«

»

Print this Post

TUPE: But not as we know it?

Sandra M Wallace, UK Group Head, comments:

The introduction of the service provision change (SPC) regulations in TUPE 2006 promised so much in terms of certainty, but unfortunately has delivered so little. Far from giving employers and employees alike much needed confidence about the circumstances in which TUPE will apply, recent case law has created a great deal of uncertainty. Now the Government has launched a consultation paper (pdf) indicating that it proposes to remove the SPC provisions altogether. With a long lead-in period, however, until any changes are likely come into force, and with no guarantee that they will provide any additional clarity, businesses still need to understand how the trend has been moving in recent months.

At its simplest, a service provision change occurs when activities carried out on behalf of a client by one person are instead carried out by another person. However, immediately before the change there has to be an organised grouping of employees situated in Great Britain which has as its principal purpose the carrying out of activities on behalf of the client. On the face of it these provisions are relatively straightforward but, over the last 12 months, they have, in fact, courted a good deal of controversy.

Organised grouping

In 2012, the first case to muddy the SPC waters was Eddie Stobart v Moreman and others. In this case, the EAT found that there had been no SPC in respect of employees who spent 50% or more of their time on a particular contract. The EAT said that the requirement of an organised grouping necessarily means that the employees be organised by reference to the requirements of the client in question. It does not apply to a situation where a group of employees may, without any deliberate intent or planning, be found to be working mostly on tasks which benefit a particular client.

Next came Argyll Coastal Services Ltd v Stirling where the EAT said the employees must be “deliberately organised for the purpose of carrying out the activities”. This approach was also taken in Seawell Ltd v Ceva Freight (UK) Ltd where the EAT found that an organised grouping does not arise merely by an employee spending 100% of their time on a particular contract. What is required is a client ‘team’ to be set up and specifically dedicated to the client. The EAT said “it cannot be a matter of happenstance”.

Activities

Further surprising decisions in late 2011/2012 arose in the context of ‘activities’. In order for an SPC to occur, the activities carried out by the new contractor must also be ‘fundamentally’ or ‘essentially’ the same as those carried out by the old contractor. However, surprisingly, in Nottinghamshire Healthcare NHS Trust v Hamshaw and others there was no SPC, and therefore no transfer of employees, when the Trust closed a care home and outsourced care of the residents to a new provider supervising independent living the residents’ own homes. Again, in Enterprise Management Services Ltd v Connect Up Ltd, there was no SPC when a new provider of IT support services provided the same services as the old provider with the exception of one small service which formed only 15% of the overall work. In Johnson Controls Ltd v UK Atomic Energy Authority there was no SPC when taxi booking services were taken back in-house when previously they had been provided by a taxi administration service. In each case, the courts held that the activities carried out after the change were essentially different from those carried out before.

Client identity

In 2012, the courts also confirmed a restrictive approach to the meaning of ‘client’. In order for there to be a SPC, the client must remain the same. In Hunter v McCarrick, the Court of Appeal found that when a property services company was replaced by another company on the sale of the property the employees of the original company did not transfer. There was no SPC as the client had changed.

This recent spate of cases has revealed a new trend in the interpretation of TUPE’s SPC provisions. Gone are many of the old assumptions about what constitutes an organised grouping of employees. Gone too are the traditional assumptions about the type of activities which need to carried out by the new provider for a SPC to occur. However, whether the Government’s plans to remove the SPC provisions altogether will assist parties to identify and understand their obligations better remains to be seen. The application (or not) of TUPE will remain very much a live issue. This is because service provision changes will still potentially fall within the definition of a business transfer (as they did pre-2006). Therefore complicated assessments of whether TUPE applies will still need to be made but potentially without the assistance of express statutory provisions.

sandra.wallace@dlapiper.com
+44 121 262 5913

Permanent link to this article: http://www.dlapiperbeaware.co.uk/tupe-but-not-as-we-know-it/