Under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE), there is a service provision change (SPC) when an “organised grouping” of employees is carrying out certain activities just before the transfer happens. In Lorne Stewart plc v Hyde and Crowley, the Employment Appeal Tribunal (EAT) said that tribunals must focus on the work that was actually being done “on the ground” before and after the transfer when deciding if there has been an SPC.
Thompsons was instructed to act on behalf of the claimants.
As part of an agreement with Cornwall Council from 2007 until 2011, Carillion provided a repair and renewal service for heating and boiler installations. The contract stipulated that the Council had to give Carillion the small value work, but did not have to offer the larger and higher value projects. Likewise, the company could decline that work. In practice, the Council did offer all the higher value work and Carillion accepted it.
In 2010, the Council carried out a re-tendering exercise which Lorne Stewart won. Although it was accepted that TUPE applied, Lorne Stewart argued that Mr Hyde and Mr Crowley were not covered as they were only involved in doing the higher value work for the Council, which it did not have to offer to Carillion under the agreement. As such, Lorne Stewart argued they did not form part of the “organised grouping of employees” whose main job was to do the work on behalf of the Council just before the transfer. Carillion maintained that Mr Hyde and Mr Crowley should TUPE transfer to Lorne Stewart and refused to continue to employ them.
Regulation 3 of TUPE states that there is an SPC when” activities” cease to be carried out by one contractor on a client's behalf and are carried out instead by a subsequent contractor if, immediately before the SPC, there is an “organised grouping of employees” which has as “its principal purpose the carrying out of the activities concerned on behalf of the client”.
The tribunal judge found that that both men were assigned to work specified in the contract and that they both should have remained employed by Lorne Stewart under TUPE. The lack of contractual commitment between Cornwall Council and Carillion on particular activities did not mean the men should not have TUPE transferred. As such, the men were unfairly dismissed by Lorne Stewart when they refused to accept them as their employees.
And the EAT agreed with the tribunal. It said that tribunals must focus on the work that was actually being done before and after the SPC. It was irrelevant whether it was work which the client was bound to give to the contractor or the contractor was bound to accept if offered. In lay terms, all that mattered was what happened "on the ground".
The employment judge found, as fact, that both men were engaged in activities which were carried on by Carillion for the council before the transfer and were intended to be, and were – or, in the case of project work, when it came up, would be – carried out instead by Lorne Stewart.
Once he made those findings, it was clear that the two men fell within an organised grouping of employees whose principal purpose was to carry out activities that should have TUPE transferred to Lorne Stewart.
Thompsons raised strong objections to the proposed repeal of service provision changes in the recent public consultation, as it would have meant less certainty as to when a relevant TUPE transfer has taken place. This case reminds us that the scope of service provision change TUPE transfers is potentially much wider than the standard business transfers that applied before TUPE 2006 came into force. If the government had repealed service provision change TUPE transfers (as was heavily rumoured), then the EAT’s judgment in this case might have been quite different.