TUPE - Case Round-Up: December 2015
In this month's round-up, Mark Shulman consultant solicitor with Keystone Law, looks at recent cases on transfers of undertakings.
Mark Shulman, Consultant Solicitor at Keystone Law
**TUPE Whether a relevant transfer** In [Hyde Housing Association & Ors v Layton ]()UKEAT/0124/15/MC, the EAT considered two interesting questions relating to transfers under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (SI 2006/246) ("TUPE"):-
(1) can there be a relevant transfer for TUPE purposes where an employee moves from an employment contract with one employer to an employment contract with several employers (including the original employer); and
(2) where the economic entity transfers to multiple transferees, including the original transferor?
Background From January 2005 the Claimant worked for Martlet Homes Limited ("M"), a registered provider of social housing. M joined the Hyde Group, becoming a subsidiary of Hyde Housing Association Limited ("HHA"), but the Claimant's employment remained with M. HHA acted as M's agent in paying the Claimant's salary.
When HHA subsequently restructured its organisation, employees who were unsuccessful in obtaining roles in the new structure were made redundant. Those who were successful, if not already on HHA contracts, would be appointed on new contracts, with HHA contractual terms and conditions, but with several separate entities constituting their employer on a joint and several basis (this being to provide flexibility and so as to ensure pension protection for some of the employees involved).
In July 2013, as part of the restructuring, a contract of employment was sent to the Claimant which stated that his employer was to be the Hyde Group, meaning that he would be jointly and severally employed by all members of the Hyde Group at any time. Although the Claimant was successful in keeping his job and was asked to sign a new contract, he did not do so because he objected to changes in terms and conditions under the new contract.
Following the restructuring affecting the Claimant, he continued working in the same planned maintenance team carrying out similar services and activities as before, with the same line managers, wearing the same uniform and badges and driving the same vans with the same logos. He was given notice and offered re-engagement on the terms and conditions set out in the new joint contract of employment. Accepting the offer of re-engagement, the Claimant maintained his dismissal (the termination of his former contract) was unfair.
The question then arose (as a preliminary issue) whether, following the restructuring affecting the Claimant, there had been a relevant transfer under TUPE. The ET held that responsibility for carrying out the business of the unit transferred had changed from M only, to M and the other members of the Hyde Group (the Respondents) and so there had been a relevant transfer for the purposes of Regulation 3(1)(a) TUPE. The Respondents appealed.
ARD As the TUPE Regulations were made under the EU Acquired Rights Directive 2001 ("ARD 2001"), it was common ground that the national Courts and Tribunals should interpret domestic law, so far as possible, in the light of the wording and purpose of the Directive.
The language used in some of the European case law assumed that one employer has ceased to employ the employee and that a new employer then stood in its place (see for example Landsorganisationen i Danmark v Ny Molle Kro  ICR 330). Cases before the domestic Courts have generally made the same assumption: a change in the identity of the employer is usually necessary in order for a transfer to arise.
*"Person" can include persons *The language under Regulation 3(1)(a) of TUPE refers to a transfer of an undertaking (or part) to "another person". Could this apply where there was a transfer to multiple transferees? Yes, said the EAT. Whilst the issue would inevitably be fact-specific, the EAT could not see that there was any principled reason why the singular should not be read as including the plural; "to another person" might equally allow for a transfer "to other people", provided such a transfer did not result in such fragmentation of the entity so that it lost its identity. If the economic entity in which the Claimant was employed had transferred from M to the other Respondents (grouped together under the umbrella of the Hyde Group), who thus became the employer on a joint and several basis, the EAT would not rule out that this could give rise to a relevant transfer for Regulation 3(1)(a) purposes.
Same original employer But what is the position as in the present case where one of the multiple transferees had the same legal entity as the original employer and transferor? Did this fall outside the scope of TUPE?
The Claimant's case was that on a practical level he was no longer employed by M acting by itself, but by M joined together with others and so taking a "real world" view that was "another person".
The EAT disagreed and pointed to difficulties in that approach. Regulation 4 (which looked at the effect of a relevant transfer on contracts of employment) assumes a difference in identity as between the "transferor" and the "transferee". Further, Regulation 2(1) refers to the transferor as the entity that had carried out the activities before a service provision change, as distinct from the person (the transferee) carrying out those activities as a result of the change. Whilst that sub-section related specifically to service provision transfers, it was unlikely to have been intended that there should be a different approach to the terms "transferor" and "transferee" for the purpose of transfers under Regulation 3(1)(a).
Factually in the present case, the control of the business (or relevant part) remained in the hands of M. That reality had not changed. The Claimant's employment relationship also remained with M. There was nothing in the ET's findings to suggest the reality was subsequently altered other than by the contractual addition of the other Respondents as jointly and severally liable for his employment.
