In CT Plus (Yorkshire) CIC v Black and others UKEAT/0035/16, the Employment Appeal Tribunal examined whether there was a service provision change under TUPE when a new contractor provided a service for its own commercial purposes and not on behalf of the original client.

CT Plus (Yorkshire) CIC (CT), a community interest company owned by a charity, ran a park and ride bus service from a car park on the edge of Hull to the city centre. The car park was owned by Kingston-upon-Hull City Council (the Council), which heavily subsidised the service. The service was governed by a contract between CT and the Council. It was open to other bus operators to run a commercial service on the same route by giving notice to VOSA. If that happened, the subsidised service would have to stop unless CT thought it was viable to continue operating without the subsidy; this is because a subsidised service cannot be run in competition with a commercial service.

In 2013 the Council invited tenders for operating the subsidised service. Stagecoach was one of the tenderers. When the tendering process was delayed, Stagecoach took the view it could run the service commercially without a subsidy but with a reduced service outside peak hours. Stagecoach gave notice to VOSA and the Council gave notice to CT to terminate its contract. CT stopped its service and Stagecoach started its new service. Stagecoach provided its own buses and no assets were transferred to it by CT. Stagecoach received no subsidy from the Council, had no contract with the Council (other than a non-exclusive licence to use the car park) and recruited its own drivers.

Stagecoach did not take on any staff from CT on the basis that there was no TUPE transfer or service provision change (SPC). CT and some drivers brought a claim to establish whether TUPE applied and who should compensate the employees.

Employment tribunal decision

At a preliminary hearing, the employment tribunal (ET) decided that there was no TUPE transfer or SPC. It found that Stagecoach was not carrying out the activities on behalf of a client but was carrying out the activities on its own behalf. The Council was no more than an interested bystander so there was no SPC under TUPE. CT and the drivers appealed.

The Employment Appeal Tribunal (EAT) dismissed the appeal. It held that, for there to be a SPC under TUPE, it is essential that the client remains the same before and after the change of contractor. The EAT also stated that "client" for SPC purposes means "an organisation that is in a position to carry out activities either itself or by commissioning them from others to carry out those activities on its behalf". It commented that judges are required to consider the position on the ground in a broad, pragmatic way when looking at TUPE, which the ET had done. There was nothing to suggest that the ET had misconstrued the law. The EAT could not therefore interfere with the judge's conclusion that the activities in question were not carried out on the client's behalf following the change in bus company.

This decision follows previous case law (see Metropolitan Resources Ltd v Churchill Dulwich Ltd [2009] IRLR 700 and Hunter v McCarrick [2013] IRLR 26) that the client must remain the same throughout in order for the SPC provisions under TUPE to apply. In this case, after the change of provider, there was no client.

It is not surprising that the drivers thought there was a transfer of the service from CT to Stagecoach and that their employment should transfer to Stagecoach: the route remained the same and some of them had transferred to CT from another contractor following a previous tender. Neither is it a surprise that CT argued that TUPE should apply; if it did apply, the drivers would transfer to Stagecoach and CT would have no further liability towards them. If TUPE did not apply, CT would have to allocate the drivers to other services or make them redundant.

With the current pressure on public sector bodies to reduce costs, we may see similar cases in the future where services that are currently subsidised by councils become commercial ventures and are run independently. In that situation, if the service is not carried out on behalf of the council, TUPE will not apply and the employees will have no right to transfer to the new provider.