Recent decisions of the EAT have considered (1) whether TUPE applies where services are fragmented following a re-tendering exercise and (2) how collectively agreed terms apply post-transfer.

Fragmentation of services means there is no TUPE transfer – Clearsprings Management Ltd v Ankers and others.

There was no service provision change and therefore no relevant transfer for the purposes of TUPE when a contract was re-let from one contractor to several new contractors in a fragmented way.

The Home Office re-tendered its contract with Clearsprings for the provision of accommodation and support services to asylum seekers and awarded it to three new contractors. There was a four-month transitional period before Clearsprings' contract came to an end and during that period the new contractors acquired leases of properties to accommodate asylum seekers and the asylum seekers covered by the contract were randomly distributed between the new contractors.

Compare this with the EAT's decision last year in Kimberley Group Housing Ltd v Hambley and Others: services were transferred from one contractor to two new contractors, but it was clear that one of them had taken on most of the services. The EAT said that TUPE applied and that all of the employees were held to have transferred to the new contractor that had taken on the majority of the services. In Hambley, the EAT recognised that there might be circumstances in which the services become so fragmented that there is no service provision change under TUPE.

Applying the reasoning in Hambley, the EAT in this case held that, because the contracting out of the services was fragmented, it was not possible to determine to which new contractor the work carried out by the employees had been transferred, and therefore TUPE did not apply at all. It suggested that where there are difficulties in determining who should take responsibility for an employee's contract following a transfer, a tribunal may take that into account as indicating there has been no service provision change.

Impact on employers

  • A fragmentation of services following an outsourcing or re-tendering will defeat TUPE.
  • However cases of this nature are very fact specific, as can be seen by the contrasting outcome in Hambley.
  • The mere fact that several new contractors are involved will not in itself mean that TUPE does not apply.
  • Employers looking for support in this decision for an argument that they do not have to take on the previous contractor's staff should proceed with caution.
  • Tribunals are always alive to avoidance tactics and, if there was evidence to suggest that a structure had been put in place to avoid TUPE, a tribunal would be reluctant to find that there was no transfer.

Collective agreement binds transferee following a TUPE transfer – Alemo-Herron and others v Parkwood Leisure Ltd

A transferee was bound by pay increases negotiated after the transfer by the transferor and a union under a collective agreement, because the collective agreement was incorporated into the contracts of employment of the employees who transferred.

The claimants were originally employees of the London Borough of Lewisham. They claimed that a contractual term entitling them to pay that was "in accordance with collective agreements negotiated from time to time by the National Joint Council for Local Government Services" (NJC), was protected under TUPE and that Parkwood was legally obliged to award increases negotiated by the NJC after the transfer, even though it was not a party to the collective agreement.

The employment tribunal followed the ECJ's decision in Werhof, that the rights of employees under collective agreements are "static" and the transferee is bound only by the agreement in force at the time of the transfer and not any subsequent agreements. Consequently, the claimants were not entitled to the pay increases negotiated by the NJC.

The EAT disagreed. It held that TUPE, as interpreted by the UK courts in cases such as Whent v Cartledge, gives more favourable rights to employees than the EU Directive. Under domestic law, the rights of employees under collective agreements are "dynamic" and they are entitled to the benefit of annual pay increases negotiated under a collective agreement after the transfer date, even where the transferee is not a party to the collective agreement.

Impact on employers

  • This case is of particular importance to private sector employers who inherit public sector employees, but is equally relevant to any business that inherits employees whose pay is collectively negotiated.
  • Where there is a collective agreement which continues to exist after the date of the transfer, the employees will be able to rely on it if it is incorporated into their individual contracts of employment.
  • Although the EAT considered it would be possible for the transferee to change the employees' contracts, in many cases that will be difficult, as under TUPE, contractual changes "in connection with the transfer" are usually void, even where employees have agreed to them.