Employment Law

Eighth edition

by Deborah Lockton

Update for Chapter 9

Unfair Dismissal

This update was last revised in October 2012
9.2.5(b) What is a relevant transfer?

After the discussion of OCS Group Ltd v Jones and another please note

After OCS there were a number of cases clarifying exactly what is needed for a service provision change to have taken place. In Hunter v McCarrick [2011] UKEAT 0617/10/DA the EAR held that for there to be a service provision change under Reg 3(1)(b) the activities carried out by the providers before and after the transfer must be carried out for the same client. Likewise in Nottinghamshire Healthcare NHS Trust v Hamshaw and ors [2011] UKEAT 0037/11/1907 the EAT held that there could not be a service provision change where the services provided to the client are not fundamentally or essentially the same as they were before the transfer and in Johnson Controls v UK Atomic Energy Authority [2012] UKEAT 0041-12-1402 the EAT held that there is no service provision change when the service is conducted in a fundamentally or essentially different manner following the transfer. Finally in Eddie Stobart Ltd v Morman [2012] UKEAT 0233/11/1702 it needs to be shown that the group of employees are assigned to the service being transferred. In the case the employer had 35 employees at a site providing warehousing and logistics services for at least 5 clients. The contracts reduced to two, the principal one relating to Vion. The employer closed the site and another company took on the Vion work. The employer decided that any employees who worked 50% or more on the Vion contract should transfer to the new provider. The EAT however held that there had not been a service provision change within the meaning of regulation 3(1)(b). The employees were organised according to their shifts and not assigned to a particular customer therefore they were not to the service provided to that customer.
HHJ Peter Clark summarised the principles related to service provision changes in Enterprise Management v Connect-Up [2011] UKEAT 0462/10/CEA at paragraph 8:
  1. An SPC arises when activities cease to be carried out by the contractor on a client's behalf and are carried out instead by a subsequent contractor
  2. The expression "activities " is not defined in the regulations thus the first task for the tribunal is to identify the relevant activities carried out by the original contractor.
  3. The next question is whether the activities carried out by the subsequent contractor are fundamentally or essentially the same as those carried out by the original contractor. Minor differences can be disregarded.
  4. Cases may arise where a division of services after the relevant date, known as fragmentation, amongst a number of different contractors means that the case falls outside the SPC regime.
  5. Even where the activities remain essentially the same before and after the transfer date an SPC will only take place if the following conditions are satisfied:
    (i)There is an organised grouping of employees in Great Britain which has as its principal purpose the carrying out of activities concerned on behalf of the client;
    (ii)The client intends that the transferee, post SPC, will not carry out the activities in connection with a single event of short term duration;
    (iii)The activities are not wholly or mainly the supply of goods (rather than services) for the client's use (Reg 3(3))
  6. Finally by reg 4(1) the tribunal must decide whether each claimant was assigned to the organised grouping of workers.
In the later case of Argyll Coastal Services Ltd v Stirling and ors [2012] UKEAT 0012-11-1502 Lady Smith gave guidance on the interpretation of key phrases in regulation 3 and 4:
  1. 'An organised grouping of employees' connotes fewer employees than the transferor's entire workforce, deliberately organised for the purpose of carrying out activities required by the particular client contract and who work as a team;
  2. 'Situated in Great Britain' is, naturally enough, just that, albeit that part of the organised grouping may work outside Great Britain;
  3. 'Principal purpose' should bear it ordinary meaning; it need not be sole purpose;
  4. In considering 'activities' carried out, consider what was it that the client required of the transferor, rather than simply characterising the activities.
Argyll was followed by the later ET case of Seawell v Ceva [2012] UKEAT 0034/11/B1 which held that where the was one employee who spent 100% of his time on one contract and other employees spent small percentages of time on the same contract along with working on several other contracts, there was not an organised grouping of employees because essentially the group consisted on one. It appears that whether or not there is a service provision change will continue to exercise the mind of judges for some time to come.
9.2.5(c) The effect of the transfer
After the phrase "all rights, powers, duties and liabilities under or in connection with any such contract" in paragraph 2 please note

In Parkwood Leisure Ltd v Alemo-Herron and ors [2011] UKSC 26 referred to the ECJ for a preliminary ruling on whether regulation 4 should be read as meaning that the transferee was not bound by any collective agreement made after the expiry of an agreement in force at the point of transfer if the employer was not a party to the collective bargaining machinery concerned. Previous case law in the UK had held that the transferee was bound to give effect to later negotiated agreements if the employees' contracts allowed this. At the time of writing the ECJ has not yet given its opinion.

