In a complex case (Mustafa and Another v Trek Highways Services Limited and Others), the Employment Appeal Tribunal (EAT) has ruled that the Employment Tribunal (ET) erred in law in finding that a temporary cessation of work activities by a subcontractor at the putative date of transfer prevented there being a business transfer or service provision change for the purposes of the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE).

Mr Mustafa and Mr Steen worked for Amey Services Limited, which was appointed by Transport for London (TfL) to carry out highway maintenance services in the North London region from 2007 to 31 March 2013. In November 2011, Amey subcontracted this work to Trek Highways Services Limited and the two men transferred to Trek to work in the North-East London traffic management service. In late 2012, TfL carried out a re-tendering exercise and the contract for the North-East area was awarded to Ringway Jacobs Limited.

In early March 2013, a dispute arose between Amey and Trek which resulted in Trek suspending its operations. Staff were told to go home and wait to be contacted. A settlement was reached and Trek’s contract was terminated by mutual consent with effect from 20 March 2013. Ordinarily, Mr Mustafa and Mr Steen would have transferred to Ringway Jacobs from 1 April 2013. However, Trek notified them that their employment would transfer to Amey with effect from 21 March 2013. Whilst Ringway Jacobs had originally believed that Trek’s employees would transfer to it under TUPE once the new contract was active, both Amey and Ringway Jacobs refused to take them on, arguing that TUPE did not apply in the circumstances.

Mr Mustafa and Mr Steen took their case to the ET, which found that there was neither a relevant TUPE transfer of an economic entity that retained its identity nor a service provision change either from Trek to Amey or from Trek to Ringway Jacobs. No finding was made as to any subsequent transfer from Amey to Ringway Jacobs. The men had not been employed ‘immediately before’ any such transfer. In the ET’s view, they had been dismissed before the new contract came into force. Consequently, TUPE did not apply.

Mr Mustafa and Mr Steen challenged the ET’s findings, arguing that it had made errors of law in reaching its conclusions.

The EAT upheld their appeal. In its view, the ET’s conclusions were flawed in several respects and should be set aside.

When determining whether there was an organised grouping of employees at the relevant date which had as its principal purpose the carrying out of the activities concerned on behalf of the client, the temporary cessation of activity is just one of the factors to be considered. The ET had erred in treating it as determinative and as having destroyed the identity of Trek’s activity, erroneously equating the entity with the activity it performed. There were no findings to suggest that the entity did not continue in existence in the form of the dedicated staff, vehicles and equipment. Nor was there any evidence that the claimants had been dismissed prior to the transfer and there were no findings to suggest that the activities could not have resumed had the outcome of the dispute between Trek and Amey been different. In addition, no finding had been made as to whether there was a subsequent transfer from Amey to Ringway Jacobs, which issue must be addressed.

The case was remitted to the same ET to reconsider the issues in accordance with the EAT’s judgment.