What a remarkably prescient little message from the late Louis Armstrong to all those employers on the receiving end of a service provision change under TUPE. Regulation 3 of TUPE says that a service provision change occurs where activities cease to be carried out by one business and are contracted-out, moved between external contractors or moved back in-house. However, that only applies where the activities carried out post-transfer are “fundamentally the same” as they were beforehand, so creating some scope for disapplying TUPE by making sure that they are not.
But how different does an activity have to be to be not fundamentally the same? How samey is “fundamental”? Is a kiss always just a kiss, as the Employment Appeal Tribunal has effectively just asked itself in the Salvation Army Trustee Company – v – Bahi & Others. The Salvation Army took over provision of certain homeless person services for Coventry City Council. The contract had previously been with another provider CCL, also a charity. Four CCL employees were left in the lurch when the Sally Army won the replacement tender. It refused to take them on because it thought the activities as now conducted were sufficiently different to disapply TUPE, and CCL refused to retain them because it thought they weren’t.
The Judges in the Employment Tribunal and then EAT reviewed the differences in the homeless service provision pre and post the change in provider. It was now run from two large hostels rather than 10 houses in different parts of Coventry. A slighter smaller age group was now catered for. Accommodation was provided for just under 4 months rather than the 6 or 12 available under CCL. Administrative support services were now on tap for 4 hours longer per day.
Against that, the Council’s objectives from the contract and their success measurement criteria were unchanged. The support services offered to the homeless people were the same. The service still included the provision of supported accommodation for a reasonably extended period as a stepping-stone back to mainstream private housing. It was all still in Coventry.
The more tightly you define “activities”, the easier it would be to show that the new service was something different. The EAT Judge therefore said that you had to define “activities” in a common-sense and pragmatic way, somewhere between being so general that they do not really describe the specific activities at all, and so excessively detailed as to undermine the SPC provisions altogether. By way of example, both a fully-catered canteen and a sandwich trolley would fit under “provision of food to staff”, so that would be too broad a definition of “activities”. Using that test, the EAT Judge concluded that the activities pre and post the new contract were indeed fundamentally the same and therefore that the Salvation Army had inherited liability for the four displaced employees.
However, time had indeed gone by. The employees had lost their jobs in April 2014 and had not found out who was legally responsible for that until September 2016. Not only that, but two charities had had to spend their hard-earned funds each trying to nail the other with that liability. This led the Judge to call for some form of expedited dispute resolution process as an alternative to a full-blown Tribunal hearing “occupying significant time and resources and producing a decision long after the events in question“, i.e. like almost every other Tribunal case. The trouble with this (apart from the irritation many commercial employers will feel that it took a charity to get involved to be recognised as a problem) is that if you have a jurisdiction as fact-dependent as TUPE, the parties must get a chance to rehearse those facts if justice is to be done and seen to be done. In addition, it would appear to the outsider at least that the principal delays here lay with the Tribunal itself – there was a six month delay between two parts of the ET hearing and then over another year before the matter could be got in front of the EAT.
Perhaps this case would have benefited from the new Early Neutral Evaluation regime introduced into the Tribunal last week. More on that shortly.
Lessons for employers
- If you are an incoming service provider, assume that TUPE will apply unless you can make real very material alterations to not just the manner but also the nature of the activities being carried – are you sure your new client wants this?; and
- If you are the client and do not want your new service provider to inherit the existing staff, be prepared to make significant alterations to the nature and scope of the services being outsourced or moved between providers;
- If you are the outgoing service provider, don’t be bullied out of your TUPE rights by your replacement tinkering round the edges of the service you provided – this case makes it clear that really material changes will be necessary.