Employment Alert No. 167: TUPE: No Service Provision Change Where Activities "Wholly Different"
October 8, 2009
OCS Group UK Ltd v. Jones & Another UK EAT/0038/09
The EAT has held that the service provision change provisions of the Transfer of Undertakings (Protection of Employment) Regulations 2006 ("TUPE") did not apply to the re-tendering of a catering contract where the activities carried out by the incoming contractor were .wholly different. to those carried out by the outgoing contractor.
Facts
Mrs Jones and Miss Ciliza were two of six Claimants chosen to be test cases concerning various claims arising from the termination of OCS Group UK Ltd.s ("OCS") catering contract at the BMW car plant.
OCS is a large company operating a number of fully managed service contracts including catering. In April 2005 OCS entered into a contract to provide catering services to the BMW car plant ("OCS contract"). The OCS contract provided for a centrally located restaurant and deli bar facility supported by four "satelites" and a general shop. The Claimants were the chefs/supervisors who worked in the satelites. The satelites were required to prepare and provide a range of hot and cold meals. OCS.s catering staff spent a .great deal. of time in the preparation of the hot meals.
OCS was losing money on the contract and wanted to try and re-negotiate it. That was not successful and the OCS contract ended. MIS started its service provision on 1 August 2007 ("MIS contract"). The MIS contract provided for substantially reduced meal services, sellling only pre-prepared sandwiches and salads. There was also no requirement for hot food preparation at the satelites.
OCS said that there had been a service provision change and so TUPE applied to transfer the catering staff to MIS. MIS said it did not.
Law in the UK
TUPE applies where there is either a traditional "business transfer" or where there is a "service provision change", ie an outsourcing, insourcing or re-tender.
For TUPE to apply to a business transfer, the undertaking in question must have retained its identity after the transfer. When TUPE was amended in 2006, the requirement for identity to be retained was purposefully omitted from the, then new, service provision change drafting. This led to the commonly held view that all service provision changes would be subject to TUPE even where the service had differences before and after the transfer.
Decisions
The Employment Tribunal concluded that the MIS contract was .materially different. to the OCS contract. Accordingly, the ET held no service provision change had occurred. OCS appealed on the basis that because the core activity was still catering, TUPE should apply.
The EAT held that as for normal business transfers, a service provision change will not be subject to TUPE if there is not a sufficient degree of retention of identity. Minor differences could be disregarded, but the activities needed to be "fundamentally and essentially" the same pre and post transfer before it could be said that the same activity had been retendered from contractor A to contractor B. Therefore, once the Tribunal had correctly identified that the activity in question was not merely the provision of food for staff, but a full catering service, they were on the facts entitled to decide that there were substantial differences in the MIS contract. That was an issue of fact for the Tribunal.
What this Means In Practice
After the 2006 Regulations came into force, it had been thought that the position for the contracting industry would be clear . ie on any service provision change, TUPE would apply. This decision contradicts the view that all service provision changes will be subject to TUPE. Whether TUPE applies will now depend on all the facts and circumstances. It allows the possibility that the incoming contractor may seek to change the nature of the services so as to seek to avoid TUPE applying. However, this case does not mean that .tweaking around the edges. of how a service is delivered will mean that TUPE will not apply.
Contractors entering into new service provision contracts will therefore want to consider how to best protect their interests if it is not certain that on service provision change, TUPE will apply.
While this case indicates that not all service provision changes will be transfers, it is still likely that most Tribunals will find that most service changes are transfers to give effect to the legislative purpose behind TUPE of protecting employment in the context of business change.
In consequence, while most service provision changes will continue to be subject to TUPE, the contracting parties involved are likely to be involved in a more contentious and uncertain process than has recently been the situation. This case creates uncertainty where before there was none.
