Teal blue graphic

Service provision changes: it's what you do, not the way that you do it

Can a service provision change be a relevant transfer for TUPE purposes if the new provider sub-contracts the services? Yes, according to the EAT in Qlog Limited v O'Brien and others.

In the case of Qlog Limited v O'Brien and others the Employment Appeal Tribunal (EAT) considered the approach taken by the Employment Tribunal to identify a transfer by way of a service provision change for the purposes of regulation 3(1)(b)(ii) TUPE.

The EAT upheld the Tribunal's decision that "activities" undertaken by an incoming service provider were fundamentally or essentially the same as those provided by an outgoing service provider, even though the method of delivery was very different.

Background

The 2006 TUPE (Transfer of Undertakings (Protection of Employment)) Regulations apply to "relevant transfers". A relevant transfer can be:

  • A business transfer; and/or

  • A service provision change

To be a service provision change, any activities carried out after the transfer must be identifiable as the pre-transfer activities, even if they are being carried out in a different way.

Previously, case law has provided guidance that post-transfer activities need not be identical. A Tribunal is entitled to consider both the intention of the parties, and to take a view on the activities as a whole, rather than as distinct elements.

Facts

Ribble, a manufacturer of cardboard packaging, entered into an agreement with McCarthy Haulage Ltd (McCarthy) to deliver products from Ribble's premises to its customers throughout the UK. Under the contract the service which McCarthy was engaged to provide was the delivery of all bulk loads of corrugated products manufactured by Ribble from the premises to destinations on the UK mainland.

In September 2011, Ribble terminated their contract with McCarthy, and appointed Qlog as a replacement service provider. Qlog owned no haulage vehicles and employed no drivers to transport deliveries. They acted effectively as a middleman between Ribble and the haulier to undertake deliveries.

Initially, there was no written contract defining the services provided by Qlog, but an agreement was subsequently made in November 2012. The agreement noted that Ribble wished to transfer transport and logistics services to Qlog. Logistics meant arranging transport services. Transport services referred to the services relating to the physical carriage and distribution of goods.

In correspondence with McCarthy, Qlog conceded that some of the employees would transfer to them under TUPE but argued that no HGV drivers would transfer, as delivery services were to be sub-contracted. The drivers were subsequently dismissed by McCarthy. They brought claims for automatically unfair dismissal under TUPE.

Tribunal decision

The Tribunal considered whether there was a service provision change under regulation 3(1)(b)(ii) TUPE. Key to this was the meaning of the "activities" carried out by McCarthy and Qlog respectively.

The Tribunal recognised that although the method of performance was very different (with Qlog sub-contracting the delivery services), the activities that Qlog had agreed to provide were fundamentally or essentially the same. Qlog could have restricted its obligations but did not do so. Ribble clearly wanted one provider to ensure the goods were delivered and that was the purpose of the November 2012 agreement.

The Tribunal also considered the agreement between the parties and the fact that the risk in the goods being transported passed to Qlog until the goods were delivered. The Tribunal held the contract to be a key indicator as to the intention of the parties. 

The Tribunal concluded that there had been a service provision transfer. Qlog appealed to the EAT.

EAT

The EAT upheld the Employment Tribunal's decision and dismissed the appeal. The EAT identified the critical question to be whether the services were "fundamentally or essentially" the same as those provided before.

The EAT concluded that the Tribunal had correctly set out and applied the legal principles to its findings of fact. The Tribunal was entitled to have found that the "activities" were the carrying out of transportation and delivery services for Ribble, and that anything else was about "method" of delivery and not the "activity" itself. The EAT held that the Tribunal was entitled to consider that, despite the different methods used, the activities being undertaken by Qlog were fundamentally or essentially the same as those which were undertaken by McCarthy.

The Tribunal had considered the intention of the parties and the contractual documentation and, in doing so, had taken a view on the activity as a whole, as they were entitled to do.

The EAT therefore upheld the Tribunal's decision and dismissed the appeal.

Comment

In reaching this decision the EAT has provided additional guidance on the situations in which TUPE may be triggered.

Although the facts of this case are unusual, and the situation may have been different if Qlog had carved out some of the services they were to provide, employers should be aware that a relevant transfer for the purposes of TUPE may be found even where some part of the activities are sub-contracted by an in-coming provider to third party.

Employers should also note that the terms of any contract may also be taken into consideration by a Tribunal when characterising the activities being undertaken.

Employers involved in outsourcing arrangements are advised to consider whether the transferring services are fundamentally the same as those previously delivered. If they are, TUPE may apply even if the method of providing those services is different.

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at April 2014. Specific advice should be sought for specific cases; we cannot be held responsible for any action (or decision not to take action) made in reliance upon the content of this publication.

TLT LLP is a limited liability partnership registered in England & Wales number OC 308658 whose registered office is at One Redcliff Street, Bristol BS1 6TP England. A list of members (all of whom are solicitors or lawyers) can be inspected by visiting the People section of this website. TLT LLP is authorised and regulated by the Solicitors Regulation Authority under number 406297
.



Insights & events View all