Does TUPE Apply?

There is nothing like the question “Does TUPE apply?” to have those who advise on employment law using expressions like “it depends” and “it could be seen like this, it could be seen like that”.

A recent Employment Appeal Tribunal (EAT) case looked at a common scenario where TUPE may or may not apply. But does it make anything clearer?

There are two broad scenarios that give rise to a TUPE transfer. The effects are the same in both cases – the jobs and contracts of the employees are protected and the employers have obligations to provide specific information to each other and the employees and to consult with employees over particular aspects of the transfer.

The first scenario is the long-established one – a business or organisation (an undertaking) is sold or taken over or hived off (transferred). The new owner (transferee) is effectively a different pair of feet in the employer shoes and the contracts of the employees continue unaltered with the same pay and conditions and continuity of service. It can get messy where only part of an undertaking goes over or where some employees are only partly assigned to the part that transfers or where there is a series of transactions. There is no shortage of case law dealing with the arguments over whether TUPE applies in these situations.

A second broad scenario is contained in the 2006 TUPE Regulations – i.e where there is a change of service provision. TUPE applies where a contracted out service moves from one provider of the service to another. Common examples of this are cleaning, security and catering. On the face of it, it’s quite straightforward. If you are a cleaning company and you win a contract to provide cleaning at office building x, you are legally obliged to employ, consult with and maintain the terms of conditions of those people already doing the work.  This is irrespective of whether the service is presently done in-house or whether it is transferring from another provider.

But what happens when not only the service provider changes, but also the service? When it carries on, but is done differently, where it is still cleaning, security or catering that is provided, but at the request of the end user it is different in the scale of it or in the way it is delivered?

This was the substance of the case of OCS Group UK Ltd v Jones and Ciliza (EAT 038/09). OCS had, until August 2007, provided the catering service at the BMW plant at Cowley. It consisted of a central restaurant and deli bar serving hot food supported by four “satellite” food outlets (also serving hot food) and a general shop.

The satellite food outlets were required to provide an appetite-whetting array of fare including “English and continental breakfast, beverages, a lunch involving hot soup and hot meals, vegetable as well as a salad bar, hot and cold baguettes, sandwiches, rolls, pizza and jacket potatoes together with hot and cold deserts and normal (sic) beverages.  The incoming catering provider (MIS) provided a substantially modified service which consisted of five dry goods kiosks with no requirement for hot food preparation. OCS argued at the first instance Tribunal that this was a relevant transfer under the 2006 Regulations. On the face of it they would seem to be correct. Regulation 3(1) (b) (ii) of the 2006 TUPE Regulations says that there is a relevant transfer where “activities cease to be carried out by a contractor on a client’s behalf …..  and are carried out instead by another person (“a subsequent contractor”) on the client’s behalf.” 

The first instance Tribunal did not find that TUPE applied, OCS appealed and the matter was examined in depth at the EAT. The EAT agreed with the first instance Tribunal that TUPE did not apply.

The key to the outcome lay in focussing on the relevance of the word “activities” in Regulation 3(1). The EAT followed the approach adopted in the recent similar case of Metropolitan Resources Ltd v Church Dulwich Ltd and Martin Cambridge which was  

“The Tribunal needs to ask itself whether the activities carried on by the alleged transferee are fundamentally or essentially the same as those carried out by the alleged transferor. The answer to that question will be one of fact and degree, to be assessed by the Tribunal on the evidence of the individual case before it”. 

So the EAT looked at what had been established at the first Tribunal about what took place before and after August 2007. The OCS contract was found to be for the provision of “a full canteen service”. Prepared cooked foods, whether hot or cold, were no longer required under MIS. There was no requirement for skilled chefs and those staffing the MIS outlets were described as operating retail units.

So although it was a catering service before and after, it was sufficiently different in terms of the activities undertaken for TUPE not to apply. The EAT agreed with the first Tribunal and OCS lost the appeal.

On the outcome of this case, TUPE may not apply if the way a service is provided changes along with the service provider. In most cases of change of service provider, the activities undertaken before and after will be sufficiently similar for it to be a TUPE situation. If the activities are going to be different though, it will be a question of, in the words of the EAT, “fact and degree” as to whether there is sufficient difference for TUPE not to apply. (In the Metropolitan Resources case referred to above, the EAT found that it did.) The possibility of TUPE not applying could be good news for an incoming contractor, who may not be required to absorb (and possibly then make redundant) the staff of the previous contractor in order to comply with TUPE obligations.
 
Any employer faced with an “is it or isn’t it” quandary in these circumstances should take advice at the earliest opportunity.