TUPE case confirms obligations apply to multiple providers

McMullen says the case confirms TUPE applies to transfers to multiple transferees split along functional lines

TUPE transferee obligations can apply where a service changing hands is divided among multiple providers on functional lines, explains Dr John McMullen in his latest update.

Under TUPE reg.3(1)(b), the first question for an employment tribunal in every service provision change case is whether or not the activities carried out by the outgoing provider, and then the incoming provider, are fundamentally the same. But what happens when the service is split up on a re-tender, with the service allocated to two or more new providers?

In Kimberley Group Housing Limited v Hambley [2008], the Employment Appeal Tribunal (EAT) rejected the argument that reg.3(1)(b) can only apply where there is one transferee to whom the activities transfer.

In Kimberley, the activities carried out by a single provider were, on re-tendering, divided among two new providers. In this case, this was a quantitative split of the service (with a proportion of properties that the original service provider was looking after divided henceforth between two new providers). TUPE applied.

Does TUPE apply when separate functions go to new service providers?

In Arch Initiatives v Greater Manchester West Mental Health NHS Foundation Trust and Others, the EAT approved this approach.

The issue in this case was whether or not there could be a service provision change when, on a re-tendering of a service, there was a split in functions, with the separated functions given to two new service providers.

Until 31 December 2002, Bolton Council had engaged Greater Manchester West Mental Health NHS Foundation Trust to carry out the provision of alcohol and drug dependency services itself through its Alcohol and Drugs Directorate. All of the claimants in this case were employed within the Trust’s Directorate.

In 2011, Bolton decided to remodel the service through a re-tendering exercise. The tendered services were spilt into five “lots”. Recovery planning and case management formed lot one, and delivery and other kinds of interventions identified by a recovery plan formed lots two to five.

It was clear that lot one was independent of lots two to five, and a successful applicant for lot one would not be awarded a contract for the remaining lots. So, at the outset, it was intended there would be a division of the two functions.

Life Line Project Ltd was the successful tenderer in respect of lots two to five (the delivery of interventions). Arch Initiatives was the successful tenderer in respect of lot one (case management).

Life Line Project accepted that TUPE transferee obligations applied and that the intervention staff transferred into its employment. Arch Initiatives disputed that TUPE was engaged.

But the employment tribunal found that the case management activities continued after the tender in fundamentally the same way. It further identified two organised groupings of employees, each of which had, as their principal purpose, the carrying out of those case management activities for Bolton Council.

The tribunal held there could be a transfer of part of an activity or service where these two separate groupings undertook these activities as their principal purpose.

There was a service provision change (SPC) TUPE transfer of both organised groupings and, as Arch Initiatives refused to take on the employees, they were automatically unfairly dismissed.

Arch Initiatives appealed. It claimed the employment judge was wrong on these points.

EAT finds TUPE applies to services split on functional lines

The EAT rejected the appeal. The service provision change regime was not to be construed as requiring that all of the activities carried out by the putative transferor before the relevant date cease and are carried out instead by a single, putative transferee. “Activities” is undefined and unqualified, and is not to be read as analogous or co-extensive with the word “service”. And there was no reason why the SPC provisions should not, in principle, apply in a case involving a division on functional lines.

Whether or not there was an organised grouping of employees carrying out the functions was a question of fact and degree, and there was no reason, in principle, to limit the number of organised groupings of employees to one in any particular SPC case.

The EAT also thought this approach was consistent with the Department for Business Innovation and Skills guidance (although the decision noted that the guidance was non-binding and certainly not decisive in anyway as to the true meaning of TUPE).

Finally, Arch Initiatives’s criticism of the the employment judge’s findings that the activities carried on after the SPC were fundamentally the same was rejected.

Whether or not the activities were fundamentally the same was a question of fact for the employment tribunal. The employment judge directed himself properly on the law and was entitled to make the findings he did based on the evidence.

Dr John McMullen

About Dr John McMullen

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