TUPE Conundrums: can an employee’s contract, be split between multiple employers, following a service provision change?

5th May 2021 Employment

In McTear Contracts v Bennett and others, the Employment Appeal Tribunal has held that the decision of the European Court of Justice in Govaerts (relating to business transfers) can also apply to service provision changes.

This means that where there is a service provision change where a relevant transfer to multiple transferees takes place, the employment contracts of transferring employees can be split between each employer, in proportion to the tasks performed by the employee.

Background

The case of McTear related to the retendering of a contract by North Lanarkshire Council to replace kitchens in their social housing properties.

Amey Services Ltd (“Amey”) were the sole provider of the services and they had divided the contract into two teams who generally worked independently of each other.

When the contract was retendered, North Lanarkshire Council decided to split the contract into two separate contracts, determined by geographical area (one contract for the North and one contract for the South). The contracts were awarded to McTear Contract Ltd (“McTear”) and Mitie Property UK Ltd (“Mitie”).

Amey therefore conducted an analysis to establish which employees would transfer to McTear and which would transfer to Mitie. This exercise involved considering the geographical areas in which each team had worked during the previous 12 months and comparing this result to the geographical split under the new contracts.  

Amey decided to allocate one team to McTear and the second team to Mitie based on the results of the exercise.

However, both Mitie and McTear refused to accept the transfer of the employees as they disputed whether there was a transfer and if there was, whether any of the employees did in fact transfer.

The Claimants therefore issued proceedings in the Employment Tribunal.

Employment Tribunal Decision

When this case was originally determined, the Employment Tribunal were bound by a case involving Kimberley Group Housing Limited (“Kimberley”). The position in Kimberley was that where a contract is split between employers, an employee could only transfer to one employer and not to both.

Applying the Kimberleydecision, the Employment Tribunal held that there had been two separate service provision changes, one between Amey and Mitie and the other between Amey and McTear.

The Employment Tribunal concluded that the employees had transferred to each of the transferees in accordance with the outcome of Amey’s exercise.  

Employment Appeal Tribunal Decision

McTear and Mitie appealed this decision to the Employment Appeal Tribunal on various grounds, one of which being that the Employment Tribunal had failed to consider the position of each individual position, and that some of the employees may simply not have transferred.
Further, they argued that the Tribunal had failed to consider the decision of the European Court of Justices’ in “Govaerts”, which had not been handed down at the time of the original Tribunal judgement. In Govaerts, it had been determined that the relevant EU legislation did not prevent an employee’s contract being split into part-time contracts, in the context of business transfers.

Taking this into consideration, the Employment Appeal Tribunal held that although there was no requirement to apply the decision of Govaerts to service provision changes (as Govaerts had only considered business transfers), it would be undesirable for there to be a difference in approach.

It is therefore possible that an employee may transfer to two or more separate employers, if the work is clearly separate and identifiable in either a business takeover or service provision change situation. As a result, an employee may hold two or more contracts of employment with different companies.

The Employment Appeal Tribunal also highlighted the importance of making an individual assessment as to whether each employee transfers and to whom, rather than simply relying on a team-based assessment as Amey did.

Practical Considerations

Unfortunately, the Tribunal and the Employment Appeal Tribunal did not consider in any depth the practical and operational difficulties that have arisen because of this judgement.

This outcome gives rise to a number of difficult questions for employers, such as how will the employees’ working time be divided where they have transferred to more than one employer.

It is also crucial that businesses consider carefully the role of each employee and make an individual assessment as to whether the employee is eligible to transfer and to whom they will transfer.

Businesses will also need be aware of the complexities that may arise in valuing potential claims, as it is currently unclear how compensation will be separated between multiple transferees, or how liabilities for claims such as failure to inform and consult may be distributed.

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Charlie Bradbury is a Trainee Solicitor located in Manchesterin our Trainee Solicitors department

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Laura Pointon is a Senior Associate located in Manchesterin our Employment department

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