TUPE update


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Here is our latest update on the most recent TUPE decisions of interest. In addition, the imminent arrival of the General Data Protection Regulation (GDPR) has been keeping those tendering for contracts on their toes. We have been hearing anecdotally that existing incumbents, rather than handing over specific information on staff, have been providing aggregate figures of staffing costs which makes the tendering process challenging to say the least!

Fragmentation

Earlier this year, the Employment Appeal Tribunal (EAT) held in London Care v Henry that a tribunal, in considering whether there has been a TUPE transfer after a service provision change, should clearly identify "the relevant activities" that have transferred.

The decision in Henry makes it clear that, in a situation where activities are distributed among a number of contractors, it is important to look very carefully at the activities of the services being carried out before determining whether fragmentation will apply.

In coming to its decision, the EAT referred to previous law and confirmed that it must look at two key issues; were the activities pre and post-transfer "fundamentally or essentially the same", and was there an organised grouping of employees that had as its principal purpose the carrying out of the activities concerned on behalf of the client. This continues to be the correct approach when determining whether fragmentation has occurred.

No TUPE transfer where there was a long gap between old and new contracts

The Advocate General gave his opinion that there was no transfer of an undertaking for the purposes of the Acquired Rights Directive (ARD) where the contract to operate a Spanish music school terminated for non-performance and the service was resumed by another contractor after a gap of five months in Colino Sigüenza v Ayuntamiento de Valladolid and others.

The Advocate General held that there had been no transfer of an undertaking for the purposes of the ARD. In order to amount to a transfer under the ARD there had to be an organised grouping of persons and assets, organised with a view to carrying on an economic activity. Here there was no economic activity as Musicos had been incorporated solely for the purposes of tendering for the music school contract (it did not provide services to anyone other than the public authority), so when the contract came to an end so did the activity of Musicos. The fact that there was a five-month gap in services did not necessarily preclude a finding that this was a going concern. However, the period of inactivity was not confined to the summer holiday, and was therefore much longer than the services users (the parents and pupils) would have expected.

TUPE transfer where equipment taken over but not staff

The Court of Justice of the European Union (CJEU) has held in Securitas v ICTS Portugal that there can be a transfer of an undertaking where a new contractor takes over security services from a previous contractor without accepting the employees assigned to that work, if the new contractor takes over equipment essential to delivering those services.

Securitas won a contract for security services at a port, refusing to accept that 17 staff employed by the previous contractor ICTS had transferred to its employment. The CJEU held that where an activity is essentially based on manpower, when a new provider does not take on employees, an economic entity won't retain its identity so there would be no transfer. However, if an economic entity is based essentially on equipment, not taking on employees would not stop a transfer occurring. It was up to the national court to decide whether ICTS had transferred equipment to Securitas, or tangible or intangible assets for the purpose of security activities.

In order to object to a transfer a transfer must have taken place

The High Court has considered whether a senior executive who had been placed on garden leave could claim that a subsequent share sale constituted a transfer to which he could object in order to end his period of garden leave early and go and work for a competitor in ICAP Management Services Ltd v Berry.

Mr Berry worked for ICAP Management Services Ltd (ICAP) which was a service company for the ICAP Global Banking Business (IGBB). On 22 July 2016 he gave written notice terminating his employment (he had a twelve month notice period) and was placed on garden leave. Three days later, BGC Services (Holdings) Ltd (BGC) a global brokerage company and competitor of IGBB issued an announcement that Mr Berry would be joining the company subject to his outstanding legal obligations.

During the garden leave period ICAP was the subject of a share sale acquisition by Tullett Prebon plc (Tullett). Mr Berry notified ICAP that he considered the acquisition of ICAP by Tullett as a transfer under TUPE and that he objected to his employment transferring, leaving him free to work elsewhere. The High Court disagreed, holding that there was a need for a change of employer. Here there was no such change. It was business as usual with ICAP and Tullett continuing to function as separate businesses despite their common ownership. There was no TUPE transfer here and therefore nothing for Mr Berry to object to in order to escape his contractual obligations to ICAP (his employer).

Pre-pack administration does not preclude TUPE protection

The CJEU has held that a "pre-pack" administration of a company did not mean that TUPE protection does not apply when an undertaking is transferred in FNV v Smallsteps.

A Dutch trade union sought a declaration that employees had transferred after a group of childcare centres were acquired under Dutch insolvency law via a "pre-pack" administration. The CJEU considered the central issues of how the Acquired Rights Directive applies to transfer employees in situations where a business is being salvaged (for example an administration), where TUPE would apply, or liquidated for the benefits for creditors, where it would not apply.

Administration (including "pre packs") is not ultimately aimed at liquidating the undertaking so the employees will not lose the right to transfer when all or part of that undertaking is transferred. A transfer will not occur in the event of bankruptcy proceedings "or any analogous insolvency proceedings".

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