Under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE), a 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 a subsequent contractor on their behalf. In McCarrick v Hunter, the Court of Appeal said that the client has to be the same one throughout - in other words, both before and after the transfer.

Basic facts

Mr McCarrick had worked for the Waterbridge group of companies since November 2005, managing a number of their commercial properties. In 2009, Waterbridge was due to be transferred to another company, WCP, but at the same time Her Majesty's Revenue & Customs lodged a winding up petition in respect of the Waterbridge group and the sale did not happen until December.

Nevertheless, it was agreed that Mr McCarrick along with some other employees would transfer over to WCP. He was paid by WCP until August 2009 when the mortgagee on the properties called in the receivers. They, in turn, appointed a new property company, King Sturge, to manage the properties.

Mr McCarrick continued to do much the same work for King Sturge although he was employed and paid directly by Mr Hunter, the erstwhile managing director of the Waterbridge group of companies.

When he was dismissed in March 2010, Mr McCarrick claimed unfair dismissal. In order to prove he had the requisite continuity of employment, he argued that there had been an SPC under regulation 3(1)(b)(ii) of TUPE from WCP to Mr Hunter.

Relevant law

Regulation 3(1)(b)(ii) states that an SPC applies to situations in which activities cease to be carried out by a contractor on a client's behalf and are carried out instead by a subsequent contractor on the client's behalf.

Tribunal and EAT decisions

The tribunal agreed that there had been a service provision change from WCP to Mr Hunter and that his continuity of employment had not, therefore, been broken when he started work for Mr Hunter.

The EAT, however, overturned that decision, holding that there could not be an SPC as the identity of the “client” had to remain the same throughout and had to refer back to a specific “client”. Otherwise the provisions would have to be completely re-written. In this case, the client had changed and there was no SPC.

Mr McCarrick appealed, arguing that the court should have taken a more “purposive” approach to the regulations, which was to protect the interests of employees.

Court of Appeal decision

The Court of Appeal disagreed. Although it agreed there were some instances when it should take a “purposive approach” (for instance courts should not be too pedantic about whether the activities carried on before and after the transfer were similar enough to amount to the same service and whether the employee was employed in the service transferred), it was not necessary to give a purposive interpretation to regulation 3(1)(b) as the concept of an SPC was clearly set out in the TUPE regulations and not the European directive.

There was therefore “no reason to think that the language does not accurately define the range of situations which the draftsman intended to fall within the scope of this purely domestic protection”.

It concluded that the “The language of regulation 3(1)(b) is only consistent with the situation where there is the same client throughout” - in other words, both before and after the transfer.