. Stagecoach did pay the Council to use the car park from where he service operated and also liaised generally with the Council about the service. It declined to take on CT’s drivers on the grounds that there was no transfer.

ET Judgment

The ET held that the activity was the running of the park and ride service from the car park to the city centre. Prior to the 29 September 2014 this service had been operated by CT on behalf of the Council and the Council was the client within Reg 3(1)(b)(ii). Stagecoach after that undertook the same activities. However, when Stagecoach took over the service it did not do so on behalf of the client and therefore the requirements for a service provision change were not met. The Council was not the client, it was merely an interested bystander.

EAT Judgment

CT appealed on the basis that the ET had focussed too much on the absence of subsidy and overlooked the fact the Council still retained some degree of control. For example, it could withdraw the licence from Stagecoach and it had engaged in discussions with Stagecoach prior to the commencement of the service by Stagecoach concerning the quality and age of buses, frequency of service, standards and qualifications of drivers. There was also publicity which gave the impression that service was being operated on behalf of the Council. In essence it was argued that in reality the service was being operated, for all practical purposes, on behalf of the Council.

The EAT held:

SPC issues should be approached in a commonsense and pragmatic way (see Metropolitan Resources and Hunter).
The ‘client’ must remain the same throughout.
Client means means the organisation that is in a position to carry out the services either itself or by commissioning them from others.
The ET had not erred in law by being unduly legalistic. It had not required the client to be in a contractual relationship with Stagecoach, it did not hold that there had to be a subsidy from the Council. The ET took into account that Stagecoach had disregarded he Council’s reservations about the frequency of the service

Link to EAT Judgment

June 13, 2016
by Jeffrey
0 comments

Amaryllis Ltd v McLeod EAT – 9 June 2016

This case is another useful example of the difficulties in determining whether there is an organised grouping of employees whose principal purposes is the carrying out of the relevant activities on behalf of the relevant client (as required by Reg 3(3)(a)(i)).

The Facts

M Ltd had been in business for many years and for over 50 years it had a contract with the MOD for renovating furniture. It lost the contract between 2003 and 2008. In that period A Ltd had a contract with the MOD to supply new furniture and renovate old furniture. A Ltd had no facilities to renovate furniture so it subcontracted the majority of that work to M Ltd. For that period M Ltd was doing the same work but its client was A Ltd and not the MOD. From 2008 to 2012 the MOD split the contract and M Ltd were once again awarded the renovation contract. From 2012 the MOD awarded contracts under a framework agreement – M Ltd was in fact given all the renovation work under this new contract. In early 2014 the renovations contract was re-tendered and M Ltd was unsuccessful. the contract was awarded to A Ltd. In the 3 months leading up to the putative transfer an average of 68.5% of the claimant employees’ time was spent on the MOD renovations contract and in the 6 months leading up to it the percentage was 68.5%.

A Ltd argued that even if historically M Ltd had an organised grouping of employees carrying out the renovation contract on behalf of the MOD it did not do so at the relevant time. Just because almost 70% of time was spent on the MOD renovations contract and the MOD was M Ltd’s biggest customer that did not mean that there was grouping dedicated to the MOD contract,

The decision of the ET

The ET held that there was a service provision change from M Ltd to A Ltd and all of the claimants transferred to A Ltd. It held that the department servicing the renovations contract had originally been set up for the specific purpose. The department had not morphed from one set up to deal with the MOD contract to one that was operating to serve all customers one of whom happened to be the MOD.

The EAT decision

A Ltd appealed essentially on the basis that the ET failed to consider the principal purpose of the organised grouping immediately before the transfer. There was no evidence as to what the original purpose of the department was and the ET had overlooked the fact that from 2003 to 2008 A Ltd was the client and not the MOD.

The argument advanced by A was that; if the department of a business carries out work for several customers and loses all but one, that does not mean that the grouping of workers had as its principal purpose the carrying out of activities on behalf of the remaining client. Happenstance is not enough there must be both an ‘organised grouping’ and a ‘principal purpose’. See Eddie Stobart v Moreman, Seawell Ltd v Ceva Freight and Costain Ltd v Armitage all of which emphasise the requirement for deliberate and conscious planning and organisation by the employer of his employees into a grouping in the nature of a team.

The EAT (Slade J) allowed A Ltd’s appeal. It pointed out that the requirement for an organised grouping was present in the ECJ cases which given rise to the need to introduce service provision changes to Art 1 of the Directive. The EAT held that ET relied on facts that did not support its conclusion, namely facts relating to the carrying out of the activities in general and did not adequately address the issues of ‘principal purpose’ and ‘organised grouping’. the EAT observed:

(i) It is not sufficient that the department carries out certain work mainly for one customer.

(ii) It is necessary to satisfy Reg 3(3)(a)(i) that the ET must make a finding that the principal purpose is carrying out the the relevant activities for the particular client. This can be inferred from primary facts as well as from direct evidence.

Link to judgment

Comment

In many TUPE SPC cases the sort of difficulties that arise in this case could be avoided by the conscious decision to arrange the workforce into specific teams servicing the particular contract at some point prior to the putative transfer. It is surprising how often, particularly in cases where there is regular re-tendering of the contracts, this is not done.