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Issue 96 (January 2005)

Contents

Taking on TUPE

Under the acquired rights directive, employees' terms and conditions have to be protected if they transfer from one undertaking to another. But only if the directive applies.

Over the last few years, there have been a series of conflicting decisions (both at European and national level) which have made it difficult for tribunals to know when the directive should apply.

In Astle and ors v Cheshire County Council and anor, the employment appeal tribunal (EAT) decided that the council's main motive in not taking on staff was not to avoid its obligations under the TUPE regulations. This is, in any event, only one factor to take into account in trying to decide if there has been a transfer.

What happened in this case?

In 1994, the council transferred its architectural services to an outside contractor which took on all the staff. The contract did not go well and was awarded to another firm which took on about 65 of the original staff members.

This contract did not work out either, partly it was felt, because of the performance of some of the council staff. The council therefore decided to engage a panel of consultants, instead of a single contractor. It gave notice of termination to the contractor and temporarily took over some of its services until the new appointments were made.

The employees argued that there had been a transfer under the Transfer of Undertakings (Protection of Employment) Regulations 1981 (TUPE) - the UK legislation to implement the acquired rights directive.

What did the tribunal decide?

The tribunal asked itself two questions:

was the reason, or the principal reason, the council selected a market economy to thwart TUPE?
would there have been a transfer if the workforce had been taken on?
It decided that, although the council was concerned to avoid a TUPE transfer, it accepted the council's argument that it had genuinely decided that the 'market economy' was the best method for delivering those services.

The reason that the council did not accept the workforce back, therefore, was not to defeat TUPE, but because it did not require a workforce to operate the business. That being so, the tribunal did not need to answer the second question as to whether there was a TUPE transfer.

What did the EAT decide?

The EAT reviewed a number of apparently conflicting cases starting with Suzen (as it has come to be known) which said that the directive does not apply to a change of contractor if no significant assets are transferred, or if the employer does not take on a major part of the workforce.

However, in ECM (Vehicle Delivery Service) Ltd v Cox, the Court of Appeal held that the contractor's motive for not taking on the workforce was also relevant in deciding if there had been a transfer.

Then in ADI (UK) Ltd v Willer the Court of Appeal said that tribunals have to look at the reason for the contractor's refusal to take on the workforce. Not surprisingly, courts have been unclear which case to follow.

The EAT has now said that if the transferee's main motive is not to avoid TUPE, then the fact that the employees were not taken on by the new contractor is not relevant. Conversely, if that is the main motive, then it is relevant to take that factor into account when deciding if there has been a transfer.

That being so, it said the tribunal had asked itself the right questions and in the right order. It also said that its decision was not perverse. Although the EAT might have decided the case differently, it could not be said that the tribunal's conclusion was one to which no reasonable tribunal could have come.