TUPE: Service Provision Changes and what activities transfer

The Employment Appeal Tribunal (EAT) has held in Johnson Controls v Campbell and Anor that there was no service provision change under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (“TUPE”) where a centralised taxi booking service was brought back in-house by the client. Although the client was still undertaking the activity of booking taxis, there was no “centralised service” in place following the transfer. As a result, there was held to be an essentially different activity in place and TUPE did not apply. 

This case follows another recent decision in Nottinghamshire Healthcare NHS Trust v Hamshaw and others which held that where care services transferred from the Trust to new providers there was not a service provision change because the services were not fundamentally or essentially the same, owing to the methods used to provide them.

What happened in this case?

Mr Campbell worked for Johnson Controls providing a taxi administration service for the United Kingdom Atomic Energy Authority (“UKAEA”). His work included taking bookings from members of staff of UKAEA, advising on the timings for journeys, reviewing booking data, combining journeys, checking invoices and dealing with queries. In 2010, UKAEA decided to cut costs and terminate its contract with Johnson Controls, choosing instead to use secretaries employed by UKAEA to book taxis directly with taxi firms. 

Mr Campbell brought a claim in the Employment Tribunal for unfair dismissal and a redundancy payment on the basis that there had been a TUPE transfer (by virtue of a service provision change) when (as he claimed) the taxi administration service was transferred from Johnson Controls to UKAEA.   The main issue for the Tribunal to determine was to decide whether there had been a service provision change within the meaning of regulation 3(1)(b)(iii) TUPE (contracting-in) which provides that such a change will occur where:

  • there is an organised group of employees situated in Great Britain which has as its principal purpose the carrying out of the activities concerned on behalf of the client;
  • the client intends that the activities will, following the service provision change, be carried out by the client itself other than in connection with a single specific event or task of short-term duration; and 
  • the activities concerned do not consist wholly or mainly of the supply of goods for the client’s case.

For this purpose, the Tribunal reviewed the relevant case law which made clear that the Tribunal must identify the relevant activities carried on by the original contractor and then decide whether the activities carried on by the transferee of the activities (i.e. the subsequent contractor or the client, where activities move in house) are fundamentally or essentially the same as those carried on by the original contractor.

The Tribunal decided on the evidence that the centralised taxi administration service provided by Johnson Controls was not continued by UKAEA in-house. This was “an important component in coming to the conclusion that it [was] not essentially the same activity as that performed by [Mr Campbell] prior to [the conclusion of the contract]”. It was also relevant that the tasks performed by the secretaries were effectively the same following the termination of the relationship with Johnson Controls than they had been during the relationship – the only difference was that, under the new arrangement, the secretaries telephoned the taxi companies direct rather than going through the intermediary, Johnson Controls. However, the Tribunal concluded it would be wrong to consider the secretaries provided the same service as before since Johnson Controls provided a central co-ordinated service (which, for example, allowed for taxi sharing and a point for administration) which no longer existed following the transfer.

The EAT upheld the Tribunal’s decision and held that:

·         it was for the Tribunal to identify the relevant “activity” and whether this had transferred – this was to be approached “holistically” rather than simply by adding up the tasks undertaken pre and post transfer;

·         the Tribunal had taken this approach and had identified that the central and co-ordinated nature of the service provided by Johnson Controls (which did not continue after their provision of services ceased) was an “important feature”, which the EAT felt was appropriate.

What does this decision mean for employers?

In the current economic environment, we are likely to see employers bringing more services back in-house to save costs, so similar scenarios to the Johnson Controls case are likely to arise more frequently. This case suggests that the Tribunals will look very closely at the nature of the services provided and take a “holistic approach” when determining whether an activity will transfer, rather than purely looking at tasks performed in relation to a particular service. Transferors should be aware that there is a risk even seemingly minor changes to the method of the provision of activities by the transferee might mean that there is no service provision change and TUPE does not apply, in which case the transferor is left with the responsibility (and corresponding liabilities) for making redundancies in these situations.

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