United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MR BENJAMIN UDUJE (of Counsel) Instructed by: Weightmans LLP Solicitors India Buildings Water Street Liverpool Lancashire L2 0GA
For the First Respondent For the Second Respondent	MR PETER EDWARDS (of Counsel) Instructed by: Messrs Thompsons Solicitors No. 1 Snow Hill Plaza St Chad's Queensway Birmingham B4 6JG MR EMMET COLDRICK (of Counsel appearing via the Bar Pro Bono Unit)


 


SUMMARY

TRANSFER OF UNDERTAKINGS:

Transfer

Tribunal correct in their view that activities had substantially changed for the purposes of Regulation 3(1)(b)(ii) of the TUPE regulations.


 


HIS HONOUR JUDGE ANSELL

1. This has been the hearing of an appeal from a decision from Reading Employment Tribunal which heard this case almost a year ago on 11 and 12 August, giving their decision on 8 September holding that the employees' contracts did not transfer under what has been described as the service provision changes contained in regulation 3(1)(b) of the Transfer of Undertakings (Protection of Employment) Regulations 2006.
2. The two Claimants below, Mrs Jones and Miss Ciliza, were two of six Claimants chosen to be test cases who have brought various claims arising from the circumstances of the determination of the Appellant's catering contract at the BMW car plant at Cowley and a new service provided by MIS.
3. The background facts are that the Appellant is a large company operating a number of fully managed service contracts including catering, cleaning, security and pest control and the relevant contract related to catering services at the Cowley plant. The contract began in April 2005 and provided for a centrally located restaurant and deli bar facility supported by what are described as four satellites and a general shop, and the Respondents who are described as chef/supervisors worked in those satellites.
4. The Tribunal Decision whilst not making specific reference to the actual wording of the contract, clearly made reference to them in a number of paragraphs of the Decision and it was clear that the satellites, as appears in paragraph 7 of the Decision, were required to provide English and continental breakfast, beverages, a lunch involving hot soup and hot meals, vegetables as well as a salad bar, hot and cold baguettes, sandwiches, rolls, pizza and jacket potatoes together with hot and cold desserts and normal beverages. There was an issue before the Tribunal as to how much time the Respondents were involved in actual cooking but the Tribunal accepted the evidence from the Respondents that a great deal of their time was spent in the preparation of these hot meals. The contract was losing money and the Appellant wanted to try and renegotiate the contract but it was not successful and in due course MIS took over the contract from 1 August 2007. There was then, of course, an issue as to whether or not TUPE applied.
5. The Tribunal found that the MIS contract was, as they described it, a substantially reduced service which was "materially different to that operated by the Appellants"; namely what were described as five dry goods kiosks, and there was no requirement for hot food preparation at the satellites. The satellites essentially were selling pre-prepared sandwiches and salads, although it is right to say the Tribunal took the view in dealing with a particular aspect of the Regulations that the staff did have to ensure the cleanliness of the tables, the presence of clean trays and condiments and the rotation of sandwiches.
6. The Tribunal in considering the Regulations in summary form found that the service provision changes did not engage on the basis, as they described in paragraph 38,` that the activities were different. In particular, that:

"… the operation had changed from the provision of a full canteen service where the Claimants were chefs to them becoming sales assistants in a kiosk."

7. That decision is challenged before us today. Mr Uduje on behalf of the Appellants repeats a number of the matters that he put before the Tribunal, and at the very heart of his complaint is the fact that through, as it were, a wrong approach to the Regulations, the Tribunal have focused too closely on the change of activities between his clients and MIS and failed to properly identify what was the core activity or activities that OCS were carrying out on behalf of BMW which is the essential first stage in the approach to this sort of case. He argues that the proper approach would have been for the Tribunal to consider that what was being offered by MIS was no more or no less than the provision of food or catering services for the staff at the BMW plant, and he argues that that service and those activities in general did not change or the detail may have changed and that, therefore, the Regulations operated.
8. The regulations in relation to the service provision changes are, of course, relatively new changes to the TUPE Regulations and were brought under the 2006 Regulations. The particular regulation is regulation 3 which applies both now to a transfer of an undertaking, business or part of an undertaking and, under regulation 3(1)(b), applies to a service provision change which is defined as a situation in which, and I move to (b)(ii):

"… activities cease to be carried out by a contractor on a client's behalf, whether or not those activities had previously been carried out by the client on his own behalf and are carried out instead by another person (a subsequent contractor on the client's behalf)."

