A serious undertaking

Balfour Beatty Power Networks Ltd and anor v Wilcox and ors (2007, IRLR 63)

Tribunals have to ask themselves two questions when trying to decide whether an undertaking has been transferred under TUPE (the Transfer of Undertakings (Protection of Employment) Regulations 1981):

• Is there a stable economic entity capable of being transferred? 
• If so, did it retain its identity after the transfer?
  
  

In Balfour Beatty Power Networks Ltd and anor v Wilcox and ors (2007, IRLR 63), the Court of Appeal said that tribunals have to answer those questions on the basis of a number of factors and not just whether assets had been transferred.

Basic facts

Up until 1 January 2002, a company called Hyder operated three separate street lighting contracts (one for cables, one for jointing and another known as RASP) for Western Power Distribution (WPD). Each contract had its own supervisor and foreman, administration and dedicated employees.

The contracts came to an end at the end of 2001. Balfour Beatty won the jointing contract and the RASP contract was awarded to Interserve. The new contractors (who did not hire all the old Hyder staff) refused to accept that the changes were governed by TUPE. The claimants thought otherwise.

Tribunal decision

In relation to the RASP contract, the tribunal said that Interserve had taken on most of the workers who had been employed by Hyder and required them to do exactly the same work. The only reason they did not hire everyone was simply to avoid TUPE. And although Balfour Beatty had not taken on as many of the Hyder employees, its motivation was the same.

It decided therefore, relying on Cheesman v Brewer, that there was an economic entity capable of being transferred in both cases and that both had retained their identity after the transfer. Both companies appealed.

EAT decision

The Employment Appeal Tribunal (EAT) rejected Interserve’s appeal and held that the employment tribunal was entitled to find that most of Hyder’s workforce had transferred over to Interserve, and were doing the same work, using the same people, for the same purpose.

However, it remitted the case of the jointing contract to another tribunal on the ground that the tribunal had not explained itself properly.

Interserve’s appeal

The company argued that the tribunal had failed to deal with its argument that the economic entity involved was not stable as there was no guarantee that the contract would continue for any length of time.

It also argued that the need for ex Hyder employees had arisen unexpectedly when WPD started asking for low voltage work to be carried out after the start of the contract and that was the only reason that Interserve had recruited a number of former Hyder employees. The low voltage element in the Hyder operation was not, therefore, part of the economic entity that had transferred.

And finally it argued that the tribunal had failed to take on board the fact that no vehicles or equipment had transferred. According to Interserve, the European Court of Justice in Oy Lilikenne required tribunals to distinguish between 'labour-intensive' and 'asset dependent' operations. If no assets transferred, there could not be a TUPE transfer.

Court of Appeal

The Court of Appeal dismissed Interserve’s appeal. It said the tribunal was right to find there had been a TUPE transfer - most of Hyder’s workforce had transferred, the same work was being done by almost the same people and with the same objectives.

There was still a stable economic entity capable of being transferred in circumstances where there was no guarantee that the contract would continue. An enterprise may be stable “as a matter of practical and industrial reality”, even though its long-term future is not assured.

The Court was not convinced that the ECJ had held as a matter of law that courts had to distinguish between “labour intensive” and “asset reliant” operations. In any event, this case was different because the assets had been leased and should therefore be “characterised as tools and equipment, rather than assets in the technical sense, and it is difficult to see them as an integral part of the former business.”

Finally, it confirmed tribunals still have to make their decision on a number of factors and not just whether there had been a transfer of assets.