11/02/2016

TUPE: Suspension of Operations Prior to Change of Contractor

Uncategorized

Employment Appeal Tribunal

In one of her first judgments as President of the Employment Appeal Tribunal (EAT), Mrs Justice Simler has considered the effect of the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) in a complex case in which a subcontractor first suspended and then ceased operations several weeks before the main contractor was replaced by two new contractors. The President’s decision in Mustafa and another v Trek Highways Services Ltd and others UKEAT/0063/15/BA 29 January 2016 examines a range of issues which commonly arise when service contracts change hands. Her key conclusions are the following:

• A temporary cessation of activity prior to a change of contractor does not prevent the transfer of an undertaking or a service provision change (SPC). Approving the decision of HH Judge Serota QC in Inex Homes Improvements Ltd v Hodgkins and others [2016] ICR 71, the President held that a grouping of employees does not have to be working immediately before a change of contractor in order to be an “organised grouping”. Rejecting an attempt by the respondents to distinguish Inex, the President concluded that the fact that the main contractor made interim, ad hoc arrangements to provide the relevant services to the client could not alter the conclusion that the temporary cessation of activity by the subcontractor was not in itself sufficient to destroy the organised grouping of employees.
• In deciding whether an SPC is excluded by the exception in regulation 3(3)(a)(ii) relating to activities connected with a task of short-term duration, the question is not whether the client intends the transferee’s involvement to be short-term but rather whether the transferee’s intended involvement is in connection with a task of short-term duration. Where, as was the case in Mustafa, the relevant services are required by the client on an ongoing basis, their provision cannot be regarded as a task of short-term duration, even if the transferee’s involvement is itself short-lived.
•  Where employees are a critical part of the organised grouping of resources, an employment tribunal has a duty to consider why the putative transferee did not take them on. If its reasons for not doing so reflected an intention to avoid a transfer or an erroneous view that TUPE did not apply, the tribunal will be required to deem the workforce to have transferred for the purposes of carrying out its multi-factorial assessment.
• The fact that the incoming contractor does not organise the service in precisely the same way as the outgoing contractor is not a relevant consideration in determining whether the economic entity has retained its identity. What matters is whether the new contractor pursues identical or analogous activities using elements of production that transferred or should be deemed to have transferred.
• A putative transferor will not be regarded as having dismissed the workforce if it informs them that they have transferred to the putative transferee or attempts to persuade the transferee that there has been a transfer, because such actions do not evince an intention to terminate the employees’ employment.

The suspension of activity shortly before a change of service provider which was the key feature of this case is by no means unusual. The judgment in Mustafa makes clear that such intermissions require careful analysis, because they may well form part of a chain of events which gives rise to a relevant transfer.

The Appellants, whose claim was supported by their trade union UNITE, were represented by Melanie Tether of Old Square Chambers and Nabila Mallick, instructed by Michael Michaeloudis of Thompsons.

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Case summary

Judgment

UKEAY/0063/15/BA
Mustafa, TUPE, EAT, Tethers, Old Square Chambers, Trek Highway