A recent legal ruling shows that sound judgment is needed during TUPE service provision changes to decide whether or not the activities carried out afterwards are “fundamentally the same” as before. Dr John McMullen advises on the ruling.
By virtue of reg.3(2A) of TUPE, for a service provision change TUPE transfer, the activities being carried out by another person in succession to a previous provider (or client) must be activities that are “fundamentally the same” as the activities carried out by the person who has ceased to carry them out. This rule was introduced by the Collective Redundancies and Transfer of Undertakings (Protection of Employment) (Amendment) Regulations 2014 and was a consolidation of a previous case law rule to this effect. This was the provision under consideration in the Employment Appeal Tribunal (EAT) case of The Salvation Army Trustee Company v Coventry Cyrenians Ltd.
Coventry Cyrenians Ltd (CCL) is a charity. The claimant employees were employed by CCL in its adult services team. CCL had a main contract with Coventry City Council to provide a range of services to homeless people. This involved providing 25 units of accommodation over 10 sites, as well as support work. This included assessment of potential service users, allocation to houses of multiple occupation, producing a support plan and supporting individuals under that plan.
Provision of homelessness
The council had subcontracted its requirements for services to the homeless through a network of 22 separate contracts with different providers. It wanted to do away with these separate contracts and merge the provision of homelessness and ex-offender support through a single point of access, and it tendered out a contract for this purpose.
It was awarded to The Salvation Army Trustee Company (SAT).
For a while it seemed likely that CCL would be taken on by SAT as a subcontractor. But in the end this did not occur. SAT operated the service in a slightly different way, with an assessment centre or hub that dealt with all referrals. If the individual was to be supported by accommodation it would be in one of two large hostels. Support services could be delivered more efficiently at two sites than in accommodation over 10 sites. So support work did continue, but at two sites and not 10.
There were other differences, for example, the service was provided to those over the age of 25, rather than over the age of 18, as was the case before. The service was to be delivered in supported accommodation for 112 days rather than the longer period (up to 12 months) which applied before.
The usual hours of support workers also changed. At the tribunal hearing a key submission from SAT was that the services were no longer provided through what SAT described as “dispersed accommodation”, that is to say the 10 multiple occupation sites that CCL operated in Coventry.
The employment judge described the activities prior to the putative service provision change as the “provision of accommodation based support for homeless men and women”, and he found that the claimant employees constituted an organised grouping of employees, having, as its principal purpose, the carrying out of these activities. The key issue was whether or not the activities carried out by SAT in succession to CCL were fundamentally the same as those carried out by CCL.
The judge examined the differences, but did not consider them fundamental. Nor, in particular, did he consider that the fact that so called “dispersed accommodation” was offered before, and hostel accommodation offered afterwards, constituted a fundamental difference in the activity. He concluded that the activities that CCL ceased to carry out on behalf of the Council were “fundamentally the same” as the activities carried out instead by SAT on behalf of the council.
On appeal, SAT argued that the employment judge’s description of the activities concerned was too general and simplistic. As to the meaning of activities, he needed to derive support from OCS Group UK Limited v Jones (where a distinction was made between the provision of food via a restaurant and the supply of food via cold cabinets, and a conclusion reached that the two activities were not fundamentally the same). The EAT however considered that the employment judge had approached the question correctly. The word “activities” in reg.3(1)(b) of TUPE was to be given its ordinary, everyday meaning. And in the context of reg.3(2A), “activities” must be defined in a common-sense and pragmatic way. On the one hand, they should not be defined at such a level of generality that they do not really describe the specific activities at all (so, referring to OCS Group it would be wrong to characterise a fully catered canteen as merely the provision of food to staff). On the other hand, the definition should be holistic having regard to the evidence in the round, avoiding too narrow a focus. A pedantic and excessively detailed definition of “activities” would risk defeating the purpose of the SPC provisions.
Dangers of over generalisation
According to the EAT, the employment judge “[steered] a correct course between the dangers of over generalisation and pedantry”. Nor did the employment judge go wrong by asking whether or not there were fundamental “differences” between the services concerned, as opposed to assessing whether they were “fundamentally the same”. SAT’s contention on this point was also rejected by the EAT.
The judge said: “I consider that it is entirely plain from the employment judge’s reasons as a whole, and from para.37 in particular, that he used the language of “fundamental difference” in antithesis, in direct opposition, to the phrase ‘fundamentally the same’.” The judge used the terms in question as direct opposites and “he never strayed from the correct legal test”.
Finally, disputes over the application of TUPE, like the litigation in the present case, are expensive. In an interesting footnote to the case His Honour Judge David Richardson wondered whether or not there might be a better way of resolving such issues. It seemed to him that some kind of speedy dispute resolution procedure would be better than a full-blown trial.
This idea was first mooted by Government in 2005 and nothing came of it, but, it is certainly food for thought.