This is the first appellate case to apply the ECJ decision in Govaerts. It did so in the context of a service provision change (SPC) under Reg 3(1)(b) of TUPE.
Amey, the transferor, had a contract with NLC to install kitchens in social housing. The claimant employees worked on this contract. From March 2017 Amey split its workforce into two teams made up of the trades necessary to fit kitchens. Each team worked across the NLC geographical area. Most of the employees were allocated to one or other of the teams.
NLC retendered its contract. In doing so it split the contract into Lots defined by geographical areas, north and south. It did not want the same contractor to undertake both Lots. Lot 1 was awarded to McTear and Lot 2 was awarded to Mitie. Amey undertook an analysis of the geographical area in which team had operated in the previous 12 months. After undertaking detailed analysis it took the view that team 1 corresponded to Lot 1 and team 2 corresponded to Lot 2. The evidence in support of this analysis was geographical split was not strong. After awarding the tender, NLC swapped the geographical areas for each Lot because apparently they corresponded more closely to the Head Office or each transferee.
Employment Tribunal decision
The Tribunal held that there had been transfers under Reg 3(1)(b) to each of McTear (team 1) and Mitie (team 2). In doing so it purported to apply Kimberley Group Housing v Hambley. Both transferees appealed.
There were numerous grounds of appeal relating to the manner in which the Tribunal had assessed the evidence and determined there was an SPC in accordance with Amey’s split into teams. However, of particular significance is that Govaerts was decided after the Tribunal decision and as a consequence Mitie’s Grounds of Appeal were amended. A new ground of appeal was added; to the effect that following Govaerts it was not necessary for the transferred employee to transfer to only one employer but an employee could transfer to two employers in proportion to the tasks performed.
The Employment Appeal Tribunal decisions
It has been held that SPCs are a purely domestic construct and there is no obligation to apply EU law principles to them.
Nevertheless, Mitie advanced 4 reasons why Govaerts should be applied: (i) Reg 4 applies to both types of transfer, those under Reg 3(1)(a) and those under Reg 3(1)(b) and Reg 4 should have the same meaning for both transfers. (ii) many transfers will meet the criteria for both kinds of transfer. (iii) the SPC provisions were introduced under powers under s. 38 of the Employment Relations Act 1999 provides the Secretary of State to make regulations with the same or similar provisions to the Directive. (iv) In Kimberley, it was held there was no principled reason for distinguishing between SPCs (Reg 3(1)(b)) and business transfers (Reg 3(1)(a))
The EAT allowed the appeal and remitted the case for the Tribunal, in doing so it held (para 41): “There is no reason in principle why an employee may not, following such a transfer, hold two or more contracts of employment with different employers at the same time, provided the work attributable to each contract is clearly separate from the work of the other(s) and is identifiable as such. The division along geographical lines, of work previously carried out under a signal contract into two new contract is, in principle, a situation where there could properly be found to be different employees on different jobs”.
This case has the potential to cause serious difficulty in multi party SPC cases. There is no obvious mechanism for determining how employment contracts should be divided between employers. This is something which English law has generally sought to avoid (no servant can have two masters). There exceptions to this principle, see paras 39 and 40, but these are limited in scope.