Did TUPE implement the ARD? Looking at the language and purpose of the ARD, it was intended to protect employees and to safeguard their rights, but only where there is a change of employer where one natural or legal person has ceased to be the employer and where there is a transferee - a natural or legal person -which has become the employer. Article 3 of the ARD specifically allowed Member States to provide for the transferor and transferee to have joint and several liability - a concept consistent with these being separate legal entities. Further, a policy decision had been taken not to extend the protection of the ARD to all cases where there was a change – there is no protection where there is a change in control by means of a change in shared ownership. That is because the employee's legal position vis-à-vis their employer remains unchanged.
That principle ultimately provided the answer in this case: M retained liability for the Claimant's employment. That M's liability changed to a joint and several basis with the other Respondents did not change the position in relation to the Claimant. The identity of his employer had not changed in a way that is legally relevant for TUPE purposes, whether taking the TUPE Regulations or reading them in the light of a purposive construction derived from EU law.
The appeal was accordingly allowed with the EAT's decision that there was no relevant transfer. However, given the unusual nature of the point, the lack of previous authority and the potential wider importance of the question, permission to appeal was given.
Service provision change: task of short-term duration Under Regulation 3(3)(a)(ii) of TUPE there is no service provision change (SPC) where the client intends that the activities following the SPC will be carried out by the transferee in connection with a "task of short-term duration". Can events subsequent to a TUPE transfer be considered by an ET when looking at the client's intention under the short-term task exception? Yes, said the EAT in [ICTS UK Limited v Mahdi & Ors ]()UKEAT/0133/15/BA.
Background The Claimants were security guards at ICTS who had a contract with Middlesex University to provide security at the Trent Park Campus site. In 2012 the University closed the campus and it became a vacant site. ICTS continued to provide security at the vacant site.
However, the Claimants all lost their jobs following First Call taking over security at the site in November 2013. There was a dispute between ICTS and First Call as to whether there was a relevant transfer under the TUPE Regulations so the Claimants brought ET claims against both ICTS and First Call.
The EJ concluded that the activities carried on by ICTS and First Call at the site before and after 11 November 2013 (the alleged date of the TUPE transfer) were substantially the same and that the client remained the same. Therefore there was a TUPE transfer unless the "task of short-term duration" exception under Regulation 3(3)(a)(ii)applied.
First Call's position in its ET Response was that:
* the client planned to redevelop the site with a multi-million pound construction and renovation scheme; * that the security contract was not to provide security for an operating university campus (as had been the case with ICTS's original contract with Middlesex University) but to secure what was to become a building site (which entails completely different security requirements); * it had entered into a contract with a company who were contracted to manage the refurbishment; and * the contract was to provide security services for a three month period and thereafter until completion of the refurbishment.
However, First Call did not attend the ET hearing or present any evidence from the client. At the ET hearing in August 2014 there was uncontested evidence from ICTS that as at that date, no planning permission had been granted for any significant building at the site and none had taken place.
In looking at the client's intention, the EJ had decided that:
"It is also clear that I must determine the intention as at 11 November 2013 and I cannot look back at previous events that have occurred since then up to the date of the hearing. I made no findings in relation to what happened subsequently for that reason …"
Permitted inferences The EAT thought that in deciding the client's intention, it would almost invariably be necessary for an ET to draw an inference from all the relevant surrounding circumstances presented to it. Such circumstances could include:
(i) contemporaneous expressions of intent and actions by the relevant party or its agents;
(ii) what the party says or does not say after the relevant event, in particular in response to the forensic process; and
(iii) subsequent events (or non-events), provided that those events are capable of casting light on the intention of the relevant party at the relevant date.
The ultimate issue to be decided was intention and not outcome.
Client's intention The EJ decided that the intention of the client was that the campus would only remain unoccupied for a limited period of time, probably no more than a year. The security of an unoccupied site was therefore "a short-term operation". He said:
"… I have no reason not to accept the contents of [First Call's] letter …which explicitly indicated that there would either be the arrival of building contractors or the re-opening of the campus [though no] indication was given as to the time that that would take. …"
The EJ concluded that it was clear on the evidence that the client "…had an intention either to redevelop the site or to re-open the campus". On that basis, the EJ found that the condition in Regulation 3(3)(a)(ii) was not satisfied and TUPE did not apply with the consequence that the Claimants' contracts of employment and claims did not transfer to First Call but remained with ICTS. ICTS then appealed.
Subsequent events The first ground of appeal was that the EJ was wrong to ignore events occurring after 11 November 2013. It was argued that the EJ should have made findings based on the unchallenged evidence from ICTS that at the time of the hearing no planning permission had been obtained and no building work had started at the site and he therefore should have considered these facts as part of all the circumstances when determining the client's intention on 11 November 2013.
