The last month has seen a flurry of decisions from the higher courts on some important questions regarding the interpretation of the service change provisions in TUPE.
The Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) now extend to cover service provision changes. This was a new addition to TUPE when the previous regulations (from 1981) were amended in 2006. Consequently, there has, to date, been some uncertainty about the interpretation of the new provisions and little case law to assist.
A service provision change occurs in three situations, broadly on an outsourcing, in-sourcing and change of contractor. However, whether or not there is a service provision change can be a complex issue.
A change of contractor tend to be the most difficult type of case. TUPE will only apply to such cases if:
".activities cease to be carried out by a contractor on a client's behalf .and are carried out instead by another person (a subsequent contractor) on the client's behalf."
Immediately before any service provision change there must also be an organised grouping of employees in Great Britain whose principal purpose is carrying out the activities on behalf of the client.
Two exceptions apply so that TUPE will not apply if:
- the activities concerned are wholly or mainly the supply of goods for the client's use; or
- the client intends that the activities will be carried out after the transfer in connection with a single specific event or task of short-term duration.
In Hunter v McCarrick, the Employment Appeal Tribunal (EAT) held that the relevant contractors must be working for the same client before and after any alleged transfer for TUPE to apply.
Mr McCarrick was employed to manage a portfolio of properties on behalf of the owner. The mortgagee of the property portfolio appointed a receiver to take control of the properties and it appointed new property consultants to manage the properties on their behalf. Mr McCarrick argued that he had sufficient continuity of employment to claim unfair dismissal because his employment has transferred by virtue of TUPE.
The tribunal originally upheld his claim but the EAT overturned that decision. The EAT made it clear that the activities, in this case, property management, must be carried out on behalf of the same client that the transferor had been acting for. As in this case, where both the contractor and the client change there can be no TUPE transfer.
In Enterprise Management Services Ltd v Connect-Up Ltd and the Claimants the EAT gave helpful guidance on the correct approach tribunals should take in deciding whether the "activities" carried out before and after the alleged transfer were the same.
Previously, in Metropolitan Resources Ltd v Churchill Dulwich Ltd  ICR 1380, the EAT confirmed that it is sufficient for activities to be "fundamentally or essentially the same as those carried out by the alleged transferor": they do not need to be identical and this is a question for the tribunal to decide.
In this case the EAT upheld the tribunal's decision that there was no service provision change because of the differences between the way the activities were performed by the different contractors.
In Pannu and others v Geo W King (In liquidation) and others the EAT considered, for the first time, the exclusion relating to the supply of goods for the client's use (regulation 3(3)(b)). The EAT upheld the tribunal's decision that the exclusion applied to a contract for the supply of van parts and TUPE did not cover the situation where the client changed its supplier after the original supplier went into liquidation.
Whether or not there is a service provision change to which TUPE applies will be a question of fact for a tribunal to decide and each case will depend on its own circumstances. Although it is therefore difficult to elucidate any hard and fast rules it is helpful that the EAT has handed down these decisions in the areas where we previously did not have much (or any) judicial guidance. However, it is worth remembering that even if there is no service provision change, it is possible that TUPE may still apply by virtue of there being an ordinary transfer of an undertaking i.e. the transfer of an economic entity which retains its identity.