Amaryllis v Mcleod and others UKEAT/0273/15
The Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) apply to a “relevant transfer”, which can be either:
- A transfer of a business, undertaking or part of a business or undertaking where the transferring economic entity retains its identity after the transfer, or
- A service provision change (where a client outsources, insources, or changes contractor carrying out a service) and where there is “an organised grouping of employees situation in Great Britain which has as its principal purpose the carrying out of the activities concerned on behalf of the client” (Regulation 3(3)(a)(i))
In this case, the EAT had to consider how and when such an organised grouping should be identified.
Millbrook carried out furniture renovation work for the Ministry of Defence (MoD) for 50 years until 2003. Between 2003 and 2008 Millbrook carried out the same service for the MoD as a sub-contractor for Amaryllis, who had secured a much wider contract with the MoD. In 2008, Millbrook was re-awarded the MoD renovation contract for four years, and from 2012, four companies tendered for the renovation work (although in fact, Millbrook received it all). This ended in 2014 when all four companies tendered for the renovation work and Amaryllis was successful. Millbrook, whose employees were spending an average of 68.5% of their time on MoD renovations work, believed that 31 employees would transfer to Amaryllis under a service provision change; after taking legal advice, Amaryllis denied that there would be any transfer of employment.
The Employment Tribunal held that, having considered the historic working relationship and that the department had originally been set up to specifically carry out MoD work, there had been a TUPEservice provision change. Although the department now worked for other customers as well, the MoD was still the largest customer. The tribunal held that “the department has not ‘morphed’ from being one dedicated to principally servicing the MoD renovations contract into one operated principally to service the needs of all customers, which happened to include the MoD as its major customer”.
The EAT allowed the appeal. The correct approach was to focus on what the grouping of employees were doing immediately before the transfer, and not what had happened historically.
The Tribunal must make a finding as to the purpose of the organised grouping. It is not enough that a department carries out significant work for a client – as the EAT said in Eddie Stobart v Moreman (2012), “the regulation does not merely say that employees should in their day-to-day work in fact (principally) carry out the activities in question; it says that carrying out those activities should be the (principal) purpose of an “organised grouping” to which they belong”.
The tribunal had failed to take account of the 2003-2008 period when Millbrook’s client was Amaryllis, not the MoD. The tribunal’s finding that the 50 years’ continuous period of service meant that the department was dedicated to principally serving the MoD contract indicated the judge was relying on the work carried out in the department, rather than the work carried out by Millbrook under its contract with the relevant client, the MoD.
What to take away?
The assessment of whether there is an organised grouping of employees with the principal purpose of carrying out certain activities on behalf of the client must take place immediately before the transfer.
Here, the tribunal made a mistake by relying on facts relevant to carrying out activities in general. Even when it looks like there is a possible TUPE transfer on a given set of facts, it is important to analyse the detail of the arrangement relating to what the purpose of the organised grouping is and which activities are carried out by and for whom, immediately before the transfer.