After the discussion of the Transfer of Undertakings (Pension Protection) Regulations 2005 please note

While Regulation 10 excludes the transfer of retirement benefits under TUPE, the ECJ cases of Beckmann v Dynamco Ltd [2003] ICR 50 and Martin v South Bank University [2004] 1 CMLR 472 decided that early retirement benefits fall outside regulation 10 and do transfer. In the case of Procter &Gamble v SCA [2012] EWHC 1257 Procter and Gamble had sold its Family Care business to SCA. Employees at the Manchester site transferred to SCA under TUPE. Their contracts with Procter and Gamble contained early retirement benefits and the employees argued these had transferred to SCA. Hildyard J said that although the early retirement benefits were discretionary they fell within the definition of "rights and obligation" and thus transferred to SCA. However, SCA was only liable for the enhancement up to normal retirement age and not beyond as TUPE is there to protect employment rights and not enhance them, given the transferred employees were already entitled to a deferred pension from Procter and Gamble.

After the discussion of Jackson v Computershare Investor Services please note

However, in Smith v Trustees of Brooklands College [2011] UKEAT 0128/11/ZT the EAT ruled that an agreed variation is effective when the transfer is not the sole or principal reason for it. In the case teaching assistants employed by Spelthorne College worked part time but were paid full time. The college was transferred to Brooklands under TUPE and Brooklands, realising that the employee's pay was out of line with the rest of the sector, got them to agree to a reduction in salary. Subsequently the employees argued that the variation was void because of regulation 4 (4). The EAT held that the reason for the reduction was not the transfer but the need to correct an obvious mistake in pay and as such the variation was valid.
9.2.6 Effective date of termination
After Robert Cort v Charman please note

In Wang v University of Keele [2011] IRLR 542 the EAT held that unless the contract states otherwise contractual notice, whether oral or written, runs from the day after notice is given. Further in Horwood v Lincoln County Council [2012] UKEAT 0462-11-0304 the employee sent a clear letter of resignation but later the employer informed her that it was taking a later date as the date of termination. The EAT stated that an employer could not unilaterally alter the EDT and, as such the EDT was the date of the resignation and not the later date.
9.7.3 Transfer of undertakings
At the end of the discussion please note

In Spaceright Eurpoe Ltd v Baillavoine [2011] EWCA Civ 1565 the Court of Appeal have stated that the transfer does not have to be in contemplation at the time of the dismissal for the dismissal to be caught by regulation 7 and also that a dismissal to make a business a more attractive proposition to prospective transferees is not an ETO reason.
9.9.2 Re-engagement
At the end of the discussion please note

However in Manchester College v Hazel and anor [2012] UKEAT 0642-11-0907 the provision of education in the prison service was transferred under TUPE to Manchester College. After the transfer the transferee discovered extra costs which had not been uncovered during due diligence. It asked for voluntary redundancies and afterwards changed the terms of some of the transferred employees to harmonise them with its existing employees. These changes involved pay cuts. Two employees refused to agree to the changes and were dismissed and offered new contracts on the reduced terms. They accepted but made unfair dismissal claims in respect of their old contracts. The tribunal said that while harmonisation of terms could be an ETO in this case it did not entail a change to the workforce as the issues of redundancies and harmonisation  were separate. As such, the dismissals were for a reason connected to the transfer and as the ETO defence did not stand they were automatically unfair. The employees asked for re-engagement on their old term and this was granted by the tribunal, a decision upheld by the EAT.

It is suggested that this is a very effective remedy for employees who are forced to accept reduced terms due to a harmonisation after a TUPE transfer.