Clear as mud

For a service provision change to be effective under the 2006 Transfer of Undertakings (Protection of Employment) Regulations (TUPE), claimants have to show they are an “organised grouping” carrying out “activities” on behalf of the client. In Clearsprings Management Ltd v Ankers and ors, the Employment Appeal Tribunal (EAT) said that there are circumstances in which the “activities” are just too fragmented to satisfy this requirement.

Basic facts

On 31 March 2000 the National Asylum Seekers Service (NASS) awarded national contracts to designated service providers for a five-year term to provide accommodation and support services to asylum seekers. In the North West, the service was provided by four private contractors, including Clearsprings.

When the old contracts expired, NASS carried out a fresh tendering process following which Clearsprings lost its contract for the North West. However, the changeover process was far from straightforward. Although the old contracts ended on 9 October 2005, interim contracts were awarded to providers (including Clearsprings) until 30 June 2006.

On 8 February 2006 the new five year contracts were awarded. These weren’t signed until 9 March 2006 but had an “effective date” of 20 March. This marked the start of the transition period when the asylum seekers for whom Clearsprings had provided services were randomly re-allocated to the three new contractors.

The claimants (who were still employed by Clearsprings in February 2006) claimed that their contracts had transferred to the new contract holders under regulation 3(1)(b) of TUPE 2006.

Relevant law

Regulation 3(1)(b) states that an service provision change (SPC) occurs when “activities cease to be carried out by a contractor on a client’s behalf … and are carried out instead by another person (‘a subsequent contractor’) on the client’s behalf”.

Regulation 3(1)(b) is, however, conditional on regulation 3(3) which requires “an organised grouping of employees … which has as its principal purpose the carrying out of the activities concerned on behalf of the client”.

Tribunal decision

The tribunal decided that no TUPE transfer had taken place because although there had been a service provision change, there was no single transferee who had taken over the “activities” referred to in the regulations.

Nor was there a clear transfer date when the asylum seekers were allocated to the various new service providers which indicated that the activity had become “so fragmented as to be outside the scope of the regulations”.

Finally, the tribunal concluded that the claimants did not form “an organised grouping of resources or employees that were the subject of any relevant transfer”.

EAT Decision

The EAT dismissed the appeal. Relying on the decision in Kimberley Group Housing Ltd v. Hambley and ors (UK) Ltd, it held that although the tribunal was wrong to conclude that TUPE could not apply, it agreed that the “activity” carried out by Clearsprings was so fragmented that no relevant transfer could be said to have taken place.

In Kimberley, the EAT held that although one transferor could transfer the provision of a service to more than one transferee, there may be “circumstances in which a service which is being provided by one contractor to a client is in the event so fragmented that nothing which one can properly determine as being an SPC has taken place. The Employment Tribunal must look at all the facts in the round..."

In this case, it was clear that the activity carried out by Clearsprings was too fragmented even by the time of the earliest transfer date. It was not then possible to ascertain which new contractor had taken over the work previous carried out by Clearsprings.