In this case, the EAT considered whether there was a service provision change when a park and ride service, originally subsidised by the local council, was taken over by a company which provided the service on its own behalf, rather than on behalf of the council.

Kingston-upon-Hull City Council developed a park and ride car park on the outskirts of Hull. CT Plus Ltd had a contract with the council, which set out its obligations and provided that the council would pay CT Plus a subsidy of £235,000 per annum. The route was not exclusive to the council, and it was open to other bus operators to operate a commercial service on the same route. However, if this happened, the council subsidy would have to come to an end.

In 2013, the council invited tenders for the service. Stagecoach, another provider, tendered for the service. The tendering process was delayed and Stagecoach decided that it could run the service commercially without a subsidy. The council accordingly gave CT Plus notice that it was terminating the contract.

CT Plus believed that there was a TUPE transfer. Stagecoach disagreed. The employees got stuck in the middle.

The employment tribunal agreed with Stagecoach. It held that there was no business transfer, because nothing had transferred. It also held that there was no service provision change. CT Plus and the employees appealed the decision in relation to the service provision change.

The EAT dismissed the appeal, agreeing with the employment tribunal that there had not been a TUPE transfer.

TUPE 2006 sets out the circumstances where there may be a service provision change. These circumstances are:

  • A client ceases to carry out activities on its own behalf and assigns them to a contractor to carry out on the client's behalf (i.e. outsourcing).
  • Activities cease to be carried out by a contractor on a client's behalf and are reassigned to a subsequent contractor to carry out on the client's behalf (often known as a second generation outsourcing).
  • Activities cease to be carried out by a contractor or a subsequent contractor on a client's behalf and are instead carried out by the client on its own behalf (insourcing).

It is central to each of these scenarios that there is a client, and that the client remains the same throughout. In this case the tribunal had held, and the EAT agreed, that the council was no longer a client; Stagecoach was not carrying out the activities on its behalf, but on its own behalf. The council was no more than "an interested bystander". In reaching this decision, the employment tribunal had correctly taken into account that CT Plus had been paid a substantial subsidy: Stagecoach did not receive this subsidy. There was a contract between the council and CT Plus, setting out CT Plus's obligations. There was no contract between Stagecoach and the council. Stagecoach sought the council's input, but had no obligation to follow its instructions – indeed, it changed how the service was provided, against the wishes of the council. There was, as the tribunal had found, simply no client any more.