The Transfer of Undertakings (Protection of Employment) (TUPE) regulations state that immediately before a service provision change (SPC), there has to be an “organized grouping of employees” whose principal purpose is to carry out the client’s activities. In Amaryllis Ltd v McLeod and ors, the Employment Appeal Tribunal (EAT) held that tribunals must concentrate on the position immediately before the transfer rather than relying on historical events when deciding if there has been an SPC.
Millbrook Furnishings Industries held contracts for about 50 years with the Ministry of Defence (MoD) to renovate upholstered wood and metal furniture. Between 2003 and 2008, however, Amaryllis was awarded a contract which involved supplying new furniture as well as carrying out the renovations, which it sub-contracted to Millbrook.
In 2008 the MOD split the supply of new furniture from the furniture renovation contract. Millbrook was awarded the renovation contract until 17 December 2012 when the MOD awarded contracts under a framework agreement to a panel of firms which included both Millbrook and Amaryllis. Millbrook carried out the renovation work as part of that agreement. In early 2014 the renovations contract was awarded to Amaryllis.
A number of employees brought claims that there had been an SPC under TUPE Regulations 2006 and that their employment had therefore transferred over to Amaryllis.
Although the employees assigned to the MoD renovations contract spent about 70 per cent of their time on it, the judge said this was not enough by itself to show that the principal purpose of the department in which they worked was necessarily to service the contract with the MoD.
Equally, however, the historical evidence showed that although the department had originally been set up to service the MoD contract, it had not “morphed” into one that operated principally to service the needs of all its customers by doing other work, as the MoD remained their major customer. There was therefore an organized grouping of employees in Millbrook which had at its principal purpose the carrying out of the activities concerned on behalf of the MoD. As such, there had been an SPC.
The EAT upheld the appeal. The judge’s observation that the department had not “morphed” (presumably from its inception 50 years) indicated that he had overlooked the period between 2003 and 2008. During that time, even if it could be said that there was an organized grouping of employees, they were not dedicated to carrying out activities for the MoD because Amaryllis was Millbrook’s client, not the MoD.
Further, the fact that the judge looked back at a continuous 50-year period also indicated that he was relying on the work carried out in the department as a whole generally, rather than work carried out by Millbrook under its contract with the MOD.
This case illustrates the importance of concentrating on the precise wording of TUPE when considering the evidence of the existence of an organized grouping. This must exist “immediately before” the transfer so evidence that the employees were in the past grouped into a team servicing the contract which is now to be transferred is insufficient. The evidence must show that the organized grouping persists.
The EAT has again stressed that it is important to establish what was the purpose of the organized grouping. It has to be shown, either by direct evidence or inference, that the purpose was to service the activities that the client wanted performed under the contract.