Tag Archive: TUPE

Important EAT case highlights that the employees protected by TUPE may extend more widely than anticipated

 Gurpreet Duhra, a Partner in our Sheffield office, comments:  The EAT has given judgment in a number of cases recently on the scope and interpretation of the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE). A case which merits particular attention is one which highlights that the protection afforded by the service change provisions in TUPE may extend beyond the employees of contractors with whom an employer has a direct contractual relationship, to the employees of sub-contractors with whom they do not have a direct contractual relationship.  This is important as it potentially significantly increases employee liabilities and these need to be assessed and accounted for when considering the impact, and cost, of a service provision change.

Jinks v London Borough of Havering

This case was concerned with Regulation 3(1) (b) TUPE which states that TUPE applies to a service provision change, which includes a situation in which “activities cease to be carried out by a contractor or a subsequent contractor on a client’s behalf (whether or not those activities had previously been carried out by the client on his own behalf) and are carried out instead by the client on his own behalf”.

The facts were that a council contracted with a company, Saturn Leisure Ltd (Saturn), to manage one of its ice rinks, including an associated car park. Saturn sub-contracted the management of the car park to another company, Regal Car Parks Ltd (Regal).  In mid-April 2013, the ice rink closed. The car park site continued to operate for another couple of weeks but Saturn gave up occupation of the whole site at the end of April 2013. The council then took control of the site and closed the car park. It subsequently granted a licence to an NHS Trust to use the car park for its staff before finally converting it a few months later into a public use car park.

The claimant employee had previously been employed by Saturn and he argued that in mid-April 2013 his employment had transferred to Regal; he then claimed that when the council took on the operation of the car park, his employment transferred to the council and that their failure to accept him as an employee had led to his constructive unfair dismissal.

The council sought to argue that the claimant had not been employed by Regal and, in any event, there had been no transfer of his employment from Regal to the council.

The employment tribunal struck out the employee’s claim on the basis that it was Saturn which had engaged Regal and, when Saturn gave up its interest in the car park, it did so without transferring the benefit of its own contract with the council to anyone else. At that point the sub-contract between Saturn and Regal ended. There was never any direct contractual link between Regal and the council and therefore the requirements for a TUPE transfer were not met when the council took the car parking service back in-house.

The EAT overturned the tribunal’s decision. In doing so, it found that whilst the relevant service provision change regulations in TUPE require activities to cease to be carried out by a contractor on a client’s behalf, and instead to be carried out by the client on its own behalf, under Regulation 2 TUPE, the term ‘contractor’ also includes ‘sub-contractor’. Whilst the EAT acknowledged that the activities before and after an alleged transfer must be for the same client, it found that the employee had a reasonable prospect of showing that the council was Regal’s client.  The EAT held that the client of a sub-contractor is not necessarily only the contractor to which it is contractually bound to provide a service. It said that 3 important principles had been established by earlier case law (1) the question of who is the client is one of fact, not law; (2) there can be more than one client in any given case; (3) the terms of the TUPE regulations indicate that the person on whose behalf services are provided by a sub-contractor may not necessarily be the contractor from whom the sub-contract is held.

This case is important as it highlights that liabilities for employees may extend further than an employer anticipates if it is engaged in a service provision change, for example, when taking a service back in-house, there may be liability not only for employees of the party with whom the employer has a direct contractual relationship but also the employees of sub-contractors as well.  This case indicates that the facts of each case will be critical, and in particular, the assessment of who is the ‘client’ for the purposes of  TUPE ie who can it be said the services are being provided for? Where risks arise, employers should ensure that this is reflected in the deal with adjustments to price and/or appropriate indemnities.

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New TUPE regulations published

Clare Gregory, a Partner in our Sheffield office, comments: With just over a fortnight to go until they come into force, the Government has now made, and published, the Collective Redundancies and Transfer of Undertakings (Protection of Employment) (Amendment) Regulations 2014 (“Regulations”).  They will take effect on 31 January 2014. A copy of the Regulations is available here.

The Regulations reflect the relatively conservative reform of TUPE with which the Government has decided to proceed after widespread concern about its original proposals. Nonetheless there are some important changes of which employers need to be aware.

Pre-transfer consultation

The Regulations provide that, in collective redundancy situations, a transferee may consult, or start to consult, with the relevant representatives before the transfer takes place.  The transferor must agree and the transferee must give written notice to the transferor. The transferee can cancel its decision to consult pre-transfer at any time by written notice.  In practice, this change may prove to have little impact; many businesses already choose to consult about post-transfer redundancies before the transfer takes place. However, there is no doubt that having a clear legitimate basis on which to do this will provide businesses with welcome certainty and may assist transferees to make cost-cutting measures more efficiently post-transfer.  Individual consultation is, however, still likely to be required to take place post-transfer.

