Contracting out of TUPE: OCS Group UK Limited v Jones and another

OCS Group UK Limited v Jones and another

Facts

Mrs S Jones was employed as a chef supervisor by OCS Group. She worked on OCS’s catering contract at the BMW car plant at Cowley. Under the contract, OCS provided a restaurant and deli bar, supported by four satellites and a shop. The satellites provided hot and cold meals and snacks. Jones worked in the satellites where she spent a great deal of her time preparing the hot food.

The OCS contract was losing money and, eventually, OCS lost the contract. On 1 August 2007 another provider, MIS, took over the contract at the plant. Under the MIS contract, staff still had to ensure that the tables were clean, that there were clean trays and condiments, and the rotation of sandwiches, but the satellites only sold pre-packed sandwiches and salads, and there was no requirement for hot food preparation.

When the OCS contract terminated, Jones and others brought various tribunal claims – including ones for wages, redundancy pay and unfair dismissal – against OCS. Her claim was one of the test cases. OCS argued that Jones should have transferred to MIS as the termination and re-award of the catering contract to MIS constituted a service provision change within the meaning of regulation 3(1)(b)(ii) of the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE).

The tribunal held that Jones did not transfer under TUPE to MIS because the MIS contract was a ‘substantially reduced service’ which was ‘materially different to that operated’ by OCS. The tribunal stated that the MIS operation had changed from the provision of a full service canteen, where Jones was a chef, to becoming a sales assistant in the kiosk. Therefore, the change in contractor did not constitute a service provision change. Unusually, it was OCS that appealed on the grounds, among other things, that the tribunal had focused too closely on the change of activities between OCS and MIS instead of the service: the MIS contract was still for the provision of food and catering services for the staff at the BMW plant.

Decision

The Employment Appeal Tribunal (EAT) dismissed OCS’s appeal. The EAT found that the tribunal had been entitled to determine that the activities under the OCS contract were the provision of ‘a full service canteen’, whereas under the MIS contract it was a ‘wholly different operation’.

The EAT relied upon the fact that the tribunal had studied both the services’ schedules to the OCS and MIS contracts. The tribunal found that the OCS contract was very detailed in terms of its requirement both in relation to food provision, management structure and the food requirements, but described the MIS contract as ‘one fairly brief paragraph’.

The EAT held that the correct approach in determining whether there has been a service provision change is to ask if the activities which ceased to be carried out by one contractor are carried out instead by a subsequent contractor, and if the activities were more than the supply of goods and not a single specific event. This will involve an analysis as to whether the activities carried on by the new contractor are fundamentally or essentially the same as those carried on by the outgoing contractor. The question is one of fact and degree.

Implications

The case is an interesting example of the potential limitations of the still relatively new service provision change concept. While there is no legal requirement under the service provision change for the activity to retain its identity post-transfer, this latest decision confirms recent case law which establishes that this element is implicit in the concept.

Incoming contractors will welcome the decision as offering them greater flexibility to provide their service with their personnel. For outgoing contractors, it illustrates again the importance of well-drafted exit provisions in the services agreement. While any attempt to contract-out of TUPE is unlawful, it does illustrate how an accurate services schedule can in reality do just that.

Suzanne Horne, associate, Morrison & Foerster

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