EAT guidance on service provision changes

Stuart Swan
9th May 2014

The Employment Appeal Tribunal ('EAT') recently provided a useful reminder to contractors that simply changing the way a service is delivered will not always be enough to avoid the application of the ‘service provision change’ type of TUPE transfer.

 

In this case, a cardboard manufacturer had engaged a haulier to deliver bulk loads of its products throughout the UK. In 2011, the manufacturer ended its contract with the haulier and a specialist logistics company took over responsibility for arranging the delivery of the products. The logistics company itself owned no haulage vehicles and employed no drivers. Instead it acted as a ‘middleman’ tendering between its customers and hauliers who then made the deliveries for its customers. They therefore provided the delivery services to the manufacturer in a markedly different way from the previous contractor, whose drivers they refused to take on under TUPE. The drivers argued that they should have transferred to the logistics company under TUPE when it took over the delivery contract.

 

The TUPE Regulations state that a relevant transfer will take place where ‘activities’ cease to be carried out by a contractor on a client’s behalf and are carried out instead by another person on the client’s behalf. At first instance, the Employment Tribunal decided that even although the mode of delivery of the service was very different, the drivers should have transferred to the logistics company. The logistics company appealed.

 

The EAT considered the available case law on the meaning of ‘service provision change’. It confirmed that the question of whether or not the service provided after the changes was ‘fundamentally or essentially’ the same as that provided before was a matter of fact for the ET to decide. The EAT noted that the appeal was based on the argument that, because the transportation was not actually being carried out by the logistics company directly and/or because it could not provide jobs for the employees, there could not be a service provision change. The EAT found that this was incorrect. A TUPE transfer could arise from a sequence of steps. The augmentation of a service by a potential transferee did not mean that there could not be a service provision change. The EAT took a very pragmatic ‘on the ground’ approach and found that ‘essentially the workers must follow the work’.

 

The existing case law that the service provided must be ‘essentially the same’ before and after the transfer for a service provision change to take place has been put on a statutory footing with recent changes to TUPE. This case shows that there are still likely to be limits to this proposition however. An Employment Tribunal is likely to look at any contractual documentation before deciding whether or not a service provided after a change of contractor is fundamentally the same. In addition, even where an incoming contractor provides the services in a very different way, if it is undertaking the same work, then this decision makes it clear that the workers must follow that work.

 

Find out more about this case here.

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