TUPE 2006 introduced the concept of a transfer by “service provision change”. It does this by including in the definition of a “transfer of an undertaking”: outsourcing, in-sourcing and a changeover of contractors. We are now starting to get EAT cases on what a "service provision change" actually means. One such case is Metropolitan Resources Ltd v Churchill Dulwich Ltd (in liquidation) and another UKEAT/286/08 which can be accessed here.
In this case Churchill Dulwich (CD) provided accommodation services for migrants under a contract with Migrant Helpline (MH), on behalf of the Home Office. MH entered into a replacement contract with Metropolitan Resources Ltd (MRL) and, when the contract between MH and CD expired it was not renewed. CD was left with ten employees who they argued had been undertaking work that they had transferred to MRL under the "service provision change" definition in TUPE 2006. The employment tribunal agreed that there had been a service provision change transfer and MRL appealed.
The EAT agreed that there had been a “service provision change” from CD to MRL. The EAT said that “service provision change” was a new statutory concept not defined in terms of economic entity or other concepts developed under the original 1981 TUPE Regulations. The EAT said that the statutory words required a tribunal to:
- concentrate on the relevant activities, and
- ask whether the activities carried on by the alleged transferee were fundamentally or essentially the same as those carried out by the alleged transferor.
The answer is one of fact and degree to be assessed by the tribunal on the evidence. There was no call for a formal list of factors which the tribunal had to consider before it could make a decision on the application of TUPE in contrast to a case under regulation 3(1(a) (a classic transfer of an undertaking) where the approach in Cheeseman v R Brewer Contracts Ltd (2001), was required, namely, was there a stable economic identity and did it retain its identity in the hands of the transferee. This case can be found here.
What is interesting in the Churchill judgment is the reference to activities being taken over having to be “fundamentally or essentially” the same after the transfer. Unlike a classic transfer, in respect of which TUPE expressly requires the undertaking to “retain its identity” after the transfer in order for TUPE to apply, there is no similar provision in respect of a "service provision change" transfer. All that TUPE requires is activities being carried on by an organised grouping of employees and the taking over of those activities. The importing of the need for the activities to be “fundamentally or essentially the same” in the hands of the transferee, in order for TUPE to apply seems to be the importation of retention of identity and may well be an unnecessary gloss on the statute which may require further judicial intervention.