For a service provision change to apply, the legal test is
that there must have been, prior to the change, a so-called
'organised grouping of workers' whose principal purpose was
to carry out relevant activities for a relevant client.
Last week the EAT handed down a judgment in Amaryllis Ltd v McLeod, confirming that the principal purpose of any organised grouping of workers must be considered at the point immediately before the change.
Background and Employment Tribunal Decision
Millbrook Furnishings Ltd had previously carried out work for the MoD, renovating wood and metal furniture. However, from 2003-2008 this work had been carried out by Millbrook, as a sub-contractor of Amaryllis. The MoD awarded new contracts, and in 2014 the contract was retendered amongst four contractors. Millbrook was then unsuccessful but Amaryllis won the contract.
Even though it was accepted that Millbrook's employees spent just short of 70% of their time on the MoD renovations contract, the Employment Judge considered evidence of what had happened before in deciding (a) that TUPE applied and (b) that the employees had transferred to Amaryllis. The Judge was persuaded that the Millbrook department had initially been set up to service the MoD contracts, even though the employees later serviced other customers. The Employment Judge was also persuaded that the MoD was still the largest customer.
Appeal Decision
The EAT overturned that decision on the basis that the Employment Judge had erred in looking back to 2003-2008. It said that the relevant time to assess the principal purpose of any organised group of employees is the point immediately before the transfer.
The EAT also said that even if there had been an organised group of employees, the group was not designated to carry out activities for the MoD, because Millbrook's client at that point was actually Amaryllis and not the MoD.
Moral of the tale
Be careful in these situations and get some decent advice. A bad guess can be very expensive.
Disclaimer
The material contained in this article is of the nature of general comment only and does not give advice on any particular matter. Recipients should not act on the basis of the information in this e-update without taking appropriate professional advice upon their own particular circumstances.