The EAT agreed. Findings that no planning permission had been obtained and that no building work had been carried out by August 2014 may have impacted on the EJ's decision by (a) casting (further) doubt on the reliability of what was said in the letter from First Call to ICTS in relation to the client's intentions (to proceed with building contractors or the re-opening of the campus), and (b) raising questions as to whether it could genuinely have been intended that the "task" would be "of short-term duration". That error of law may have made a difference to the result.
Burden of proof Another ground of appeal was that the EJ had misapplied the burden of proof in relation to Regulation 3(3)(a)(ii). Was it for the party relying upon the exception "to establish that the exception applied" (as per Slade J in Robert Sage Ltd v O'Connell ?
The EAT dismissed this part of the appeal. It agreed with the Claimants that the EJ was entitled to consider the issue regardless of what evidence First Call did or did not provide. A Judge presented with an issue of fact must do their best to make a finding by drawing inferences if necessary and that only if they are unable to reach any view is it appropriate to fall back on the concept of the burden of proof. That conclusion was not inconsistent with the principle in Robert Sage Ltd and also avoided the potential unfairness for Claimants of being prejudiced by a situation where a putative transferee cannot, or will not, bring relevant evidence to the ET.
Having allowed the first ground of appeal cornering the consideration of subsequent events, the EAT remitted the case to the ET for further consideration.
**Detrimental change in terms *The TUPE Regulations impose restrictions on an employer's ability to change the terms of employment of transferring employees. In [Aguebor v PCL Whitehall Security Group & Anor ]()*UKEAT/0078/14/JOJ, the EAT had to consider whether a Claimant had suffered a detrimental change to his working hours, entitling him to claim constructive dismissal. It was contended that there had been a TUPE transfer and so his terms and conditions had carried over and any detrimental variations were of no effect by reason of TUPE. (It should be noted that this case was decided by the ET before the broader changes to terms and conditions after a TUPE transfer as currently allowed by the Collective Redundancies and Transfer of Undertakings (Protection of Employment) (Amendment) Regulations 2014 (SI 2014/16)).
Background The Claimant was originally employed by Securiplan plc as a security officer. His contract stated that whilst there were "…no normal working hours applicable..." the "contracted hours will generally be 56 hours per week unless otherwise agreed".
When security services were taken over by PCL following a TUPE transfer, the Claimant was given a statement of terms which stated that "Due to the nature of security work "The Company" cannot guarantee either maximum or minimum hours available". In fact the Claimant continued to work regular hours as before until April 2013 when his employment was then further transferred under TUPE to KSG. Both PCL and KSG endeavoured to find alternative work for the Claimant, but his role changed dramatically and his pay was cut. He resigned claiming that his treatment amounted to a fundamental breach of contract and entitling him to claim constructive dismissal.
An ET found that there was no breach of contract because it clearly stated in his contract that there were no minimum working hours. The ET dismissed a claim of constructive unfair dismissal and the Claimant appealed.
Detrimental change in working hours The Claimant's case was that TUPE had applied so that his terms and conditions with Securiplan were carried over to PCL and any detrimental variations were of no effect by reason of the TUPE Regulations. The Securiplan contract had defined working hours as "generally … 56 hours per week unless otherwise agreed" and the Claimant had in fact consistently worked 66 hours per week since the year 2000.
KSG conceded that if a provision of the PCL terms was detrimental to the Claimant when compared to the Securiplan contract, that provision would be void under TUPE. However, it contended that no minimum hours of work were guaranteed by the Securiplan contract, which simply provided that no more than that 56 hours would "generally" be the hours worked. Further, the reference to "full-time employment" in the Securiplan terms denoted no more than a prohibition on outside work without management permission.
Contractual hours The EAT agreed with the Claimant. The Securiplan contract could not be read as if it were a zero-hours contract giving the Claimant no entitlement to work. It entitled him to 56 hours per week unless otherwise agreed. The qualification of the 56 hours by the word "generally" allowed some latitude for a short period of time or for an emergency, but it could not be read as permitting the employer to reduce the Claimant's hours unilaterally below that level for any significant period. If therefore the stage was reached where the Claimant was no longer generally offered 56 hours per week and if he did not agree, there would be a breach of contract.
The PCL terms were very different in this respect. They expressly stated that there was no guarantee of either maximum or minimum hours of work and that hours may be varied by the company at any time at its absolute discretion. Therefore, the EJ had erred in law in finding that there was no significant difference between the two contracts. The EJ ought to have approached the Claimant's claim for constructive dismissal on the basis that he had the benefit of the Securiplan agreement.
Accordingly, if the stage was reached where the Claimant was no longer generally offered 56 hours per week and if he did not agree, there would be a breach of contract. But the EJ had made no findings as to whether the Claimant was given or offered work in accordance with that contract.
Therefore, that matter would have to be remitted to the ET for findings to be made on the question of constructive dismissal.
Mark Shulman is a Consultant Solicitor with Keystone Law and an accredited workplace and employment mediator. His blog on new employment legislation can be found here.
Published: 14/12/2015 12:53