How the allocation of employees under TUPE could affect employers

In light of a recent tribunal ruling, Meredith Hurst examines the implications of when a contract is split between more than one service provider

The Transfer of Undertakings (Protection of Employment) Regulations (TUPE) is a vexed subject, which has had business owners and lawyers scratching their heads since the 1980s when the UK implemented the European Transfer of Undertakings Directive. Alas, the scratching of heads will only continue following the decision in McTear Contracts Limited v Bennett and Others. 

The Employment Appeal Tribunal (EAT) has ruled that employees can be allocated between different contractors when a contract is split between more than one service provider. Let’s take a closer look at the case, but first, a recap of TUPE. 

The regulations exist to protect employment rights when there is a relevant transfer of a business from one party to another. It also applies when there is a so-called ‘service provision change’ relevant to a ‘contracting-out’ scenario. A common example of this is where a business puts its cleaning contract out to tender, or as in McTear, its kitchen maintenance contract. 

The facts of the case are prosaic. The consequences of the decision, however, are far-reaching and not that straightforward. Between 2012 and 2017, Amey undertook the replacement of kitchens within the social housing stock of North Lanarkshire Council (NLC). 

Under the contract NLC issued orders to Amey identifying the addresses of properties where kitchens were to be replaced. Amey would carry out the necessary works. All employees except one worked solely on the job generated by the kitchen contract between NLC and Amey. One employee, Mr Daly, worked for 99.9 per cent of his time on the NLC contract, and for the remainder on a contract with another local authority. 

From March 2017, the work under the Amey and NLC contract was divided between two teams of Amey employees. Infrequently, members of one team would assist the other to cover annual leave and sickness absence. Teams were not allocated to a geographical area within NLC’s boundary, and both worked across the whole of the NLC area.

The contract between Amey and NLC came to an end in July 2017. NLC re-tendered the kitchen installation contract, which it split into two lots. The lots were defined by geographical areas, north and south. NLC took a policy decision that the two contracts would be awarded to two contractors, McTear and Mitie. The parties agreed that TUPE applied to the transaction.

Although McTear and Mitie each took on some of Amey’s former employees, they refused to take on others (the claimants), including Mr Daly. Amey maintained that the claimants had transferred to either McTear or Mitie. 

When reaching its decision, the EAT took its lead from the European case of Govaerts. In Govaerts, the European Court of Justice held that where a transfer involves more than one incoming contractor, a contract of employment could transfer to each contractor in proportion to the tasks performed by the worker, being effectively split between two employers. 

While this is likely to cause a headache for employers, the EAT noted that the issues were not necessarily insurmountable – and much would depend upon the type of work and the way in which it was carried out. The division, on geographical lines, of work previously carried out under a single contract into two new contracts is, in principle, a situation where different employers could be signed up for different jobs and employees effectively working part-time for each employer, on different jobs. 

The EAT has remitted the case back to the employment tribunal, which had not had the benefit of Govaerts, considering itself bound by established law that an employee cannot have two employers at the same time. The employment tribunal must now reconsider its position in light of Govaerts. Watch this space.

Meredith Hurst, partner in the employment law department of specialist law firm Thomas Mansfield