The EAT has delivered judgment in this the first case to consider the “supply of goods” exception to the service provision change rules in the Transfer of Undertakings (Protection of Employment) Regulations 2006 (“TUPE”). The case concerned the supply of axle assemblies for vans built by a company within the General Motors group. James Goudie QC and Holly Stout appeared for two out of the three respondents.
The EAT held that in deciding whether there has been a service provision change within reg 3(1)(b) of TUPE the focus must be on the activities of the relevant organised group of employees. However, the question is not what activities those employees are carrying out for their employer, but what activities the employer is (through the particular organised grouping of employees) carrying out on behalf of the client. One must ask whether the activities carried out on behalf of the client in fact consist “wholly or mainly” of the supply of goods. If so, there is no service provision change under reg 3(1)(b) of TUPE. Whether activities are “wholly or mainly” the supply of goods is a question of fact for the Tribunal. In this case the EAT considered that the Tribunal had been entitled to conclude that the activities that the transferor employer was carrying out on behalf of the client was wholly or mainly the supply of goods.
The EAT further held that changes in payment arrangements prior to the putative transfer did not mean that the activities ceased to be the supply of goods and became a provision of services. As a result of the financial difficulties of the transferor, arrangements had changed so that the client paid the transferor’s parts suppliers direct (and took title to the parts) rather than simply paying the transferor for the completed axle assemblies. The EAT held that the Tribunal had rightly concluded that the activities carried out by the transferor on the client’s behalf remained the same, however the goods were paid for.