9. So this is one of the three ways that these Regulations can come into operation, in shorthand terms known as a change of contractor and the end of that regulation provides that the conditions set out in paragraph 3 are satisfied:

"(3) The conditions referred to in paragraph (1)(b) are that -

(a) immediately before the service provision change -

(i) there is an organised grouping of employees situated in Great Britain which has its principal purpose the carrying out of the activities concerned on behalf of the client;

(ii) the client intends that the activities will, following the service provision change, be carried out by the transferee other than in connection with a single specific event or task of short-term duration and;

(b) the activities concerned do not consist wholly or mainly of the supply of goods for the client's use."

10. The first ground of appeal advanced before us today related to the correct approach and interaction between 3(1)(b)(ii) and subparagraph (3). Mr Uduje's argument is that paragraph (3) should be looked at first and creates a condition precedent before one moves on to consider whether the activities have changed as between one contractor and another. In particular, he argues that it is important for a Tribunal to first of all ask itself the question whether or not there is an organised grouping of employees which has as its principal purpose the carrying out of the activities concerned on behalf of the client before moving on to determine whether those activities have moved to a new contractor.
11. In support of this submission, in particular he has referred us to certain paragraphs in Harvey which may suggest the first question to be asked is whether the condition in 3(3)(a)(i) is satisfied. We cannot agree with that approach for a number of reasons. Firstly, if one looks at Regulation 3(3)(a) and the conditions that are set out, the first requirement is that "immediately before the service provision change there is an organised grouping". That leads us to form the view that these conditions cannot be considered until a decision is made as to whether or not there is, indeed, a service provision change.
12. Secondly, we derive support from the only two authorities that have been placed before us on these new provisions. Firstly, the Decision of Longstaff J in Kimberley Group Housing Ltd v Hambley & Ors [2008] IRLR 682 where at paragraphs 27 to 29 Longstaff J sets out his approach to the regulations and it is clear that in those three paragraphs his approach is, firstly, to consider the relevant activities under regulation 3(1)(b), then to consider whether those activities have, indeed, been transferred over and, lastly, to consider whether the conditions in regulation 3(3)(a) have been satisfied.
13. In a very recent decision of this court, Metropolitan Resources Ltd v (1) Church Dulwich Ltd - in liquidation (2) Martin Cambridge & Ors [2009] UKEAT/0286/08, HHJ Burke, sitting alone, adopted a similar approach. At paragraph 20 of that decision he says this:

"The issue before the Tribunal can be simply expressed, namely, was there a relevant transfer under regulation 3(1)(b) of TUPE 2006. In the circumstances of this case two questions arose, namely were there activities which ceased to be carried out by CD on behalf of a client (MH) which were carried out instead by a subsequent contractor (MRL) on behalf of MH and were the conditions referred to in regulation 3(3) satisfied?"

14. So we are satisfied that the proper approach is, indeed, the one which this Tribunal adopted which was to consider regulation 3(1)(b)(ii) first of all. We say that there was no real issue about the conditions in regulation 3(3). The Tribunal found that the activities were more than the supply of goods even under the new MIS arrangements and were more than a single specific event, and clearly also it was not challenged that there was an organised grouping of employees, namely either the chef employees or their assistants working on the kiosks.
15. Whichever approach one adopts whether Mr Uduje's or that which we find the Tribunal correctly adopted, there is still the first question to be answered, namely to define the activities being carried out by the first contractor in this case, the Appellant. Mr Uduje's main criticism of the Tribunal Decision which he says has arisen through their over-focusing on the change of activities is their failure to effectively step back and to give proper definition to that which was being carried out over the OCS contract.
16. In particular, he asks us to concentrate on the generic term "service provision change" which is used as part of the TUPE regulations and submits that "activities" should not be given too narrow a definition and in a sense asks us to equate "activities" with a "service" which he says in this case was the provision of food for the BMW staff. He argues that to narrow down the definition as the Tribunal did would be to lead to problems and he gives us an example how one would define a change in a style of menu moving from an English type cuisine to, for example, an Asian type of cuisine. We are able to deal with that problem quite easily and will do so below by reference to a paragraph from Judge Burke's Decision.
17. The Respondents argue that "activities" may well be narrower than a general service being provided such as food, cleaning or catering. We were taken to a decision under the earlier TUPE regulations involving continuity of businesses, Mathieson & Another v United News Shops Ltd EAT/554/94, an unreported decision from the Scottish EAT where the issue related to a change of activities at a hospital shop where the Tribunal found that the degree of similarity between the activities carried on before and after the alleged transfer was:

"… in our opinion minimal having defined the range of goods that was being sold under the two regimes."

