In Hunter v McCarrick the Court of Appeal has confirmed that there was no service provision change under TUPE where the identity of not just the contractor providing services but also the client to whom the services were being provided changed.

Mr McCarrick was an employee of Waterbridge, a property company.  After an abortive sale of the company, he was transferred to WCP Management to provide property management services while sale negotiations continued.  It was accepted that this was a service provision change (SPC).  A few months later, in August 2009, the lender on Waterbridge's property portfolio appointed a Receiver to take control of the properties.  The managing director of WCP and other employees (including Mr McCarrick) continued to provide services in relation to the properties, but once the Receiver was appointed, Mr McCarrick was paid directly by the managing director, not by WCP.

The issue was whether the August 2009 change amounted to an SPC.  This depended on whether the TUPE definition of an SPC (the client reassigning the contract) was met.

The EAT held that the August 2009 change did not amount to an SPC because the identity of the client must remain consistent before and after a change of contractors: there is a transfer under the SPC rules only where the activities are carried out by the new contractor on “the” client’s behalf.  On the facts, not only had the identity of the contractor changed, but the identity of the client had changed as well (from Waterbridge to the Receiver).

The Court of Appeal has confirmed this decision on the SPC rules.  In addition, the Court raised the question of whether, despite failing to come within the SPC definition, the transfer of property management services from WCP Management to the managing director constituted an "ordinary" TUPE transfer.  But it could not take this issue further because of the way the claim had been argued in the tribunal and EAT.

Nevertheless, the decision in the Court of Appeal does leave open the possibility that, even where both the client and contractor change, the “ordinary” TUPE transfer rules could apply, if there has been a transfer of an economic entity which retains its identity after the transfer.  But that will depend on a variety of factors such as the nature of the services being carried out and whether any assets transfer, inevitably leading to all the old tricky questions that led to the introduction of the SPC rules!

One other point to bear in mind – the SPC rules are not derived from the European Directive and the Government is expected to begin consultation shortly on whether to retain them at all.