February 28th, 2012 by Simon Devonshire QC

In Metropolitan Resources Ltd v Churchill Dulwich Ltd [2009] IRLR 700, the EAT observed that in construing the service provision change (“SPC”) regulations there was “no need for an employment tribunal to adopt a purposive construction … as opposed to a straightforward and common sense application of the relevant statutory words to the individual circumstances before them … [or] for a judicially prescribed multi-factorial approach … such as that which has necessarily arisen in order to enable the tribunal to adjudge whether there was a stable economic entity which retained its identity after what was said to be a transfer falling within what is now reg. 3(1)(a)”.   These observations have been approved and applied by other divisions of the EAT (see, e.g., Hamshaw; UKEAT/0037/11/JOJ).   The same approach is apparent from the recent decision of the EAT in Eddie Stobart –v- Moreman & Ors (UKEAT/0223/11/ZT).  

Eddie Stobart employed a number of employees at a site in Manton Wood to store and deliver meat on behalf of its supplier clients.    By the time that it came to close that business, Eddie Stobart serviced just two clients (Vion and Forza), whose requirements were in practice addressed (respectively) by the day and night shifts.   Eddie Stobart alleged that there had been a SPC of Vion’s logistics requirements to another logistics company, which inherited responsibility for the day shift employees.   But were those employees even an organised grouping for the purposes of the SPC regime?

As Underhill J observed (para 18), the SPC regulations did not merely say that it was sufficient that employees should in their day to day work in fact carry out the activities in question; they required that those activities should be the principal purpose of the organised grouping, and “that necessarily connotes that the employees be organised in some sense by reference to the requirements of the client in question”.   It was not enough that a combination of circumstances meant that this happened in practice “but without any deliberate planning or intent”.    Underhill J was unimpressed by the argument that this would move a lot of employees in the logistics industry out of the protection of TUPE, where it was rare to have identified, client dedicated teams (para 19).   Whilst the broad intent of TUPE was that employees should go with the work, “it remains necessary to define the circumstances in which a relevant transfer will occur, and there is no rule that the natural meaning of the language of the Regulations should be stretched in order to achieve transfer in as many situations as possible”.    On the contrary (para 20), the policy considerations pulled the other way – if the putative grouping did not reflect any existing organisational unit there were liable to be real practical difficulties in identifying which employees belonged to it, and employees should know where they stood, whereas “if the touchstones was whether a particular employee was assigned to a recognised team principally serving a particular client, the answer would normally be evident”.

In the 90s, TUPE seemed to extend to every contractor change, with even an office cleaner and her broom being treated as a business entity capable of transfer.   One of the ironies of the SPC regime is that it has gone some way towards reversing this trend domestically.  It has discouraged Tribunals from ‘discovering’ old style business entity transfers in change of contractor cases – resort to artificial constructs is no longer necessary in the light of the bespoke domestic legislation for SPCs.   Yet the SPC regime is not being construed purposively or with a view to extending its reach.   For those of us who have to advise on the application of TUPE in transactional situations, an emphasis on certainty and clarity of application is to be welcomed.

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