According to the Court of Justice of the European Union (CJEU), an employee’s contract can transfer over to a transferee with all its rights and obligations even if there is more than one transferee. In McTear Contracts Ltd v Bennett and ors, the Employment Appeal Tribunal (EAT) held that the same principle applies to a service provision change transfer, even though that concept does not exist under European law.

Basic facts

North Lanarkshire Council had a contract with Amey to replace the kitchens in their social housing stock. The company divided the work between two teams which generally worked independently of one another.

When the council retendered the contract, it divided the work into two “lots” which it then awarded to two different companies – McTear and Mitie. In order to work out which employees should transfer to which company, Amey worked out that team one broadly corresponded to Lot 1, while team two corresponded to Lot 2.

Although McTear and Mitie each took on some of Amey’s former employees on new terms and conditions, neither company took on the contracts of any of the claimants, arguing that the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) did not apply. For their part, Amey continued to maintain that the contracts had transferred either to McTear or to Mitie, on the basis that there had been a service provision change (SPC) under TUPE.

More than 20 claimants lodged proceedings for claims including unfair dismissal and redundancy pay, among others.

Tribunal decision

The tribunal agreed with Amey that there had been two SPCs, the first between Amey and Mitie and the second between Amey and McTear amounting to a relevant transfer under Regulation 3 of the 2006 TUPE Regulations. The tribunal also held that the claimants should be allocated to the two transferees on the basis outlined by Amey.

McTear and Mitie appealed arguing that the tribunal was wrong to allocate Amey’s employees between the two incoming contractors. Firstly, it had failed to consider the respective positions of the employees individually; and secondly it had not allowed for the possibility that some employees had not transferred at all.

They also argued that the tribunal’s conclusion was contrary to the subsequent decision by the CJEU in ISS Facility Services NC v Sonia Govaerts & Atalian NV (weekly LELR 692). In that case, it was held that where a number of transferees were involved, Article 3(1) of the Acquired Rights Directive means that the contractual rights and obligations transferred over to each of the transferees in proportion to the tasks performed by the worker. If, however, it was not possible to divide the contract up or doing so would adversely affect the employees’ rights under the directive, then the transferees would be responsible for any consequent termination of the employment relationship.

EAT decision

Although there was no requirement to apply Govaerts to the purely domestic provisions of TUPE, the EAT held that it would be undesirable for there to be a difference in approach between a business transfer under Regulation 3(1)(a) and an SPC (which does not exist in European law) under Regulation 3(1)(b).

It concluded that there was no reason in principle why an employee could not work for two or more different employers at the same time following a transfer, provided that the work attributable to each contract was clearly separate and identifiable as such.

Acknowledging that the tribunal had correctly applied the law as it stood at the time, the EAT held that its decision about how the employees should be allocated to the two contractors had to be set aside. The matter was remitted to the same tribunal to reconsider its decision in the light of Govaerts.