That certainly lends support to the fact that activities may demand a more detailed look at what is actually being carried on by the organised grouping of employees under the old and new contractors.

18. Judge Burke's approach was set out in paragraph 30 of his decision when he said this:

"The statutory words require the Employment Tribunal to concentrate upon the relevant activities; and tribunals will inevitably be faced, as in this case, with arguments that the activities carried on by the alleged transferee are not identical to the activities carried on by the alleged transferor because there are detailed differences between what the former does and what the latter did or in the manner in which the former performs and the latter performed the relevant tasks. However it cannot, in my judgment, have been the intention of the introduction of the new concept of service provision change that that concept should not apply because of some minor difference or differences between the nature of the tasks carried on after what is said to have been a service provision change as compared with before it or in the way in which they are performed as compared with the nature or mode of performance of those tasks in the hands of the alleged transferor. A commonsense and pragmatic approach is required to enable a case in which problems of this nature arise to be appropriately decided, as was adopted by the Tribunal in the present case. The Tribunal needs to ask itself whether the activities carried on by the alleged transferee are fundamentally or essentially the same as those carried out by the alleged transferor. The answer to that question will be one of fact and degree, to be assessed by the Tribunal on the evidence in the individual case before it."

19. Did the Tribunal in this case perform that function? We are satisfied that they did, firstly, in defining the activity or activities carried out under the OCS contract. It is clear from paragraph 38 of the Tribunal's decision that it was there defined as the provision "of a full canteen service". That was a decision that they were entitled to come to on the facts of the case, having analysed and heard from the two employees and, in particular, studied the two schedules to the OCS and MIS contracts. We do not propose to repeat those or set them out in detail, but it is clear as the Tribunal have found that the OCS contract is very detailed in terms of its requirement both in relation to food provision and, indeed, management structure and within its schedule which we see at paragraphs 221 to 222 of the relevant bundle, there is set out the food requirements for the operation of the satellites. This is to be compared with the new contract within really one fairly brief paragraph of its schedule and it sets out what is required under the new contract. It was described by the Tribunal as a wholly different operation from that which was run by MIS.
20. The Tribunal then went on to identify the differences. These were not merely changes of menu or style of food to answer the point that Mr Uduje made. Those potential minor differences were acknowledged by the Tribunal in paragraph 40 in this way:

"We accept Mr Uduje's submission for there to be an SPC the activities of the organised grouping of workers does not have to be carried out in the same way. Activities that cease under one contractor can be carried out by a new contractor using different systems but the activities have to be broadly the same. However, prepared cooked foods whether hot or cold were no longer required under MIS. It was put to Mr Wain that the job of a skilled chef was not the same as somebody selling sandwiches and he agreed that it was not. He suggested that Mrs Jones role as chef supervisor became team leader under MIS. In reality, she was operating a retail unit devoid of any input of her chef expertise."

21. Although the Tribunal did not have the benefit of HHJ Burke's decision, their words in paragraph 40 of their decision closely mirror Judge Burke's suggested approach as to whether the activities are fundamentally or essentially the same as those carried out by the alleged transferor, the question being one of fact and degree.
22. It seems to us that once the Tribunal had correctly identified the activity not merely as the provision of food for staff but, as they described it, a full catering service, they were on the facts entitled to come to a view whether there were substantial differences in the new contract. That was an issue of fact for them and once they had made up their minds on the activity and we are not persuaded that there is any fault in that approach.
23. One final issue was raised by Mr Uduje, a suggestion that the MIS contract may have been something of a sham or ruse to avoid the TUPE provisions. There is not a suggestion of that in the fact finding made by the Tribunal and, indeed, it is clear from paragraph 11 that BMW were only forced at short notice to find a new contractor once the renegotiations with the Appellant had broken down.
24. As it happened, the sandwich and salad regime did not prove successful and within a short space of time, firstly, a hot food van came on site and within six months the whole contract had reverted to a new employer who began again to operate a hot food regime. But that was, it appears, simply a matter of history and there is nothing in the Tribunal's Decision that alerts us to any suggestion of an attempt to avoid TUPE obligations.
25. Accordingly, for the reasons that we have set out this appeal is dismissed. Permission to appeal is denied. A transcript will be produced as requested.