Facilities staff will not automatically transfer under TUPE if client changes at the same time as service provider, tribunal confirms
Regulations designed to protect employees when the company they work for is taken over by a new owner will not apply where the contractor providing business services changes at the same time as the client for whom those services are being carried out, the Employment Appeal Tribunal (EAT) has confirmed.28 Jun 2012 in its ruling
In this case, Mr Crofts (a security guard), was employed by Reliance Security (“Reliance”) at student accommodation called The Glasshouse. The property company which entered into a contract for security services with Reliance went into administration after which management of the site was taken over by another company which continued to pay Reliance for those services. However, when the site was later taken on by the Mansion Group, Reliance lost its contract to a new security services contractor, Taurus. Reliance told Crofts that his contract had automatically transferred to the new security services contractor, Taurus, under TUPE, however Taurus disagreed.
Reliance, the original security service provider, had argued that its case could be distinguished from the decision in the December ‘Hunter’ case (a case subject to appeal). As there was a slight delay between when the contract for the sale of the property was drawn up and when it was signed, the security guard, Mr Crofts, must have remained in his role as part of a duty on the part of the seller to “maintain the property in a reasonable state of preservation” before the Mansion Group moved in.
However, Mr Justice Richardson said in his ruling that this duty did not necessarily make the Mansion Group a “client” of Reliance’s.
“I have no doubt that I should follow Hunter,” [added Hunter below, for ease] said Mr Justice Richardson in his ruling. “It does not follow that, because the vendor owes a duty to the purchaser to maintain the property in a reasonable state of preservation, the purchaser is the client of those whom the vendor engages to perform the duty. On any normal use of language, the vendor is their client.”
He added that it was not up to him to decide whether the judge in the Hunter case had decided the issues wrongly since “as a general rule the Appeal Tribunal will follow its own decisions, particularly where they are considered decisions after argument on the point, and where there are no conflicting appellate decisions”.
Croft must therefore pursue Reliance rather than Taurus for potential unfair dismissal, he said.
Hunter v McCarrick
19. The essential facts of Hunter were the following. Mr McCarrick was employed by Waterbridge (whose managing director was Mr Hunter), running a small team who managed a portfolio of properties which it owned. In February 2009 Waterbridge agreed to sell those properties to Midos. Mr McCarrick’s employment (along with others in the team) transferred to a subsidiary of Midos. The team continued to manage the properties. However the sale was postponed; and in August 2009 a secured lender appointed receivers to assume control of the properties. Once the receivers took control there was nothing more for Mr McCarrick and his team to do. However, Mr Hunter, hoping to see the properties come out of receivership, employed Mr McCarrick and others in the team for some months to run a property management service.
20. When Mr McCarrick and Mr Hunter eventually parted ways, in March 2010, the question arose whether there was a service provision change within the meaning of TUPE in August 2009. The Tribunal found that there was. The Appeal Tribunal overturned that finding.
“2. The appeal raises the question of whether there can be a service provision change within the meaning of reg. 3(1)(b) when there is not only a change in the contractor providing services but also a change of client.”
“27. In our judgment ‘the client’ in Regulation 3(1)(b)(ii) refers back to a specific client. The specific client referred to earlier in the provision is the client on whose behalf the transferor contractor carried out activities. The use of the definite article ‘the’ must refer back to ‘any client’. Regulation 3(1)(b)(i) applies to contracting out activities which were carried out by the client himself, ‘a client’, and are to be carried out on ‘the client’s’ behalf by another person. Similar wording, ‘a client’, and ‘the client’, is used in Regulation 3(1)(b)(iii) dealing with contracting in. There is no warrant for the giving the words ‘a client’ and ‘the client’ different meanings in the different sub-paragraphs of Regulation 3(1)(b). As in Regulations 3(1)(b)(i) and (iii) ‘the client’ in Regulation 3(1)(b)(ii) is the same client as ‘a client’.
28. Conditions set out in Regulation 3(3)(a) must be satisfied for there to be a service provision change within the meaning of Regulation 3(1)(b). Regulation 3(3)(a)(i) refers to the person on whose behalf activities are carried out before the transfer as ‘the client’. In context ‘the client’ in Regulation 3(3)(a)(i) is ‘a client’ in Regulation 3(1)(b)(i), (ii) and (iii). Regulation 3(3)(a)(ii) requires a consideration of the intention of ‘the client’ with regard to the activities following the service provision change. The relevant intentions are those ‘immediately before the service provision change’. There is no warrant for giving a different meaning to ‘the client’ in 3(3)(a)(i) and in (ii). If ‘the client’ were to include the plural, whose intention would be relevant for the purposes of Regulation 3(3)(a)(ii)? Regulation 3(1)(b) which HH Judge Burke QC held was introduced to provide certainty would be rendered uncertain by such an interpretation.”