In McTear Contracts Ltd v. Bennett & Ors, the Employment Appeal Tribunal (EAT) considered whether an employee could transfer to more than one new provider when there is a service provision change under TUPE and two or more contractors take over the services. Spoiler alert – it said the employee could!
It has long been clear that, for an employee to transfer under TUPE, they must be assigned to the undertaking or services that are taken on by the transferee employer. Where the undertaking or services are fragmented between two or more transferees, it often becomes difficult to identify to which transferee each employee should go. The UK tribunals and courts have previously decided that the contract of an individual employee cannot be split between multiple transferees. That has tended to mean if a single transferee cannot be identified as the new employer, the employee remains with the transferor – and often faces redundancy as a result because the work has gone.
This position was called into question recently when the European Court of Justice (ECJ) held in ISS Facility Services NV v. Govaerts that, in principle, there was nothing to prevent an employee being transferred to more than one transferee, provided that dividing the employment contract was possible and did not prejudice the working conditions or rights of the employees. This would result in the employee having two (or more) contracts with different employers. If a split transfer did prejudice the employee, the ECJ said that the transferees would be liable for that in another change from the established position. The McTear case is the first to be decided on this point by a UK appeal tribunal since the ECJ’s decision.
A single contractor, Amey Services Ltd, was engaged by the local council to replace kitchens within its social housing stock. The local authority subsequently re-tendered the work and appointed two new contractors, McTear and Mitie (the new contractors), on a geographical basis. Each of the new contractors took on some but not all of Amey’s employees engaged in the work. The employees who did not transfer brought a number of claims against Amey, and the two new contractors and Amey.
The employment tribunal decided that there was a service provision change despite the fragmentation of the work. It went on to allocate the claimants to one or other of the new contractors.
The new contractors appealed to the EAT. They accepted that there had been a service provision change but argued that the tribunal had erred in determining that each of the employees must have transferred to one of the new contractors. They relied on the ECJ’s decision in Govaerts, which was published after the tribunal’s decision, and argued that the tribunal should have considered the possibility that the employees might transfer to both the new contractors.
The EAT recognised that the decision in Govaerts applies to a business transfer rather than a service provision change as the latter is a purely UK concept. However, it concluded that the decision “can and should apply” as “it would be undesirable for there to be a difference in approach to the consequences of a transfer” depending on whether it was a business transfer or a service provision change. The EAT sent the case back to the tribunal to be reconsidered in the light of this decision.
Fragmentation of services has often been seen as a way of avoiding TUPE, so perhaps the Govaerts decision and that of the EAT in McTear are not entirely surprising. However, it raises lots of practical issues, not least how tribunals will decide in what proportions to split an employment contract and just how employees and transferees will work with increasing numbers of fractional, part-time contracts. For example, if an employee is required to start at 9.00am before a transfer and afterwards has two employers, at whose workplace do they turn up first?
Some contractors have sought to minimise their TUPE liabilities by arguing that the work has been split up and so the employees remain with the outgoing contractor. In future, that may not work, but there will still be an incentive to argue that only a small proportion of the employment contract has transferred.
Due diligence and tendering processes are likely to become even more complicated as everybody tries to work out how the workforce might be split up, both in terms of groups of employees and in terms of each individual employee’s working time.
In many cases, further splitting an employment contract is perhaps likely to be prejudicial to the employee’s conditions and rights, and so result in the termination of that contract. Such dismissals of partially transferred employees may be automatically unfair if connected to a transfer.
Due diligence and tendering processes have always been important, but this decision only re-emphasises this and the need to assess carefully who might transfer.