TUPE 2006 still hasn’t produced much caselaw on service provision changes, but one thorny point has been helped by the case of Kimberley Group Housing Ltd v. Hambley & Ors (UK) Ltd [2008] which deals with ’split’ service provision.
By way of reminder, the event that triggers a transfer under the service provision change provisions is when:
activities cease to be carried out by a contractor on a client’s behalf (whether or not those activities had previously been carried out by the client on his own behalf) and are carried out instead by another person on the client’s behalf
In this case the activities weren’t outsourced to just one successor, but two. So what happens to the jobs? The employment tribunal at first instance performed a strange exercise where they divided the contract between the two transferees.
In truth, a ’split’ transfer is a very similar problem to that quoted by opponents to service provision change transfers in the professional arena - sure, I do 70% for client A, but if I transfer to him then is it 70% of my job or 100% that goes? The only answer on a reading of the regulations can by that 100% goes, and Lady Smith applies the same principle to split transfers. The tribunal must analyse the facts to determine which of the transferees had received the majority of the activities to which the employees were assigned. That transferee is therefore the recipient of the employee’s principal activities and is thus the sole transferee.
The EAT also makes the valid point that this present case shouldn’t have caused so much of a headache, there is a line of authority deriving from ‘conventional’ transfers that some work performed for a third party won’t preclude an employee from belonging to the entity that transfers.
…it’s not exactly straightforward either, but any competent adviser can identify warning signs that mean the issue should be looked at. Say, for example, Mr Bloggs is tired of running Bloggs pharmacy, so he closes it and reaches a financial agreement with the local Londis or Spar or whatever that they’ll plonk a Bloggs Pharmacy at the back of their store as a franchise. As the new pharmacy won’t be owned by Bloggs he gives his staff notice of redundancy. Now, was there a transfer of an undertaking, business or part of an undertaking or business situated immediately before the transfer in the United Kingdom to another person where there is a transfer of an economic entity which retains its identity? Yes there was. I honestly don’t see how you can get round it. So, take the same situation, with Post Offices in major towns (such as my own), where they’re closed down and bunged at the back of WH Smith. Do the same principles apply?
For some mad reason the Post Office don’t ever seem to have considered the possibility - rather than start consultation on a transfer they simply wrote to offer a choice between voluntary redundancy or redeployment to another site. The unions are now bringing a claim based on failure to consult (easy money, 13 weeks’ pay per employee) that could cost them as much as £2,000,000. And all for failure to consult. Such is the elementary nature of the TUPE claim ene could cynically imagine that the possibility occurred to the Post Office yet they decided on a commercial basis not to proceed with consultation. But that would indeed be cynical.
It’s a cynical view that all you do when your company goes bust is put it into administration and buy it back, but would seem to be amply demonstrated by this case.
Company goes into administration, administrator has no money for wages so sacks all the staff, then duly sells business back to original owner. Is dismissal for a reason connected with the transfer, thus giving TUPE protection? No. The dismissal’s because the administrator didn’t have any money. The allegation that this is exactly what was planned by the owner all along isn’t relevant once you establish the motivation and mind of the actual dismissing officer.
This is a real kick in the balls for employees in this situation. Although I think the decision’s probably correct, the morals of it are amply spelled out by the court:
As counsel have identified, the critical question is whose decision was it? Once the answer is that it was the administrator’s decision, then nothing done by Craig Smith before that decision was taken nor after it could have any bearing on the reasons why Mr Rutherford acted as he did. The facts may give rise to the inevitable conclusion that Craig Smith cynically manipulated the insolvency of Friction, saw the opportunity of the August holidays as the best time to place the company in administration and did so not simply with a hope but with every expectation that by reason of Realty’s close association with Dynamex, Dynamex itself would soon fall into his palm. That is what happened. It is not an attractive story. It brings no credit to Craig Smith. But Craig Smith did not decide to dismiss the employees even though he knew that would happen and wanted it to happen. Mr Rutherford dismissed them. He did so for economic reasons.
Having decided as it seems to be to me inevitable that the reasons have to be discerned from the actions of the administrator whose actions were unsullied by Smith’s scheming, then there is only one conclusion for any tribunal to reach: the reason for dismissal was an economic one. As Mr Ralls recognised, if the focus is on Mr Rutherford’s state of mind, then he is “a shot fox”. Unsporting as shooting a fox may be and as lacking in fair play as Craig Smith’s machinations were, I am compelled to allow the appeal and restore the decision of the Shrewsbury Employment Tribunal.
This is not an uncommon situation, and there may well be some argument for legislation providing for extra accountability by those who purchase a business they owned until a few weeks before. Will this happen though? No.