Two recent Employment Appeal Tribunal (EAT) cases have provided further guidance on the application of the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) to service provision changes.
In the first decision of Hunter v McCarrick, the EAT had to determine whether there had been a service provision change under TUPE when there was not only a change in the contractor providing the services, but also a change in the client to whom the services were being provided. Mr McCarrick was employed by Mr Hunter from 14 August 2009 until he was dismissed on 8 March 2010. He brought unfair dismissal proceedings against Mr Hunter and had to demonstrate he had one year’s continuous service. Whether he had that continuous service hinged on whether the transfer of his employment to Mr Hunter in August 2009 was a TUPE transfer.
Mr McCarrick had originally been employed by Waterbridge Group Ltd but transferred to WCP Management Ltd in February 2009 to manage a portfolio of properties on behalf of Waterbridge. In August 2009, the mortgagee of those properties, Aviva, appointed receivers who assumed control of the properties. Mr McCarrick then became employed by Mr Hunter, the Managing Director of Waterbridge, who, it seems, was keen to employ Mr McCarrick to keep on good terms with Aviva and to try to rescue the situation.
The EAT upheld the employer’s claims that, as the property management activities on which Mr McCarrick was employed were carried out on behalf of Aviva and not on behalf of Waterbridge, there was no service provision change under TUPE. The EAT concluded that for there to be a service provision change under TUPE, the activities (property management in this case) carried out by the new contractor had to be carried out on behalf of the same client on whose behalf the old contractor carried out the activities. As the client as well as the contractor had changed in this case, there was no service provision change under TUPE.
In the second decision of Enterprise Management Services Ltd v Connect-Up Ltd & Ors, the EAT had to decide whether there had been a service provision change within the meaning, ascribed to it in TUPE, in circumstances where the activities carried out by the old and new contractors were not identical.
In this case, Enterprise was the preferred provider under a framework agreement for IT support services to Leeds City Council schools. When that framework agreement expired on 31 March 2009, Leeds City Council appointed Connect as its preferred provider under a new framework agreement. The schools, however, could opt for a different provider of ICT services and many did. As a result, following 1 April 2009, Connect and at least another four suppliers provided ICT services to the Council’s schools. The new framework agreement with Connect also differed from the framework agreement which the Council had with Enterprise as it excluded any service cover providing for curriculum systems (which represented 15% of the work the Enterprise staff carried out for the Council).
The EAT upheld the Tribunal’s finding that there had been no service provision change under TUPE on the grounds that (i) the activities carried out by Connect and Enterprise were not fundamentally and essentially the same; and (ii) there had been a fragmentation of service providers.
Impact for employers
- The Hunter v McCarrick case is helpful in clarifying and restricting the scope of service provision changes under TUPE. Employers should not conclude, however, that in circumstances where activities are transferred to a new contractor to be carried out on behalf of a new client, there will never be a TUPE transfer. Whilst there will not be a service provision change under TUPE, there may still be a TUPE transfer if, on the facts of the case, there is an economic entity which is transferred and retains its identity (i.e. if the traditional TUPE test is satisfied).
- Meanwhile, the Connect-Up case is a further reminder that differences in the activities carried out before and after the transfer and fragmentation of the activities can defeat a claim that the transfer is a service provision change under TUPE.