UK: UK Update - TUPE Service Provision Changes Become More Complex With The Potential Involvement Of Multiple Clients And Contracts

In Ottimo Property Services Ltd -v- Duncan and another, the Employment Appeal Tribunal has decided that, where several different clients change service provider at or around the same time, each individual service provision change can be considered together to decide how TUPE applies.

The facts

Mr Duncan worked as a site maintenance engineer at a residential estate called Britannia Village. The estate was made up of several different blocks, each of which had a residents' management company. Each of these companies was a separate legal entity which contracted separately for the provision of property management services for each block. Additionally, a general management company at the estate contracted for the maintenance of the common parts, such as the estate car park and gardens.

Initially, Mr Duncan's employer was responsible for providing the maintenance work under most of the maintenance contracts at Britannia Village, but, gradually, those contracts were lost to other contractors. Between May and August 2012, Mr Duncan's employer, Ottimo, lost work under five of the contracts to Warwick Estate Properties. Warwick employed a property manager to work on the contracts and also engaged contractors to provide some of the services. Warwick did not believe that TUPE applied to transfer Mr Duncan's employment to it and did not consider him for the property manager's position. In July 2012, Ottimo terminated Mr Duncan's employment.

Mr Duncan brought a claim in the Employment Tribunal. The Tribunal had to decide whether Mr Duncan's employment had transferred to Warwick under TUPE when Warwick acquired the five contracts. The Tribunal decided that there had been no transfer. The key part of their decision concerned whether there had been a "service provision change" from Ottimo to Warwick which might have caused TUPE to apply to transfer Mr Duncan's employment.

Service Provision Changes under TUPE

Regulation 3(1)(b)(ii) of TUPE says that a service provision change can occur where:

"activities cease to be carried on by a contractor on a client's behalf......and are instead carried out by another person..." [emphasis added]

Ottimo and Mr Duncan argued that the word "client" should not be limited to the singular; in other words, where several clients changed service provider as here, those changes should be considered together as one single service provision change. If there was one single larger service provision change, Mr Duncan would be better able to say that he was assigned to that service, such that TUPE applied to transfer his employment, rather than having the more difficult task of arguing that he was assigned to one of the individual contracts that had been transferred to Warwick.

The Tribunal disagreed. It said that, reading TUPE literally, a service provision change occurred when a single client changed contractor; in other words each client's situation needed to be looked at individually, not together with other service provision changes going on at the same time. In this case, while it could be argued that the service provision change provisions of TUPE applied to the change of contractor made by each individual residents' management company, Mr Duncan was assigned to none of these contracts, and so his employment did not transfer to Warwick under TUPE.

The EAT's decision

On appeal, the Employment Appeal Tribunal overturned this decision. It said that the word "client" in regulation 3(1)(b) of TUPE could be read as the plural "clients", so long as the clients retained their identity before and after the service provision change (as was the case here). However, the EAT was keen to emphasise that there must be some commonality, or link, between those clients for individual service provision changes to be considered together. This does not mean that there needs to be a single "umbrella" contract between all the clients and the contractor. The fact that each client contracted individually with the contractor in this case was not fatal. However, in this case, the EAT said the fact that each individual client contracted with the contractor using the same standard form contract did not necessarily mean that there was such commonality. The case has been sent back to the Tribunal to decide the point.

Practical Issues for Employers

Unfortunately, this case does muddy the waters for employers deciding whether the service provision change provisions of TUPE might apply. The EAT's decision makes clear that where several different clients change contractors at or around the same time, the employer cannot focus on an analysis of each individual contract change to decide how TUPE might apply. Where there is some "commonality", there is a risk that a Tribunal may analyse each service provision change together to decide how TUPE might apply.

For the time being, and until a Tribunal makes a decision on what "commonality" might mean, employers may understandably struggle to come to a conclusion as to whether a contract change needs to be considered in isolation or together with other changes going on at the same time. This may have a significant impact on the analysis of those employees who may be in scope to transfer under TUPE.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.