TUPE – Service Provision Change Guidance

In Argyll Coastal Services Ltd. v Stirling and Others, a pre-hearing review was necessary to decide whether or not there had been a service provision change under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE).



The case concerned 11 members of the crew of the St Brandan, a vessel which had been chartered by the Ministry of Defence to deliver cargo in and around the Falkland Islands, and two administrative staff based near Glasgow. Following a re-tendering process, the contract was lost to a Dutch company, which subsequently entered into an agreement with Argyll Coastal Services Ltd. to hire one of its vessels in order to be able to fulfil the part of the contract that related to the work in the South Atlantic.



The crew of the St Brandan argued that there had been a service provision change under TUPE Regulation 3(1)(b).



The Employment Tribunal (ET) held that TUPE did apply and that the claimants’ contracts of employment had transferred to Argyll Coastal Services. The company appealed against this decision.



In the Employment Appeal Tribunal, Lady Smith found that the ET had failed to carry out a proper examination of all the facts and circumstances. It had made an error in law in determining that the claimants’ contracts of employment had transferred without considering whether or not the requirements of TUPE Regulation 4(1) were satisfied – i.e. whether or not a particular employee was assigned to the ‘organised grouping of employees’ affected by the transfer and thus entitled to protection under the Regulations. The error was such that the judgment failed in its entirety and the case was remitted for re-hearing by a new ET.



In reaching her decision, Lady Smith made observations on the facts of the case and the meaning of the conditions that have to be satisfied to establish that there has been a service provision change under TUPE. The requirement under TUPE Regulation 3(3)(a)(i) is that immediately before the service provision change ‘there is an organised grouping of employees situated in Great Britain which has as its principal purpose the carrying out of the activities concerned on behalf of the client’.



Firstly, the phrase ‘organised grouping of employees’ connotes a number of employees that is fewer than the whole of the transferor’s entire workforce, deliberately organised for the purpose of carrying out the activities required by the particular client contract and who work together as a team.



Secondly, ‘situated in Great Britain’ clearly requires that group of employees to be based in Great Britain. It is a fundamental prerequisite of a service provision change that there is an organised grouping of employees situated in Great Britain, although the fact that a person or persons who are part of that organised grouping of employees work outside the United Kingdom does not prevent the condition being satisfied.

 

Thirdly, there seems to be no reason why the words ‘principal purpose’ should not bear their ordinary meaning. Thus, the organised grouping of employees need not have as its sole purpose the carrying out of the relevant client activities, but that must be its principal purpose.

 

When considering the ‘activities’ being carried out, it seems clear that what is meant is what it was that the client required of the transferor or employer.  What exactly was the service that was contracted for?



Lady Smith also rejected the argument that a single organised grouping of employees could be made up of employees who have different employers, which is quite different from a situation where a client moves his business from two service providers to a single service provider.