In this briefing we look at three recent decisions which provide practical illustrations of how TUPE works in some common scenarios.
After a relatively quiet period on the TUPE front, three decisions were published by the Employment Appeal Tribunal (EAT) in August. Among other issues, these cases addressed:
- When a TUPE transfer takes place
- What happens when a sub-contractor is interposed between the service provider and the ultimate client
- The implications of a change in work location following a transfer
We will look at each of these issues in turn. These decisions have not changed our understanding of the basic legal principles but provide useful examples of how they are applied in the real world.
Messy transfer of cleaning and maintenance contract muddies transfer date
In the first of these decisions, the EAT had to decide how to determine the date on which a transfer had taken place in a rather unusual situation. It involved the transfer of a cleaning and maintenance contract for housing stock owned by a housing association in Liverpool.
The contract had been operated for a number of years by Kinetic, but Kinetic had fallen into financial difficulties, and as result was unable to provide an adequate service. The housing association terminated its contract with Kinetic, and administrators were appointed at Kinetic. Unfortunately the new contractor appointed, Housing Maintenance Solutions (HMS), was not ready to go live with its housing maintenance service until several weeks later. However it promised Kinetic’s staff, who were being made redundant by the administrator, that there would be work for them when the service did go live.
Ultimately all the claimants in this case were engaged by HMS but they had been without pay for several weeks. They argued therefore that the transfer had taken place at the point when HMS had promised them employment, not at the point the service in which they were engaged had “gone live”.
The employment judge reasoned that the date HMS promised to employ employing the staff was decisive. The transfer had therefore happened at the point HMS assumed responsibility for employing Kinetic’s staff. The EAT said that this was effectively putting the cart before the horse. In the case of Celtec Ltd v Astley, the European Court of Justice had held that the transfer occurred at the point the transferee assumed responsibility for the undertaking. The employees engaged in that undertaking were then automatically transferred by operation of law.
So while the date the new employer assumed responsibility for the transferring staff is obviously an important factor, it did not of itself determine the transfer date. The case has now been sent back to a new employment judge to apply the correct legal principles in deciding when the transfer took place.
It is therefore important for a transferee to ensure that the date it agrees to assume responsibility for the employees (either under contract with the transferor/client or, as here, via a promise or agreement of employment with would-be transferring staff) coincides with the date of the transfer.
A complicated building security solution side-steps TUPE
Next up at the EAT was a dispute that arose when the London Borough of Waltham Forest changed the arrangements for providing security for a property it owned, known as the Alpha Business Centre. The question was whether this had involved a service provision change under TUPE.
Originally the Council had engaged a company called Workspace plc to provide a building management service at the property. This involved, among other things, building security services which Workspace sub-contracted to the PCS Group. The claimant was one of two security guards employed by PCS who were based on the property. Workspace rented office space within the property to its own clients.
In January 2013 the Council decided to terminate the building management service agreement with Workspace, as it planned to re-develop the property. As the property was due to be demolished, it decided to enter into a short- term building security contract, but selected Horizon Security rather than PCS as the contractor.
The employment judge decided that there had been a service provision change, since the ultimate “client” for the security services both before and after January 2013 was the Council. For these purposes, the employment judge considered that, in essence, both Workplace and PCS were sub-contractors of the same client, the Council.
The EAT said this was wrong. For there to be a service provision change the “client” before and after the transfer must be the same (as per the Court of Appeal’s decision in Hunter v McCarrick). This was not the case here. Crucially the EAT found that the contract between Workspace and PCS was not related to the contract between the Council and Horizon Security. The former related to the provision of security at a property managed by Workspace for Workspace’s clients. The latter related to the guarding of a site pending its demolition. As such there was no scope for broadening the definition of the term “client” so that the Council, rather than Workspace, was the “client” to whom PCS provided security services. Accordingly, there was no service provision change.
While a helpful decision for landlords, this decision should not be taken to mean that TUPE will not apply in all agency/sub-contracting scenarios. Take, for example, the scenario where an employer sub-contracts all of its IT functions to a single contractor and the contractor then sub-contracts the help desk service to a sub-contractor. If the employer subsequently “insources” the help desk service or appoints a replacement provider, TUPE may apply. In this scenario the employer, not the single contractor, may be the “client” since the help desk service is effectively performed for its benefit.
London bus company could re-allocate depot post-transfer
The third EAT decision to emerge in August concerned a common TUPE problem – what happens if the transferee operates from a different location?
Prior to the reform of TUPE in January 2014, if a transferee changed the location of its workforce but still needed to retain the same overall number of employees, those dismissals were automatically unfair. As has remained the case before and after TUPE reform, where a change in location was significant, employees can seek to rely on a specific protection afforded by TUPE. Under regulation 4(9) of TUPE, an employee can resign and be treated as dismissed by their employer where a transferee is proposing a substantial change in their working conditions to their material detriment.
The case that went to the EAT involved the transfer of the number 10 bus route from CentreWest to London United Busways. The claimants had been based at the Westbourne Park depot.
Following the transfer the claimants were required to work from Stamford Brook, about three and a half miles away. The claimants did not opt out of the transfer, but resigned on or soon after the transfer date. They claimed that the change of depot was either a fundamental breach of contract, or alternatively a substantial change in their working conditions to their material detriment. Either way they said this entitled them to resign and claim that they had been constructively dismissed by London United Busways.
The EAT upheld the decision of the employment tribunal dismissing the claims. Its reasoning had been that even though moving the depot added as much as 30 minutes to the typical commute for the drivers, in context the impact of these change was “relatively slight”. In addition, under the terms of their contract with CentreWest there was a provision for imposing a change in terms and conditions after consultation.
This case is reminiscent of another decision involving former CentreWest drivers, Musse v Abellio, published in early 2012. Musse involved a depot move from Westbourne Park to Battersea, a considerably greater distance, which added as much as two hours to the claimants’ daily travelling time. In Musse the EAT upheld the employment tribunal’s decision that such a change had amounted to a substantial change to their detriment.
It would be oversimplifying things to draw the conclusion that adding an hour to the daily commute will not be a substantial change, but adding two hours will be. This may well be a useful rule of thumb, but the EAT in both cases has emphasised that whether any post-transfer change in working conditions has a substantial effect on a claimant is a question of fact and degree to be assessed in the particular circumstances.
Since the facts in both of these cases arose, TUPE has been amended to allow a change in work location to qualify as an economic, technical or organisational reason (ETO reason). Transferees faced with a similar situation in future have the option of treating the change in location as a redundancy situation, rather than being compelled to attempt to impose a relocation on them for fear of facing a claim for automatically unfair dismissal under TUPE.
Where an employer is concerned about the change in location triggering an obligation to pay redundancy payments (as may well be the case where payments due would be significantly more generous that the statutory payments) an alternative would be to rely on any mobility clause in the transferred employees’ contracts.