The UK's Employment Appeal Tribunal (EAT) has held that, in principle, an employee's contract of employment can be split between multiple transferees, where a service is split between multiple service providers. This applies under both UK TUPE tests: business transfers and service provision changes. This decision follows last year's ECJ decision on the same issue in Govaerts. Similarly to that case, the EAT has not, yet, had to deal with the practicalities or desirability of splitting a contract, whether from the perspective of the transferor, transferee or employee.
In March 2020, the ECJ ruled that, in principle, a transferring employee's contract of employment can be split between multiple transferees in proportion to the tasks performed by the employee (ISS Facility Services v Govaerts). For more information about that decision, see here.
The Govaerts decision forms part of retained EU law in the UK following Brexit. The parties before the EAT agreed this meant it applied to the business transfer test under TUPE. The EAT has now confirmed it also applies to the service provision change test, with the effect that following the transfer an employee would hold two or more contracts with different employers, provided the work attributable to each contract is clearly separate from the work on the other(s) and is identifiable as such. The transfer in that case (a contract for installation of kitchens which was split geographically on re-tendering) was one where it could properly be found that employees' contracts could in principle be split. However, the question of whether there should be a split transfer of each employee's contract on the facts of this case, or indeed whether some employees didn't transfer at all, was remitted to the employment tribunal.
Prior to Govaerts, the direction of travel in the UK cases where the service/undertaking is split was to consider whether the employee can be truly said to be assigned to the element of the service/undertaking which is transferred to any individual transferee, or whether the service/undertaking is fragmented in such a way that no TUPE transfer can be said to have happened at all. Notably, neither the ECJ nor the EAT considered the concept of fragmentation. In our view, that remains a valid argument to run in appropriate cases.
In practice, we consider that the 'split' approach is unlikely to be attractive to either the transferring employees or transferees and potentially gives rise to other tricky issues; for example, where the employee is effectively required to work for multiple transferees which are business competitors. UK employers entering into transactions or outsourcings where TUPE applies should conduct proper due diligence to understand if (and how) employees' time is split between different services/assets to assess the level of risk of transfer. Although percentage of time spent working within a service is not the determinative test of assignment, it remains a useful yardstick. Appropriate warranties and indemnities should be incorporated into the commercial contract to ensure that there are no unexpected transfers of employment and that, if termination liabilities arise, they are appropriately provided for.
(McTear Contracts Ltd v Bennett and others; Mitie Property Services UK Ltd v Bennett and others, EAT.)