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 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 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).”