The EAT has held in Metropolitan Resources Ltd v Churchill Dulwich Ltd (in liquidation) and Martin Cambridge & others that, where the activities carried on by the alleged transferee are fundamentally or essentially the same as those carried out by the alleged transferor, this will amount to a service provision change.
In another TUPE case involving the provision of services to asylum seekers, Churchill Dulwich Ltd (CD) supplied accommodation for asylum seekers to Migrant Helpline (MH). In 2006 the system was changed and, for a period of a few months, there were two systems in place and CD was dealing with a mix of residents, some being processed under the new and some under the old system.
MH then entered into a new contract with a new service provider, Metropolitan Resources Ltd (MRL). MRL began providing accommodation services from 26 January 2007 even though CD's contract did not expire until several months after that date and was allowed to run to term. With immediate effect, however, asylum seekers were sent to MR. The only differences in the contractual terms related to the location of the accommodation being provided, the length of the asylum seekers' stay and the number of beds available on a permanent as opposed to an ad-hoc basis.
The tribunal held that there had been a service provision change under TUPE 2006. In reaching its decision, the tribunal noted that the relevant activities were the provision of accommodation to asylum seekers. It did not matter that the accommodation was for one night or longer or that the activity was provided at a different location, as the essential service or activity provided was the same.
The EAT upheld the tribunal's decision. The EAT noted that the test is whether the activities carried on by the alleged transferee are fundamentally or essentially the same as those carried out by the alleged transferor and that question will be one of fact and degree to be assessed by the tribunal. The fact that one contractor ceased and another begins providing the service at different times and places and in a different manner does not preclude the application of TUPE.
Impact on employers
- It will be difficult for employers to try and avoid the application of TUPE by restructuring contracts if the activities carried out for the client are fundamentally or essentially the same before and after the change in provider.
- In cases where the activities carried out on behalf of a client are different or there is fragmentation of the services between two or more providers following a change of contractor (see, for example Clearsprings Management v Ankers and others) it can be possible to avoid the application of TUPE.
- Minor differences in the nature of the tasks or the way they are performed or the provision of some additional duty or function following a change in contractor will not prevent the application of TUPE.
- When re-tendering contracts, clients should take care to properly define the services in question, the scope of the activities carried out before and after the transfer and how, if at all, employees are assigned to those activities in order to clarify whether TUPE will apply to re-tendering exercise. This will ensure that bidders know whether they will be inheriting employees and that the bids can be transparent and properly priced.