TUPE - Service Provision Changes

tupe_service_solicitorsIn Hunter v McCarrick, the Employment Appeal Tribunal (EAT) held that for there to be a service provision change within the meaning of the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE), the activities carried out by different contractors before and after the transfer must be carried out for the same client.

Mr McCarrick was employed to carry out work on a portfolio of commercial properties. After he lost his job in March 2010, he brought a claim of unfair dismissal against Mr Hunter. He only had sufficient length of continuous service to bring a claim, however, if two changes (one in February 2009 and one in August 2009) in the provider of property management services by whom he was employed qualified as service provision changes under TUPE Regulation 3(1)(b).

Mr McCarrick’s employment history was complicated. He had worked for Waterbridge Group Ltd., of which Mr Hunter was the Managing Director, from 7 November 2008 until 3 February 2009, when the Waterbridge Group of companies were expected to be sold to Midos. The sale was void, however, owing to the lodging of a winding up petition in respect of the group by HM Revenue and Customs. A decision was made, however, to seek validation of the sale through the courts and it was agreed that a small number of employees would transfer to WCP Management Ltd. (WCP), a wholly owned subsidiary of Midos, to continue to maintain the properties in the portfolio. Mr McCarrick worked for WCP until mid-August 2009, at which point Aviva, which was the lender on the properties, appointed Law of Property Act Receivers to assume control of them. Although there was now no work for Mr McCarrick to do, Mr Hunter still believed that a sale to Midos was possible and so paid Mr McCarrick a salary so that he would continue to maintain the properties should this go ahead. This arrangement ceased on 8 March 2010.

The Employment Tribunal (ET) found that both the February 2009 and the August 2009 transfers were service provision changes under TUPE. Mr Hunter appealed in respect of the August 2009 transfer on the ground that to be a transfer under Regulation 3(1)(b), the same activities must be carried out by different contractors for the same client.

The EAT upheld the appeal. It rejected the suggestion that the purpose of TUPE Regulation 3 is to preserve employees’ terms and conditions and continuity of employment in circumstances in which the activities on which they are engaged by one contractor are carried out by a different contractor for a different client. In the EAT’s judgment, the ET had erred in holding that there was a service provision change and therefore a transfer of the undertaking for the purposes of TUPE when, on the August transfer, there was not only a change of contractor but also a change of client.

 Click here for further information on service provision changes and TUPE.

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