Mind the TUPE gap
Graham Richardson considers a recent case where the Transfer of Undertakings (Protection of Employment) Regulations 2006 (“TUPE”) was found not to apply on termination of a Council contract, despite the service continuing with a new provider.
The case of CT Plus (Yorkshire) CIC v Black and Others [2016] UKEAT/0035/16/DM is a timely reminder that a situation which may at first sight look like an “open and shut” TUPE transfer may be found not to be a TUPE transfer if one or more of the legal tests is not satisfied.
Legal background
There are two types of TUPE transfer – a transfer of an undertaking and a service provision change. Subject to various conditions being satisfied, a service provision change will occur in any of the following circumstances:
- activities cease to be carried out by a person (“a client”) on his own behalf and are carried out instead by another person on the client’s behalf (“a contractor”);
- activities cease to be carried out by a contractor on a client’s behalf and are carried out instead by another person (“a subsequent contractor”) on the client’s behalf; or
- activities cease to be carried out by a contractor or a subsequent contractor on a client’s behalf and are instead carried out by the client on his own behalf.
Previous case law has made clear that there will not be a service provision change if at the same time as the change in service provider there is also a change in the identity of the client on whose behalf the service is being provided.
The facts
For some years there had been a park and ride car park in the outskirts of Hull, developed by Kingston upon Hull City Council (the “Council”). From time to time the Council invited tenders from bus companies to operate the park and ride bus service to the city centre, with a subsidy from the Council to offset the costs of running the service.
In 2009, CT Plus Ltd (“CT”) had successfully tendered for the service. It took over the service from another operator and accepted the employees under TUPE.
In 2013 the Council again invited tenders for the service. One of the companies that tendered was Lincolnshire Road Car Ltd (“Stagecoach”). For various reasons the tendering process was delayed, and Stagecoach decided that in fact it could run the service commercially without a subsidy, with a reduced service outside peak hours.
A subsidised service was not to be run in competition with a non-subsidised commercial service, and the Council gave notice to CT to terminate the subsidised service and withdrew the tendering process for a further subsidised contract. CT stopped providing its subsidised service at the same time as Stagecoach began to operate the new commercial service. While there had been a contract between the Council and CT for the provision of the subsidised service, there was no equivalent contract between the Council and Stagecoach for the provision of the commercial service.
Stagecoach denied that there was any TUPE transfer in respect of the commencement of the commercial service. It provided its own buses and staff to run the service and refused to take on any CT staff. CT however claimed that there had been a TUPE transfer to Stagecoach. CT’s employees were caught in the middle and brought claims in the Employment Tribunal. After considering the matter, the Employment Tribunal found that there had been no TUPE transfer, and the case was appealed to the Employment Appeal Tribunal (the “EAT”).
EAT decision
The EAT upheld the Employment Tribunal’s decision that there had been no service provision change under TUPE. This was because, in the EAT’s view, the service was no longer being provided for the same client. CT had previously been providing the service for the Council, with the Council being the client. Stagecoach was running the service on its own behalf as a commercial venture, and not on behalf of the Council – as such Stagecoach was not carrying out the activities on behalf of a client.
While Stagecoach liaised with the Council over a range of matters in relation to the service, there was no Council contract for the Stagecoach service similar to that with CT, nor was Stagecoach receiving any subsidy from the Council in respect of the service. This was enough to prevent there from being a service provision change under TUPE, as the Council was no longer the client in respect of the service.
Comment
It is easy to see why the CT employees who had been engaged in providing the bus service would be disappointed by a finding that there was no service provision change to Stagecoach. However, while the CT service had been provided for the Council as client, it was found that the Stagecoach service was not. According to the Employment Tribunal, the Council was no more than an “interested bystander” in respect of the Stagecoach service. The fact that the Council had ceased to be the client on the change in service was sufficient to prevent there being a service provision change under TUPE.
This case serves as a reminder that when considering whether there has been a service provision change under TUPE, all of the legal tests will need to be considered, and something which at first sight might appear to be a relatively minor issue may prevent a finding of a service provision change.
It should however be noted that just because there is no service provision change does not necessarily mean that there is no TUPE transfer. In any given case, it will also be necessary to consider whether there are the necessary ingredients for a transfer of an undertaking.
Whether or not TUPE applies is often a difficult legal issue which requires careful consideration of the relevant facts.
Graham Richardson is a Legal Director at Bond Dickinson LLP. He can be contacted on 0191 279 9456 or This email address is being protected from spambots. You need JavaScript enabled to view it..
