TUPE service provision change: employees’ contracts can be split between transferees

The Employment Appeal Tribunal has ruled that it is possible to split employees’ employment contracts following a TUPE service provision change so they become employed by more than one transferee. 

The Council's contract with Amey

Amey had a contract with North Lanarkshire Council to fit kitchens in the Council’s social housing.  It had two teams working on the contract, who generally worked independently of each other. The teams were not allocated to a specific geographical area.

Following a retendering exercise, the Council split the contract geographically, with McTear Contracts Limited taking on responsibility for the north region, and Mitie Property Services taking on responsibility for the south region. Amey considered TUPE applied.  It reviewed the locations where each team had worked in the previous 12 months and allocated one team to McTear and one to Mitie based on where the teams had spent the most time.

McTear and Mitie refused to take on the employees and the employees claimed their dismissals were automatically unfair.  

Employment tribunal decision

The employment tribunal ruled that there had been two service provision changes and that the employees had transferred to McTear and Mitie respectively, as per Amey’s allocation. 

The ECJ decision in ISS Facility Services v Govaerts

Shortly after the employment tribunal’s decision, the European Court of Justice gave its ruling in ISS Facility Services v Govaerts. The ECJ ruled that where a contract is split and awarded to two or more incoming service providers, under the EU Acquired Right Directive the employees’ employment contracts transfer to each of the new service providers (in proportion to the tasks they performed).  This is subject to it being possible to divide the employment contract and provided this does not adversely affect workers’ rights and working conditions. This approach contrasts with the UK approach, which is for the employees to transfer to one of the new service providers – the one taking on the greater part of the activities to which the employee was assigned pre-transfer.

McTear and Mitie appealed to the Employment Appeal Tribunal, arguing that the ECJ decision should also apply to transfers under TUPE’s service provision change provisions.

Employment Appeal Tribunal rules employment contracts can be split

The Employment Appeal Tribunal agreed and ruled that the employees’ contracts could be split between the new service providers.  It noted that it was not obliged to follow the ECJ decision because TUPE’s service change provisions are UK provisions (and not derived from EU law).  However, it considered it would be undesirable to take a different approach for business transfers and service provision changes under TUPE. 

The Employment Appeal Tribunal ruled there was no reason why an employee could not, following a service provision change, have two or more employment contracts with different employers at the same time.  This was provided that the work attributable to each contract was clearly separate from the work on the other(s) and was identifiable as such. The division of work on geographical lines into two new contracts was such a situation.

It sent the case back to the employment tribunal to decide the position of each employee and the liability of each transferee, taking account of the ECJ decision.   

Practical implications 

Employees may transfer to more than one transferee if a contract is split between two or more service providers on a service provision change.  The decision is likely to cause practical difficulties for transferees, but at the same time many transferee employers will be keen to rely on it in order to limit their liability for transferring employees. 

McTear Contracts Ltd v Bennett and others and Mitie Property Services UK Ltd v Bennett and others