Changes to terms and conditions post-transfer

The Regulations continue to provide that any purported variations to contracts of employment where the reason, or principal reason, for the variation is the transfer will be void. However, the Regulations provide for two exceptions to this (1) where the sole or principal reason for the variation is an economic, technical or organisation reason entailing changes in the workforce, provided that the employer and employee agree the variation (ETO defence); or (2) the terms of the contract permit the employer to make the variation.  

These changes are an attempt to assist transferees to harmonise their employees’ terms and conditions, which, until now, has been a significant problem in practice. However, the new Regulations are not without their difficulties and arguably are in breach of ECJ case law which suggests that any variations by reason of the transfer are prohibited by the Acquired Rights Directive.  The Government is expected to issue detailed guidance in this area, but, ultimately, until cases come before the UK courts the extent to which employers can rely on these provisions to facilitate post-transfer harmonisation remains uncertain.

Change in location is a “change in workforce” for the purposes of the ETO defence

The Regulations expressly provide that ‘changes in the workforce’ provided for in the ETO defence include a change to the place where employees are employed.  This is a welcome change to the legislation, preventing genuine place of work redundancies from being automatically unfair.

Renegotiation of terms derived from collective agreements

The ongoing effect of collective agreements has been the subject of recent case law in the UK. The Regulations therefore provide welcome certainty that no provisions contained in a collective agreement agreed after the date of the transfer, and where the transferee is not party to the collective bargaining, will transfer. The new Regulations also provide that terms and conditions incorporated from a collective agreement may be varied after a period of one year post-transfer, provided that the terms are no less favourable to employees overall.

Employee liability information

The Regulations extend to 28 days (from 14) the deadline for a transferor to provide employee liability information to the transferee. This change should assist transferees and better meet their commercial needs by enabling them to have important employee information earlier in the business transfer process.  This change applies to TUPE transfers which take place on or after 1 May 2014.

Micro-businesses permitted to consult employees directly

Where an employer employs fewer than 10 employees and there are no appropriate trade union or employee representatives, the employer may consult with the employees directly.  This is likely to be welcome news for smaller employers, significantly reducing the administrative burden of electing representatives.


The new Regulations contain some useful provisions for employers.  However, until cases start to come before the UK courts the full extent of the changes will remain uncertain.  In particular, transferee employers should remain cautious about harmonising terms and conditions of employment and take advice before implementing any changes.

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December 2013’s review of the year

Sandra Wallace, Partner and Employment group head, highlights the most important legislative and case law developments from 2013 and identifies the key cases to watch out for in 2014.   Remember to use our On the horizon legislation tracker to keep up to date with the further changes to legislation which are expected in 2014 and beyond.



Employment Tribunals

1 February Cap on a week’s pay for statutory awards increased from £430 to £450
  Unfair dismissal compensatory award increased from £72,300 to £74,200
25 June In political affiliation cases the two year unfair dismissal qualifying period no longer applies
29 July One year cap on unfair dismissal compensatory award introduced
  Protection of settlement negotiations from admissibility in unfair dismissal tribunal proceedings introduced
  Introduction of fees regime for employment tribunal claims and new tribunal rules
  Compromise agreements renamed ‘settlement agreements’
7 October New fee remission system in force for employment tribunal fees

Family friendly

8 March Parental leave increased from 13 to 18 weeks
7  April Statutory maternity, paternity and adoption pay rates increased from £135.45 to £136.78 per week


25 June Amendments to whistleblowing legislation to remove good faith requirement and introduce public interest test
1 November

Close of call for evidence on further whistleblowing reform


1 February Cap on a week’s pay for statutory redundancy payments increased from £430 to £450
6 April Period of required collective consultation for 100+ redundancies reduced from 90 to 45 days

Employment status

1 September Employee shareholder status introduced


25 June Obligation for the Government to make an order outlawing caste discrimination came into force
1 October Repeal of third party harassment provisions from Equality Act 2010





USDAW and others v WW Realisation 1 Ltd and others This case involves the redundancy consultation obligations arising out of the closure of Woolworths and Ethel Austin stores between 2008 and 2010.   The EAT ruled that the words “at one establishment” in the UK’s collective redundancy legislation should be disregarded for the purposes of any collective redundancy involving 20 or more employees. This potentially results in employers needing to collectively consult whenever they propose to make 20 or more redundancies in a 90 day period, regardless of where the employees are based.  This case is however being appealed to the Court of Appeal.

Working time

Neal v Freightliner Ltd


An Employment Tribunal held that a freight worker was entitled to have overtime payments and shift premiums included in the calculation of his holiday pay as they were intrinsically linked to the performance of the tasks he was required to carry out under his employment contract.  This case is being appealed to the EAT.

