UK: TUPE Or Not TUPE ... That Is The Question

Last Updated: 23 June 2016
Article by David Hughes

An 'interesting TUPE case' might reasonably be regarded by all but a very select few as something of an oxymoron. The recent judgment of the EAT in Amaryllis v McLeod, at first glance, could certainly be mistaken as being one for the TUPE anoraks alone. However, it does raise important points about when a service provision change type transfer (e.g. where activities are outsourced or taken in-house) will and will not take place.

Facts

Millbrook Furnishings Limited was an established business employing around 370 workers. For over fifty years it held contracts with the Ministry of Defence for the renovation of upholstered wood and metal furniture.  Between 2003 and 2008, another company, Amaryllis, secured a much wider MoD contract, which included the supply of new furniture as well as furniture renovation work.  As Amaryllis did not have any furniture renovation facilities in-house, they sub-contracted the majority of the furniture renovation work under the MoD contract back to Millbrook.

In 2008 the MoD split the supply of new furniture from the furniture renovation contract.  Millbrook was awarded the renovation contract until 17 December 2012.  With effect from December 2012 the MoD awarded contracts under a framework agreement including to Millbrook and Amaryllis.  Under that agreement Millbrook was actually given all of the renovation work.

In early 2014, the furniture renovations contract was re-tendered between the four contractors. Millbrook was unsuccessful in this re-tender and the furniture renovation contract was awarded to Amaryllis.

The question that then arose was whether there was a TUPE transfer (a service provision change) when Millbrook lost the furniture renovation contract to Amaryllis.

Analysis

Millbrook had undertaken all of the MoD furniture renovation work for the MoD continuously for many years, both directly and as a sub-contractor, or under a framework agreement. Although Millbrook did not exclusively work for the MoD, in the period leading up to the putative TUPE transfer, its employees spent about 70% of their time on MoD furniture renovations work.

TUPE requires first that there be a service provision change (in this case that activities have ceased 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). Secondly, there must be an organised grouping of employees situated in Great Britain which has as its principal purpose the carrying out of the activities concerned on behalf of the client.

In the Employment Tribunal the Employment Judge (EJ) focussed on the historic relationship between Millbrook and the MoD and the amount of time the employees spent working on the MoD contract. The EJ found "that the fact that the spreadsheet ... shows that almost 70% on average of the time spent by the relevant employees on the MoD renovations contract showed that MoD was the departments [sic] "biggest customer", that did not mean that it was "dedicated" to MoD or that its principal purpose was to service the contract with MoD". Perhaps surprisingly, given that finding, the EJ then went on to conclude that there had in fact been an organised grouping of employees, which had as its principal purpose the carrying out of the activities concerned on behalf of the client. The EJ was satisfied that the department had originally been set up with the specific purpose of servicing the MoD contracts, and although that grouping of employees now serviced other customers, the MoD was still the largest customer. Accordingly, he found TUPE applied.

The EAT rejected that finding. It said that the correct approach was to focus on what the organised grouping employees were doing at the relevant time, that is, immediately before the transfer.

The EAT also considered the issue of the purpose of the organised grouping of employees and stated that the Tribunal must make a finding as to the purpose of the organised grouping. It was not sufficient that a department carried out significant work for a client. It must be organised for the principal purpose of carrying out that work for the client.

Finally the EAT held that it was incorrect for the EJ to take into account work done on furniture renovation by Millbrook between 2003 and 2008 when Millbrook was a subcontractor of Amaryllis. During this time the MOD was not a client of Millbrook. Millbrook's client for this work was Amaryllis. That period could not be taken into account since, even if there were, during that period, an organised grouping of employees, the grouping concerned was not dedicated to carrying out the activities for the relevant client.

Comment

This case highlights the importance of careful analysis of the facts of any case involving TUPE. In particular, what activities potentially transferring employees were carrying out, and for whom, immediately before the transfer.  It is too easy to fall into the trap of thinking that if at first blush it looks like a TUPE transfer, then it probably is. Only a careful and detailed analysis of the facts of a case, and a thorough understanding of the regulations and case law, will enable a proper assessment to be made. Something the TUPE anoraks amongst us love to do, of course!

TUPE Or Not TUPE ... That Is The Question

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