A TUPE service provision change can apply to transfers to more than one firm

tupe-service-provision-change

Application of a TUPE service provision change transfer depends on whether or not activities on behalf of a client cease to be undertaken by one person and are, instead, taken over by a new person on behalf of that client. However, a recent case shows that TUPE may apply when activities are taken over by more than one organisation, as Dr John McMullen explains.

It is established law, following the decisions in Hunter v McCarrick [2013] ICR 235 and SNR Denton UK LLP v Kirwan [2012] IRLR 966, that the client of a TUPE service provision change must be the same. In other words, if the services are carried out for a different client after the changeover, TUPE will not apply.

In Ottimo Property Services Limited v (1) Duncan (2) Warwick Estate Properties Limited (UKEAT/0321/14/JOJ), the novel point arose as to whether “a” or “the” client, for the purposes of a service provision change TUPE transfer, was to be understood solely in the singular or if it also means a grouping of clients in the plural (providing that they remain identical).

Facts of the case

The facts were that, on 1 May 2007, Mr Duncan was employed as a site maintenance manager by Chainbow Limited based at Britannia Village (BV), an estate which comprised different blocks of residential housing, each block being named “BV1”, “BV2”, and so on.

There was also a separate resident’s management company and a separate general management company, which dealt with common parts of the estates. This company was described in the decision as “BVG”. In 2007, Chainbow had contracts to provide property management services at BV1 to 10, BV12 and for BVG. Each was a separate contract with the separate management company. BV11, however, had entered into a property management contract with a different entity.

In the period 2009 to 2011, the resident’s management contracts for BVs 4, 8 and 10 also moved from Chainbow to another company, leaving Chainbow with contracts to provide property management services for BVs 1, 2, 3, 5, 6, 7, 9, 12 and BVG.

In February 2012, Trinity Estates acquired the residential property department of Chainbow and subcontracted the on-site property maintenance work to Ottimo. Mr Duncan’s employment was treated as having transferred from Chainbow to Ottimo under TUPE.

In early 2012, the management contracts for BV2, 9 and 12 moved to other companies. Ottimo was left providing property maintenance services to BVs 1, 2, 5, 6, 7, 10 and BVG. For Mr Duncan, however, things looked the same. He still worked out of an office on the BV estate, which kept him occupied.

In the period May to August 2012, Warwick Estate Properties acquired the property management contracts for BVs 1, 3, 5, 6 and 7. Warwick employed another property manager. It declined to take on Mr Duncan as it assumed that TUPE did not apply. Mr Duncan was therefore dismissed from Ottimo and never physically employed by Warwick. The question was whether or not there was a TUPE transfer between Ottimo and Warwick for the purposes of protecting Mr Duncan’s acquired rights.

Was there a TUPE service provision change?

First, it was common ground that reg.3(1) (a) of TUPE (a business transfer) did not apply. There was no transfer of an economic entity retaining its identity because no assets transferred from Ottimo to Warwick and no employees were voluntarily taken on.

So, for there to be a TUPE transfer, it had to be a service provision change under TUPE reg.3(1)(b). The question was whether or not activities ceased to be carried out by one contractor on a client’s behalf and, instead, were carried out by a subsequent contractor on that client’s behalf. The contractors concerned were Chainbow and Warwick. The clients were BVs 1, 3, 5, 6 and BVG, all of which were separate legal entities that had entered into separate contracts. But the employment tribunal held that the service provision change rules could not apply when there was a multiplicity of clients, even if they remained the same after the change of provider. There had to be a changeover of activity, carried out on behalf of one single client.

It was possible that there might have been a service provision change in relation to each individual contract with each BV and BVG, but Mr Duncan would not have been assigned to any one particular contract. It was therefore important that the clients were considered cumulatively.

Before the Employment Appeal Tribunal (EAT), the employment tribunal decision was overturned.

An issue was s.6 of the Interpretation Act 1978, which provides that “in any act, unless the contrary intention appears… words in the singular include the plural and ones in the plural include the singular”. So, the question was whether or not TUPE demonstrates an intention that “a client” or “the client” should be understood in the singular and not the plural.

The EAT’s answer was that the identity of the client or clients must remain the same before and after the service provision change, but this might involve more than one legal entity, subject to the caveat that it would be necessary to discern the intention of the clients for these purposes. It was a requirement, therefore, that the clients were sufficiently linked so as to allow the assumption of a common intention.

The case was remitted to the employment tribunal for reconsideration of whether or not there was such a common intent among the clients in this case. Given the nature of the housing “community” concerned, I suggest that intention could well be established. If so, Mr Duncan should have transferred to Warwick, the new service provider, under TUPE.

Dr John McMullen

About Dr John McMullen

Dr John McMullen is a partner at Wrigleys Solicitors LLP and author of Business Transfers and Employee Rights.
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