INSTITUTE OF EMPLOYMENT RIGHTS TUPE Update When does TUPE apply? The complexity of a simple question. Richard Arthur, Thompsons Solicitors 13 February 2013

TUPE 2006: COVERAGE “The 2006 amendments brought more service provision changes within the ambit of TUPE. The intention was that TUPE would apply to most service provision changes, thereby giving greater legal certainty, ending any exposure to fluctuating case law, creating a more level playing field in the tendering process and reducing cost………..”. Business transfers; Service Provision Changes; and Public Sector

BUSINESS TRANSFERS “A transfer of an undertaking, business or part of an undertaking…..to another person where there is a transfer of an economic entity which retains its identity”. (Reg.3(1)(a)).

“Economic entity” “An organised grouping of resources which has the objective of pursuing an economic activity……” (Reg. 3(2)). Factors include: Workforce; Management staff; Organisation of the work; Operating methods; and Where appropriate, operational resources. (Suzen v Zehnacker Gebaudereinigung GmbH Krankenhausservice C-13/95 [1997] IRLR 255)

“ Economic entity” An organised grouping of employees specifically and permanently assigned to a common task may amount to an economic entity (Francisco Hernandez Vidal SA v Gomez Perez [1999] IRLR 132); Absence of organisational structure might not be critical (Jouini and others v Princess Personal Services GmbH [2007] IRLR 10050) (about a temporary employment business); and Transfers can relate to “part” of an undertaking and the “part” of an undertaking does not need to exist as a stable economic entity before the transfer (Fairhurst Ward Abbotts Ltd v Botes Building Limited [2004] IRLR 304).

“Retains its identity” Necessary to consider all the factors including: Type of undertaking; Whether tangible assets transfer; The value of intangible assets; Whether a majority of the undertaking’s employees are taken on by the new employer; Whether or not customers transfer; Degree of similarity between activities pre- and post-transfer; and Period of any suspension of activities. (Spijkers v Gebroeders Benedik Abbattoir [1986] ECR 1119)

“Retains its identity” The ECJ (now CJEU) has drawn a distinction between: Asset-reliant undertakings-where the non-transfer of assets will mean that there is no transfer (Oy Liikenne Ab v Liskojarvi [2001] IRLR 171); and Labour-intensive undertakings-where the decisive factor is whether the new employer “…takes over a major part, in terms of their numbers and skills, of the employees…” (Suzen and CLECE SA v Valor and another [2011] IRLR 251)

“Retains its identity” Approach in the United Kingdom: “Asset-reliant” and “labour-intensive” are opposite ends of a spectrum (eg Balfour Beatty Power Networks Ltd v Wilcox [2007] IRLR 63); Problem in labour-intensive undertakings: existence of a transfer may depend on whether the new employer takes on a major part of the existing workforce; and The reason why the employees were not taken on by the new employer is a relevant circumstance as to whether there is a transfer (RCO Support Services and another v UNISON and others [2002] IRLR 401).

“Retains its identity” Still really unclear in labour-intensive undertakings where the major part of the workforce is not taken on: Atos Origin UK Ltd v (1) Amicus and others (2) Compaq Computer Ltd (3) Compaq Computer Customer Services Ltd EAT/0566/03 26 February 2004; and Integration of the transferor’s undertaking: the link between the workers and materials and a similar economic activity must be retained: Klarenberg v Ferrotron Technologies GmbH [2009] IRLR 301.

SERVICE PROVISION CHANGES “ Activities” cease to be carried out by a client/contractor. Covers: Contracting-out; Second generation contracting; and Contracting-in.

SERVICE PROVISION CHANGES Requirements: Organised grouping of employees” which has as its “principal purpose” the carrying out of the activities; Not in connection with a “single specific event or task of short duration”; and Activities not wholly or mainly the supply of goods or services. (Reg 3).

“Organised grouping of employees” Grouping must be organised by reference to the requirements of the client in question: Eddie Stobart Ltd v Moreman and others [2012] IRLR 356-the fact that the nightshift workers happened to work mainly for one client didn’t make them an “organised grouping of employees”.

Changes in activities or client The activities do not have to be identical after the transfer: Metropolitan Resources Limited v (1) Churchill Dulwich Limited and (2) Martin Cambridge [2009] IRLR 700; “Activity” has been restrictively construed: Ward Hadaway Solicitors v Love and others UKEAT/0471/09; But change in activities can mean no transfer (eg OCS Group UK Ltd v Jones and another UKEAT/0038/09; and The activities before and after the transfer must be carried out for the same client: Hunter v McCarrick [2012] EWCA Civ 1399.

Fragmentation of activities There may be no service provision change if the service is so fragmented that no transferee can be identified: Clearsprings Management Limited v Arkins and others UKEAT/0054/08/LA and, most recently, Enterprise Management Services Ltd v Connect-up Ltd and others [2012] IRLR 190; and It may be possible to identify a transferee even if the service is split: Kimberley Group Housing Limited v Hambley and others [2008] IRLR 682.

Transfers within public administration “An administrative re-reorganisation of public administrative authorities or the transfer of administrative functions between public administrative authorities is not a relevant transfer” (Reg.3(5)). Implements ECJ decision in Henke v Gemeinde Schierke and Verwaltungsgemeinschaft Brocken [1996] IRLR 701.

Transfers within public administration Distinction between: Activities falling within the exercise of public powers, which are not economic; and Services which, without falling within the exercise of public powers, are carried out in the public interest and without profit motive, in competition with profit-making operators (Ivana Scattalon v Ministero dell’Universita e delia Ricera [2011] IRLR 1020).

The Public Sector Cabinet Office Statement of Practice on Staff Transfers in the Public Sector 2000; Code of Practice on Workforce Matters in Local Authority Service Contracts 2003 (withdrawn March 2011); Code of Practice on Workforce Matters in Public Sector Service Contracts 2005 (withdrawn December 2010); and Fair Deal for Staff Pensions.

OTHER MATTERS TUPE does not apply to share sales-unless the evidence shows that the new owner assumes control of the business (see Millam v Print Factory (London) 1991 Ltd [2007] IRLR 526); and TUPE can apply to a transfer from the UK to a non-EU State (see Holis Metal Industries Limited v GMB and another [2008] IRLR 187).

BIS CONSULTATION “…..However, [SPCs] go further than the provisions of the Directive and are thus considered gold-plating……”. “…Given that it is not clear that the intended benefits are being realised, the anti-competitive effects of efforts to avoid TUPE in this context, and its wish to remove unnecessary gold-plating, the Government proposes to reverse the 2006 amendments relating to service provision changes in Great Britain.”

Some thoughts in reply BIS Impact Assessment: “…..as there as so many TUPE transfers and a comparatively low number of Tribunal cases, TUPE legislation should be viewed as an area where there is good compliance”; BIS relies erroneously on the ET statistics for TUPE information and consultation cases to say that there has been an increase in TUPE claims in ETs; The number of disputes as to whether there is a transfer has decreased significantly-eg decrease in appeals to EAT and Court of Appeal; SPCs have led to increased certainty; and The majority of respondents to BIS’ call for evidence in 2012 favoured retaining SPCs (66: 47)