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)).
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.
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.