Employment E-Bulletin: January 2020

TUPE – Service Provision Change
Deliberately Organising Workforce to Take Advantage of TUPE
Mattravers and others (C) v Ian Williams Ltd (R1) and R and M Williams Ltd (R2)

Preamble

This short e-bulletin is prepared for the benefit of our instructing solicitors, prior to the written judgment being published. A fuller analysis of the consequences and effects of the judgment will be included in our spring newsletter.

Background

Ian Williams Ltd, R1, the purported transferor, provided building maintenance services to Cardiff City Council. The Council put its contract out for re-tender, but stipulated that it was to be split into three geographical regions and no single bidder could be successful in more than one area.

R1 was unsuccessful in its bids, whilst three new contractors, including R2, the purported transferee, won one of the three geographical areas.

In response to the news that it had been unsuccessful, the transferor rearranged its workforce to ‘match’ the geographical arrangement of the new tender, with the explicit intention that it would thereby be captured by TUPE, so the activities pre-transfer were ‘fundamentally the same’ (r.3(2A)) as those post-transfer, as the activities did not fragment at the moment of transfer.

First Instance

At first instance it was argued by R2 that the deliberate organising of the workforce by R1 in this manner was not compliant with TUPE. The ‘purpose’ of the organised grouping of employees was not to do the activities on behalf of the client, but the purpose was to avail R1 of the benefits of TUPE.

The Tribunal disagreed and found that there was an organised grouping of employees, that those employees were assigned to the activities of the client, and that those activities remained fundamentally the same before and after purported transfer. The Tribunal found that the ‘motive’ of the transferor (i.e. to avail itself of the TUPE protections) in creating the organised grouping was an irrelevance.

At the EAT

R2 appealed. The grounds of appeal were multifaceted but focussed on the word ‘purpose’. Essentially, it was argued that ‘purpose’, within the regulations, is the purpose, the intention or motive of the employer, R1, in creating the organised grouping of employees, and if that primary purpose is not the work/activities on the client’s behalf, then this cannot be a TUPE transfer.

The argument advanced by R1 was that the word ‘purpose’ related to the purpose of the organised grouping, i.e. what activities was it tasked to do rather than the motive behind the creation of the organised grouping in the first place. Further, by examining the language in reg 3(a)(i), the word ‘its’ clearly attaches the purpose of the organised grouping to the activities on behalf of the client, and so long as the activities were fundamentally the same before and after, then any ideas of motive should not be taken into account.

The EAT agreed with R1’s submissions.

Conclusion

When dealing with an SPC it is perfectly legal, i.e. compliant with TUPE, to pre-empt the cessation of the contract and to deliberately organise the transferor’s workforce so as to avail itself of the benefits of TUPE.

Richard Shepherd

Practice Areas: 
Employment