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.
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  applied in Duncan Web Duncan Webb Offset (Maidstone) Ltd v Cooper :
- 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.