TUPE: Service Provision Change

David McRae
Managing Director
View Profile

The Employment Appeal Tribunal (EAT) recently reaffirmed that for a service provision change to have taken place under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE), there must be an organised grouping of employees organised for the principal purpose of carrying out the transferring activities immediately prior to the transfer.

A service provision change normally occurs where a business, engaging a contractor to do work on its behalf, reassigns such a contract or brings such work ‘in-house’. A service provision change may amount to a ‘relevant transfer’ under TUPE.

If TUPE is found to apply to a service provision change, the organised grouping of employees will normally automatically transfer to the new service provider with their existing terms and conditions of employment preserved and without a break in their period of continuous employment. Any changes to employees’ terms and conditions will be void, and any dismissal will be automatically unfair, if the sole or principal reason for the change or dismissal is the transfer itself and is not for an economic, technical or organisational (ETO) reason.

In the case referred to above (Amaryllis Ltd v McLeod), furniture renovations at the Ministry Of Defence (MOD) had been carried out by Millbrook Furnishings Ltd for a number of years, mainly directly and for a period between 2003 and 2008 as a subcontractor for another company, Amaryllis Ltd. In 2014 the service of furniture renovations was put out to tender and Millbrook Furnishings Ltd lost the contract to Amaryllis Ltd. The question for the Employment Tribunal to determine was whether a service provision change under TUPE had taken place.

It was initially decided by the Employment Tribunal that, as Millbrook’s employees spent around 70% of their time on the transferring activities and as the department had originally been set up for the purpose of carrying out these activities, TUPE applied in this case.

The EAT overturned the decision and held that the Employment Tribunal erred on two counts. The first being that the correct test to be applied is not to simply assess the proportion of time a grouping of employees spent carrying out the transferring activities but instead whether the grouping of employees is organised for the principal purpose of carrying out the transferring activities. Secondly, that in determining this, the only relevant point to consider is immediately prior to the transfer.

The amount of time employees spend carrying out the transferring activities will often be one factor to be taken into account when assessing whether the grouping is organised for the principal purpose of carrying out the transferring activities but the EAT’s decision in this case is another reminder to employers that this will not of itself be determinative.

For completeness, the EAT also highlighted that the period during which Millbrook Furnishings Ltd acted as a sub-contractor was not relevant here as the work was not being carried out for the relevant client (the MOD) but instead for Amaryllis Ltd.

This case is a reminder that although sometimes it may appear at first glance that a transfer is taking place, on close careful examination of the circumstances it may not be the case. It is therefore important to deal with each situation individually and take appropriate advice as early in the process as possible to ensure the correct approach is taken.

You can read the judgment here:

http://www.bailii.org/uk/cases/UKEAT/2016/0273_15_0906.html

Topics: EAT, Employment Appeal Tribunal, TUPE