LRD guides and handbook May 2013

Law at Work 2013

Chapter 12

Activities must stay fundamentally the same after transfer

Case law has established an extra test for a service provision change, which was not foreseen when the regulations were first drafted. There can only be a service provision change if the transferred activities remain intact and fundamentally unchanged, after the transfer. In other words, the basic business being carried on after the transfer needs to be essentially the same as the business carried on before the transfer. Minor differences will not stop TUPE applying, but where the new service provider carries out services in a fundamentally different way, there is unlikely to be a transfer. Here is the most well known example:

OCS delivered a full catering service to workers at the BMW car plant in Cowley, made up of a restaurant and deli bar serving hot food prepared by OCS employees. BMW replaced OCS with a new contractor running “dry goods kiosks” which did not serve hot food. The role of the in-coming contractor’s staff was to sell ready-prepared sandwiches and salads. The EAT concluded that the services provided by the new contractor were fundamentally different from those provided by OCS and that as a result, there was no service provision change, and OCS’s staff did not transfer to the new business. Minor differences between roles would not prevent a service provision transfer, but material differences would.

OCS Group UK Limited v Jones ([2009] EAT/0038/09)

It is worth noting that in the OCS case, the tribunal relied extensively on contract documentation to work out what services were to be provided post-transfer. To a large extent this is unavoidable, given the very short timeframe for a tribunal claim. However, it also makes it easier for employers to avoid TUPE, by crafting the contract wording to maximise any differences between the services provided before and after the transfer.

Another example is Johnson Controls Limited v Campbell and UK Atomic Energy Authority ([2012] UKEAT/0041/12/JQJ). In this case, there was no service provision transfer where the UK Atomic Energy Authority (UKAEA) stopped using an external taxi booking service, Johnson Controls, whose duties included record keeping, invoices, complaints and co-ordinating taxi sharing. Instead, the UKAEA decided to bring its taxi-booking back in house, with individual secretaries booking directly with taxi firms. The EAT decided that the claimant’s job as taxi administrator at Johnson Controls no longer existed after the change because the new service was a different activity.

In another illustration, the EAT decided that NHS staff at a Nottinghamshire trust did not transfer automatically to two small charities supplying care in the community, after the closure of an NHS residential care home. The test was the same — were the activities being carried out before and after the transfer fundamentally and essentially the same. The answer here was no:

Nottinghamshire Healthcare NHS Trust decided to close a residential home for vulnerable adults (Hillside House), re-housing its seven residents to live independently in the community. Two charities, Perthyn and Choice Support, were awarded the contract to supply care in the community. The Trust argued that the employment contracts of the NHS nurses and healthcare assistants had transferred from the NHS to one or other of the two charities via a service provision change. The nurses argued that there was no service provision change, meaning that the Trust was still their employer and remained responsible for their wages and for looking for redeployment opportunities within the NHS, or for paying a redundancy payment.

The EAT found in favour of the NHS staff. There was no transfer of the employment contracts to the charities under TUPE, because the services provided in the community after the “transfer” were not “fundamentally or essentially the same” as the services provided at Hillside House before the “transfer”. Fundamental changes included a new focus on developing skills for independent living within the community, such as cleaning, shopping, cooking and managing money. These amounted to a “material shift in the ethos of the service and the manner of its provision”. The NHS remained the employer and if there was no suitable alternative work available for the staff affected, it was responsible for carrying out redundancies and making notice payments.

Nottinghamshire Healthcare NHS Trust v Hamshaw & Others, Perthyn and Choice Support Respondents [2011] UKEAT0037/11

In Department of Education v Huke (UKEAT/0080/12/LA), the EAT suggested that not only a change in the character or type of activity but also the quantity of work could be relevant to deciding whether or not there was a service provision change. In that case, work gradually wound down, until by the date of the transfer, only one person, Mr Huke, remained assigned to the contract, with “very little work to do”.

The EAT decided that a significant decline in work volume can result in TUPE not applying to the transfer. But a better decision is London Borough of Islington v Bannon [2012] UKEAT00221/12/2509. In this case, the EAT confirmed that the fact that due to lack of resources, a much reduced service was being provided inadequately by Islington BC before the transfer did not change the essential character of the service. There was still a service provision change. Any other conclusion would allow service providers to avoid TUPE by deliberately winding down the service in the months leading up to the transfer date.

A change in provider of a service usually involves one provider ceasing to carrying out the activities, to be replaced instead by a new provider, or the original client, who takes the services back in-house. The fact that the old provider carries on with some of the activities on behalf of the client after the transfer date may make it harder to persuade a tribunal that there has been a service provision change (see for example, Ward Hadaway v Love and others ([2010] UKEAT/0471/09). But this is not black and white — and each case depends on its own facts.