UK: TUPE Service Provision Change - Look At What Is Going On 'On The Ground', As Well As The Contract

In the recent case of Lorne Stewart plc v Hyde and others, the EAT made clear that it is important not to get side-tracked by the details of formal written contracts which are in place between the parties before and after a potential TUPE transfer, if such details do not reflect reality. Rather, it is essential to consider whether, in practice and on the facts, there is a service provision change and, if so, whether the employees in question are assigned to an organised grouping of employees which has as its principal purpose the carrying out of the activities concerned. 

The facts of the case

In a situation common to many local authorities, Cornwall County Council ("the Council") had been outsourcing its heating and boiler installation and repair work under a contractual arrangement known as a framework agreement. Under the framework agreement, the Council could call on its contractor, Planned Maintenance Engineering Ltd ("Carillion"), to carry out work as and when it was required. The framework agreement specified five different types of installation/repair work: three of these types were guaranteed work for Carillion, but the Council was under no obligation to offer to the company the remaining two types of (more high-value) work, and Carillion was under no obligation to accept any such work offered. In practice, however, during the life of the agreement the Council did offer and Carillion did accept all such work.

This arrangement continued until April 2011 when, following a re-tender of the services, the Council appointed a new contractor, Lorne Stewart plc ("LS") to replace Carillion. The new contract was largely on identical terms to the original framework agreement between the Council and Carillion, and so it was Carillion's view that there was a clear service provision change, and that those employees carrying out the works on behalf of the Council should transfer to LS. LS accepted that there was a service provision change, and even accepted that most of the employees of Carillion who were carrying out the services for the Council would transfer to it under TUPE. However, LS considered that two employees (Mr Hyde and Mr Crowley) should not transfer:  because they were carrying out the second type of works – those which were not guaranteed by the contract – LS considered that they were carrying out activities which were not provided for under the framework agreement, and those activities were therefore outside the scope of the transfer. 

Both employees dismissed – who was liable?

The dispute as to whether these two employees should transfer under TUPE continued right up until the date of transfer and, when the employees turned up for work that day, they were turned away by LS. 

It was not disputed that Mr Hyde and Mr Crowley had therefore been unfairly dismissed – the question was who should be liable for such dismissals. If the correct interpretation of TUPE meant that Mr Hyde and Mr Crowley should have transferred to LS, then it would be LS who would be liable. If LS were right, however, and the employees did not transfer under TUPE, then Carillion would be liable.

The employees therefore brought claims against both Carillion and LS.

The decision

The Employment Tribunal found in favour of Carillion: Mr Hyde and Mr Crowley were carrying out activities for Carillion on behalf of the Council, and these activities transferred to LS. The fact that such activities were not guaranteed by the framework agreement meant that there was a certain risk for LS which it would have to factor into its tender pricing, but that did not affect the scope of the transferring activities. The Tribunal further found that there was an organised grouping of employees whose principal purpose was the carrying out of these activities on behalf of the Council, that the employees in question were assigned to this organised grouping, and that the activities were not for a single specific event or task of short duration. Mr Hyde and Mr Crowley should have transferred to LS under TUPE, therefore,  and so LS was responsible for the dismissals. 

LS appealed but the EAT agreed with the Tribunal.

The EAT firstly made clear that the key issue was what took place in practice, not the wording of the contract. It did not matter, therefore, that the contract did not oblige the Council to give Carillion the type of work which Mr Crowley and Mr Hyde had been carrying out. In practice this work was given to Carillion, and it was intended that it be carried out in the same way by LS. There was no reason why work that the employees did should be excluded from the scope of the transferring activities merely because that work was not guaranteed by the contract.

Instead, the EAT went on to hold, a Tribunal should focus its attention on the established principles set by case law (in particular Metropolitan Resources v Churchill Dulwich and summarised in Enterprise Management Services v Connect-Up Ltd) to determine whether employees should have transferred under TUPE.    It will need to consider the following:

1.       Have the activities ceased to be carried out by one contractor on a client's behalf to instead be carried out by another contractor?

2.       What are these activities?

3.       Are the activities fundamentally/essentially the same before and after the transfer?

4.       Has there been any division of services after the transfer to such an extent that there can no longer be said to be a service provision change (fragmentation)?

5.       Have the following conditions been satisfied:

a.       there is an organised grouping of employees in Great Britain which has as its principal purpose the carrying out of the activities concerned on behalf of the client;

b.      the activities are not to be carried out in connection with a single event of short-term duration;

c.       the activities are not wholly or mainly the supply of goods (rather than services)?

6.       Were the employees in question 'assigned' to the organised grouping of employees?

It is these questions which should be answered by a proper analysis of the facts in order to find out what is "actually going on 'on the ground'" in the words of the EAT.

In this case, the Tribunal had found as a matter of fact that both employees were engaged in activities which were carried on by Carillion for the Council before the transfer and were intended to be carried out instead by LS following transfer. The Tribunal had considered the relevant principles above, and the EAT therefore agreed with its decision.

Helpful guidance for employers

This case highlights that, when considering whether a particular employee should transfer under the service provision change provisions of TUPE, it is always important to concentrate on the factual reality of the situation and apply the basic principles as established by long-standing case-law set out above to those facts. 

Employers who are frequently involved in TUPE transfers – be it as client, first-generation contractor, or new contractor following a retender – will often have to make quite difficult decisions as to what to do in respect of employees who claim to transfer to them (or away from them) following a service provision change: should the employer accept the transfer? Or take the difficult decision, as LS did in this case, to close the doors to someone the employer believes should not transfer?

Employers may take reassurance from this case: the principles which need to be considered are clear and well-established and, by taking real note of what is "actually going on 'on the ground'" rather than simply focussing on what the contract says, employers can hopefully be confident in the decision they make in respect of such employees.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.