SPLITTING UP

Kimberley Group Housing Ltd v Hambley and ors; Angel Services (UK) Ltd v Hambley and ors

The 2006 Transfer of Undertakings (Protection of Employment) Regulations state that, in the event of a transfer, the new employer is liable for the contracts of the old employer’s staff. In Kimberley Group Housing Ltd v Hambley and ors; Angel Services (UK) Ltd v Hambley and ors the Employment Appeal Tribunal (EAT) said that this liability cannot be split if there is more than one transferee.

Basic facts

Leena, a housing organization, had had a contract since 2000 with the Home Office to provide accommodation for asylum seekers in Stockton and Middlesbrough. It lost the contract in 2006 to two other organizations – Kimberley and Angel – both of which said TUPE did not apply. Six employees brought unfair dismissal claims.

The new contracts were due to begin on 20 March 2006, (just before the 2006 TUPE regulations came into force), but provided for a transition period in which Kimberley and Angel catered for an increasing number of asylum seekers while Leena wound down their services.

Relevant legislation

Regulation 3(b)(1) of TUPE 2006 states that the regulations apply to a service provision change, in which:

(i) activities cease to be carried out by a contractor on a client's behalf (whether or not those activities had previously been carried out by the client on his own behalf) and are carried out instead by another person ('a subsequent contractor') on the client's behalf;

Regulation 4(1) of TUPE 2006 states that a relevant transfer will not terminate the contract of employment of anyone who is subject to the relevant transfer, but their contract “shall have effect after the transfer as if originally made between the person so employed and the transferee.”

Tribunal decision

Applying regulation 3(1), the tribunal concluded that there had been a "service provision change" which had taken place on 17 April to Angel and on 8 May to Kimberley (after TUPE 2006 came into force). This was therefore a "relevant transfer" for TUPE purposes. But who was the new employer, given that two organizations were involved in the transfer?

The tribunal decided that “although the people and their contracts cannot be “split” the liabilities under these contracts can". It therefore divided the liabilities between the transferees on a percentage basis - 97% to Kimberley in Stockton and 3 per cent to Angel; 71 per cent to Kimberley in Middlesbrough and 29 per cent to Angel.

EAT decision

The EAT said that although the tribunal had been entitled to conclude that there had been a service provision change (and therefore a relevant transfer for the purposes of TUPE 2006), there was no basis in law for dividing the liabilities between two transferees on a percentage basis. If that theory applied on dismissal, it would also apply during employment and would mean that the transferees would also be liable to each pay a proportion of the employees’ salary. That is why “it is a well established principle of the common law that an employee cannot be the servant of two masters”.

Instead, it said that the tribunal (having established there had been a service provision change) should then have identified the relevant “activities” in order to decide whether those came within regulation 3(1)(b)(ii). It followed that if an employee’s activities were mainly assigned to one transferee rather than the other, then their contract of employment passed over to that transferee.

The EAT admitted that “there is not necessarily an exhaustive list of factors which will conclusively determine to which part of an undertaking an employee is assigned or in a case such as the present to which aspect of the activities involved in service provision the employee is assigned. The overall principle, however, we consider is clear. What is to be focused upon is essentially the link between the employee and the work or activities which are performed.”

The EAT allowed the appeals and, based on the activities identified, said that the liabilities should not be split between the two transferees but should fall on Kimberley.