The EAT has ruled that, where there is a service provision change TUPE transfer involving a split in the provision of services, there can be no percentage apportionment of liabilities for the relevant employees between the companies taking over the service. Rather, the established case law of assignment in conventional transfer situations should be applied.
In Kimberley Group Housing Ltd v Hambley & Others/Angel Services (UK) Ltd v Hambley & Others, the EAT considered where employee liabilities fall when there is a service provision change TUPE transfer to two transferees.
A Ltd operated a Home Office contract to provide accommodation and ancillary services to asylum seekers. It lost the contract to two separate companies, B Ltd and C Ltd. The contracts of B and C overlapped but C took on the greater percentage of the activities carried on by A.
On losing the contract, A dismissed its employees who had worked on the contract. In subsequent employment tribunal claims pursued by the employees, the employment tribunal ruled that the financial liabilities for the dismissals should be split between the two transferee contractors according to the percentage of the work they had each taken from the total activities previously carried out by A.
On appeal to the EAT, both transferees sought to argue, on different grounds, that there had been no service provision change TUPE transfer where the transfer involved more than one transferee. The EAT gave short shrift to these arguments and found that, as had been long established with conventional transfers, a service provision change transfer could also involve activities being transferred to more than one transferee.
The main issue raised in the case was what is the correct approach in identifying to whom a particular employee will transfer to and likewise to whom will liabilities for that employee go to?
Overturning the employment tribunal's decision, the EAT found that the correct approach was to consider which activities the employees had been assigned to and which transferee had taken up those activities. Where, as in this case, the two successor contracts overlapped, the result was that the employees were assigned to the transferee that had taken on the majority of the activities carried on by A. Accordingly, the relevant employees of A should have all transferred to C and all of the liabilities for their transfer-related dismissals should have transferred to C.
In practice, parties involved in outsourcing arrangements where there is a split of activities should carefully consider the way in which the activities are to be split and identify whether particular employees of the transferor were assigned to a particular part of the activities or the activities as a whole. Where, as in this case, the transferee contracts overlap in providing the activities, the parties will need to appreciate the possibility that those assuming the lion's share of work may be liable for more employees than previously contemplated.
Whilst the EAT's decision in this case is sound, it leaves open the interesting conundrum of what would happen in a situation whereby activities are spit between two successor contractors on an exact 50/50 split.