Employee competition

Coppage and anor v Safety Net Security Ltd The Court of Appeal upheld an order that a former company director pay at least £50,000 following a breach of his post-termination restrictive covenants which prohibited solicitation of any customers of his former employer for a period of six months following termination.
Vestergaard Frandsen SA v Bestnet Europe Ltd The Supreme Court held that a former sales manager was not liable for misuse of confidential information.  The manager had not acquired information while working for Vestergaard and had no implied knowledge of the misuse of information by her new employer.

Transfer of undertakings

Alemo-Herron and others v Parkwood Leisure Ltd

Considering the status of collective agreements following a TUPE transfer, the ECJ decided that under the Acquired Rights Directive it is impermissible for UK courts to adopt a “dynamic” rather than a “static” interpretation.  Where transferring employees’ contracts provide that their terms are to be determined in accordance with collective agreements, the transferee cannot be bound by terms which are collectively agreed after the transfer if it is unable to be involved in the negotiating process.

Crystal Palace FC Ltd v Kavanagh & Ors

In a case which arose out of the dismissal of employees of the company which owned Crystal Palace football club when it went into administration, the Court of Appeal held that the employees were dismissed by the administrator shortly before the business was sold for a valid “economic, technical or organisational reason”. The administrators needed to reduce the wage bill in order to continue running the business and avoid liquidation.


Lockwood v Department of Work and Pensions

The Court of Appeal held that a severance scheme, which paid higher payments to older employees on the basis that they needed more of a cushion than younger employees, was objectively justified.

Cox v Essex County Fire and Rescue Service

In this disability discrimination case, the EAT decided that although the employee had advised that he was suffering from bipolar disorder, the absence of a definite diagnosis meant that the employer did not know, and could not have reasonably been expected to know, that the employee was disabled.

Croft Vest Ltd & Ors v Butcher

The EAT held that an employer who refused to pay for an employee with work-related stress and depression to have private psychiatric counselling and cognitive behavioural therapy breached its duty to make reasonable adjustments.



USDAW v Ethel Austin Ltd (in administration) and another case


The Court of Appeal will consider whether the words “at one establishment” in the UK’s collective redundancy legislation should be disregarded for the purposes of any collective redundancy involving 20 or more employees. (NB. this is the Woolworths case  – see above for EAT decision).
Lyttle and others v Bluebird UK Bidco 2 Ltd In an application from a Northern Ireland employment tribunal to the ECJ, clarification is sought as to the meaning in the UK’s collective redundancy legislation of the term “establishment” and whether the duty to collectively consult is triggered when 20 or more employees are dismissed at a particular establishment or across the whole of the employer’s business.

Working time

Lock v British Gas Trading Limited and others The ECJ will consider whether the holiday pay of a worker, who receives basic pay and sales-related commission, should be more than just basic pay, even though during holiday periods they are not undertaking work that would entitle them to commission.
Neal v Freightliner Following the Employment Tribunal in 2013 (see above), the EAT will consider if holiday pay must be calculated in a way which takes account of pay for voluntary overtime.


Z v A Government Department & the Board of Management of a Community School;    CD v ST There are currently two cases before the ECJ which will consider whether an mother who has a child via a surrogacy arrangement has pregnancy and maternity rights under EU law.
FOA on behalf of Karsten Kaltoft v Billund Kommune The ECJ will consider whether discrimination on grounds of obesity is prohibited by EU discrimination law.

Gallop v Newport City Council


Judgment is awaited in this case in which the Court of Appeal has considered if an employer’s lack of knowledge prevents the duty to make reasonable adjustments arising where the employer relied on advice from an occupational health adviser that an employee was not disabled for discrimination purposes.

Mba v Mayor and Burgesses of the London Borough of Merton

Judgment is awaited in this case in which the Court of Appeal has considered whether or not an employer’s requirement that all care workers work some Sunday shifts indirectly discriminated against a Christian residential care worker who strongly believed that Sunday should be a day of rest.

Employment law reforms

R (on the application of UNISON) v Lord Chancellor


Judgment is awaited in this case in which the High Court heard an application by UNISON claiming that the introduction of employment tribunal fees is in breach of EU law and contrary to the principle of access to justice.    A similar application to the Scottish Court of Session has been stayed pending the outcome of the High Court case.

R (on the application of Compromise Agreements Ltd) v Secretary of State for Business, Innovation and Skills

An application has been made for judicial review of the statutory cap of one year’s salary in unfair dismissal cases. The application is based on the premise that older people are more likely to be out of work for more than a year and therefore would be eligible to more than a year’s compensation were it not for the new cap.

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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”.


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.

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