TUPE – can we really split an employment contract?

Mention the words “service provision change” and the spectre of TUPE hovers in front of you. Most of our readers will already be aware that, where a service provider is changing, or work is being out-sourced or brought back in house, TUPE will usually apply.

Recent case law significantly affects how TUPE transfers will need to be looked at in the future. In particular, where an outgoing service provider is replaced by two or more incoming providers, it is possible that a transferring employee’s contract should be divided between the new service providers pro rata to the tasks performed by that employee. Just when we thought that TUPE couldn’t get any more complicated!

Prior to the recent cases, the established law in the UK was that employees could only transfer to one employer following a TUPE transfer. This meant that, where services were fragmented (i.e. split between different service providers), staff would only transfer if they were assigned to a particular fragment (i.e. the part of the service going to a particular provider). If they were not assigned in this way, there would be no TUPE transfer.

This was thrown into doubt by the European Court of Justice in July 2020. In the case of ISS Facility Services v Govaerts (Case C-344/18), the ECJ held that where a transferring business is split between two or more different entities, employees could transfer to each new entity on contracts representing the proportion of their tasks carried out for each part of the business. In simple terms, if the business was split in two, and an employee did an equal amount of work for each of the fragments, they would transfer on a 50% contract to the new owner of each part.

The EAT has now confirmed that this can apply in domestic law, including in service provision changes. The case in question, McTear Contracts Ltd v Bennett and others UKEATS/0023/19; Mitie Property Services UK Ltd v Bennett and others UKEATS/0030/19, concerned a contract for replacing kitchens in a council’s housing stock. The contract had originally been undertaken by one contractor (Amey) but, following a re-tendering exercise, the contract was to be split between geographical areas (north and south) with each part being awarded to different contractors (McTear and Mitie). Amey decided that there was a TUPE transfer, with the employees being divided into two teams and transferred to either McTear or Mitie based on the total number of days during which each of the teams had worked within each of the areas. McTear and Mitie disputed that TUPE applied and refused to take the employees. The Tribunal decision, made in 2019 prior to the ECJ’s decision in Goaverts, sided with Amey, finding that the employees had all transferred to either McTear or Mitie, in accordance with Amey’s analysis (based on which area the employee’s team had spent more time working in).

McTear and Mitie appealed, and by the time it was heard by the EAT, the judgment in Goaverts had been published. The EAT confirmed that the domestic law could be subject to that decision and so the case had to be looked at again by the Tribunal, allowing for an analysis that the staff had transferred to both McTear and Mitie, or to neither.

What this means is that where services are being transferred to multiple providers, it will be necessary to carry out an analysis in respect of each affected employee to determine whether they should transfer to one or more of the incoming providers. If their work is split between the services being taken on different providers, they may then transfer on proportional contracts to each provider.

This exercise is likely, in most cases, to be far from straight forward. In addition, the practical implications have yet to be fully understood, for example what happens if the employees choose not to (or cannot) work part time for two different employers? How can a transferee defend an automatic unfair dismissal claim from an employee who has resigned as a result of this adverse impact on their rights and working conditions.

Although we have referred to “employees” throughout this article, it would be remiss of us not to remind you of the employment tribunal decisions which have suggested that TUPE can apply to “workers” as well as employees. There is no binding appellate decision on this point at present, but it would be sensible to err on the side of caution and assume that workers are covered. As workers do not have unfair dismissal rights, the actual risks are limited, but they would be covered by the information and consultation and employee liability so do need to be considered during the planning and consultation process.

As always, if you have a practical issue which you would like to discuss, please get in touch.


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