The “fundamentally and essentially the same” test

The requirement for activities to be “fundamentally the same” pre- and –post transfer has developed through various cases, for example Metropolitan Resources Limited v Martin Cambridge [2009] UKEAT 0286/08/2406. For transfers on or after 31 January 2014, the requirement is now found in Regulation 3(2A) of TUPE, following an amendment made under the 2014 Regulations. The coalition government argues that this change simply codifies existing law. However, unions are concerned that changing the legislation in this way will send a clear message to employers that they can avoid TUPE by adapting their contract documentation to maximise differences between pre- and post-transfer services.

Under this test, as long as the core service activities remain the same, minor differences introduced by the new service provider should not prevent TUPE applying. This should make it harder for employers to list a large number of non-fundamental differences in the service, and to rely on these non-fundamental differences to build a case that TUPE does not apply. For example, in Metropolitan Resources, a change in location and the addition of a new service element were both regarded as insufficiently “fundamental” to change the core character of the activities.

A different result was reached in Enterprise Management Services Limited v Connect-Up Limited [2011] UKEAT 0462/10/2112, illustrating the unpredictability of tribunal decisions as to whether or not TUPE applies. In this case, which involved the re-tendering of an IT framework agreement to supply schools, the EAT refused to interfere with a tribunal judgment that post-transfer activities were “fundamentally different”, even though only 15% of the work (the curriculum element) was left out of the re-tendered agreement. The tribunal decided that there was no service provision change, even though the remaining 85% (administration work) fell within the scope of the new agreement. As a result, the staff did not transfer to the new service provider.

There is other useful case law as to when a tribunal is likely to conclude that activities are fundamentally the same. A good example is OCS Group UK Limited v Jones [2009] EAT/0038/09, where the EAT found no service provision change because the post-transfer services were fundamentally different from those provided after the transfer. Before the transfer, OCS provided 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 employees of OCS. BMW replaced OCS with a new contractor running “dry goods kiosks” which did not serve hot food. The incoming contractor’s staff sold pre-prepared sandwiches and salads.

The EAT decided that the new contractor’s services were “materially different” from those provided by OCS, meaning that there was no service provision change and the staff did not transfer. Minor differences between roles would not prevent a service provision transfer, but material differences would.

OCS is an example of a case where the tribunal was heavily influenced by the description of the relevant “services” in the service contracts drawn up by the legal advisers on both sides of the transaction. As such, it illustrates union concerns about the risk of service providers tailoring the descriptions of their services to avoid TUPE, by maximising differences between the old and new services.

Sometimes, it is the employee who wants to argue against the presence of a transfer, especially where a large employer such as an NHS Trust or a local authority breaks up services through public sector outsourcing and invites small employers such as charities and voluntary organisations to tender. Under the government’s Any Willing Provider policy, staff can find themselves transferred from a large well resourced employer to a far smaller organisation, and denied opportunities to redeploy to other roles within their existing employer. In the following example, the EAT decided that NHS staff did not transfer automatically to two small charities supplying care in the community after the closure of an NHS care home, because the activities before and after the transfer were not fundamentally and essentially the same:

In practice, the need for activities to remain “fundamentally the same” under Regulation 3(1)(b) of TUPE is very similar to the need, in the case of a business transfer under Regulation 3(1)(a), for an economic entity to “retain its identity” post transfer. The net result is that in most cases there may now be little practical difference between the two categories.