This case and the case of Cheesman v R Brewster Contracts Ltd set out the approach that should be taken to determine whether or not there is a Reg 3(1)(a) (old style) TUPE transfer.
The EAT upheld a tribunal’s conclusion that there was no transfer of an undertaking within TUPE when there was a change in the contractor managing a leisure centre, but no transfer of assets and no transfer of the majority of the workforce either in number or in skills.
The EAT provided the following guidance in determining whether there has been a TUPE transfer:
(para 7) “It will normally be best and clearest for an employment tribunal to deal first with the question of whether there was a relevant and sufficiently identifiable economic entity, and then proceed, whatever be the answer to that question, to ask and answer whether there was (or would have been, if such hypothetical question can be answered, in the event of a conclusion that there was no such entity) a relevant transfer of any such entity.”
Relevant and sufficiently identifiable economic entity?
The tribunal should consider whether there is a ‘stable and discrete economic entity’ or whether the entity is ‘sufficiently structured and autonomous’. Consideration of whether there is a ‘distinct cost centre’ may be helpful.
A relevant transfer?
In determining whether there was a transfer, the best and clearest guidelines are to be found in Spijkers (1986) ECR 1119. There can be a transfer even if there are no significant tangible or intangible assets. But if assets are transferred from the predecessor to a successor sub-contractor, that is a very likely indicator of a relevant transfer. In looking at an alleged transfer of a labour-intensive undertaking, the question is whether the staff is ‘substantially the same’. Although, in accordance with ECM (Vehicle Delivery) Service v Cox , a tribunal is entitled to look at the reason why employees were not appointed by the transferee.