United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MR KEN HERSEY (Representative)
For the First and Second Respondents For the Third Respondent	MR ROHAN PIRANI (of Counsel) Instructed by: Messrs Thompsons Solicitors 18 Lawford Street Old Market Bristol BS2 0DZ MS AILEEN McCOLGAN (of Counsel) Instructed by: Messrs Clarks Legal LLP Solicitors One Forbury Square The Forbury Reading RG1 3EB


 


SUMMARY

TRANSFER OF UNDERTAKINGS

Service provision change

Transfer

R3 carried out repair and maintenance work for Cornwall Council under a "framework agreement"; some types of such work were given to and done by R3 under obligations in the agreement; for other types of work the Council could place it elsewhere and R3 could decline it; but provision was made for such work in the agreement and in practice the Council gave all such work to R3 and R3 accepted it.

After a re-tendering process A replaced R3 under an agreement containing similar provisions to the agreement with R3. The Claimants (R1 & R2) were employed by R3 mostly on R3's work for the Council. A declined to take them on under TUPE. The Employment Judge found that, although one of the Claimants in particular worked for R3 on work which the Council did in practice but were not obliged to give to R3 before the service provision change, both were assigned to the organised grouping of employees which was the subject of the service provision change and became employees of A.

Held: on appeal by A

(1) It was not necessary for the work which the Claimants did to be work which the Council were obliged to provide to R3 (or A). The essential questions, as derived from Metropolitan Resources v Churchill Dulwich UKEAT/0280/08 and Enterprise Management v Connect-Up UKEAT/0462/10, focused attention on what was actually being done before and after the service provision change. The EJ had made findings of fact which answered these questions; perversity was not argued.

(2) The EJ had made adequate findings of fact; he was entitled to make those findings.

Appeal dismissed.

HIS HONOUR JEFFREY BURKE QC

The Nature of the Appeal

1. This appeal involves an interesting point arising from the application of the "service provision change" provisions of the Transfer of Undertakings (Protection of Employment) Regulations 2006 ("TUPE"). The Appellant is Lorne Stewart PLC, the second Respondent before the Employment Tribunal. The first and second Respondents to the appeal, Mr Hyde and Mr Crowley, were the Claimants before the Employment Tribunal. The third Respondent, Planned Maintenance Engineering Ltd, trading as Carillion Planned Maintenance, was the first Respondent before the Employment Tribunal. In this judgment I shall refer to them, as did the Employment Judge, as LS, the Claimants (or by their names where necessary to distinguish between them) and Carillion respectively.
2. From 2007 until 2011 Carillion had a contract with Cornwall Council ("the council") pursuant to which they provided services to the east area of Cornwall in conection with the council's heating and boiler installations and ancillary equipment. With effect from 1 April 2011 the contract between the council and Carillion came to an end; it was replaced by a contract between the council and LS which covered the whole of the county, including the east area. The Claimants were employed by Carillion and worked mostly on the council's heating and boiler installations.
3. There was no dispute that there was, in the circumstances, a service provision change; in the case of a number of other employees of Carillion who worked upon the council's boilers and heating equipment, LS have accepted that their employment transferred to them; but LS did not accept that the work done by the Claimants fell within the scope of that change. Although at one stage before the transfer LS informed the Claimants that their employment would transfer to them on 1 April 2011, on receiving further information LS changed their views. Carillion believed that the Claimants would be so transferred; but when on 1 April 2011 the Claimants reported to LS for duty they were turned away. It appears not to have been in dispute that both were unfairly dismissed; but LS and Carillion each assert that the other dismissed them, on the basis that there was not – on LS's case – or that there was – on Carillion's case – a service provision change which had the effect of transferring the Claimants' employment from Carillion to LS.
4. Employment Judge Matthews, sitting alone at the Truro Employment Tribunal, in a reserved judgment sent to the parties on 1 May 2012, found in favour of Carillion and the Claimants. LS challenge the Employment Judge's conclusions; Carillion and the Claimants seek to uphold them.
5. LS has been represented before me by Mr Hersey, a consultant, who represented them before the Tribunal. Carillion have been represented by Ms McColgan of counsel, and the Claimants have been represented by Mr Pirani of counsel, neither of whom appeared below. I am grateful to all three for their helpful arguments.

The statutory provisions

6. It is sensible to set out the relevant statutory provisions at the outset. Regulation 2(1) of the 2006 Regulations defines "relevant transfer" as:

"a transfer or a service provision change to which these Regulations apply in accordance with Regulation 3 […]."

7. Regulations 3(1) and 3(3) provide as follows:

"(1) These Regulations apply to—

(a) a transfer of an undertaking, business or part of an undertaking or business situated immediately before the transfer in the United Kingdom to another person where there is a transfer of an economic entity which retains its identity;

(b) a service provision change, that is a situation in which—

(i) activities cease to be carried out by a person ("a client") on his own behalf and are carried out instead by another person on the client's behalf ("a contractor");

(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; or

(iii) activities cease to be carried out by a contractor or a subsequent 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 the client on his own behalf,

and in which 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 as 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 […]."

8. Regulation 4(1) provides as follows:

"Except where objection is made under paragraph (7), a relevant transfer shall not operate so as to terminate the contract of employment of any person employed by the transferor and assigned to the organised grouping of resources or employees that is subject to the relevant transfer, which would otherwise be terminated by the transfer, but any such contract shall have effect after the transfer as if originally made between the person so employed and the transferee."

9. Regulation 7(1) provides as follows:

"(1) Where either before or after a relevant transfer, any employee of the transferee or transferor is dismissed, that employee shall be treated for the purposes of Part X of the 1996 Act (unfair dismissal) as unfairly dismissed if the sole or principal reason for his dismissal is—

(a) the transfer itself; or

(b) a reason connected with the dismissal that is not an economic, technical or organisational reason entailing changes in the workforce."

The facts

10. I take the facts from the Employment Judge's judgment. The Claimants were fitters employed by Carillion, in the case of Mr Hyde from 2004 and in the case of Mr Crowley, from 2002. Although both did a small amount of work for customers of Carillion other than the council, it has not been suggested that either failed to qualify for the transfer to LS for that reason; both worked principally for Carillion upon the provision by Carillion of services to the council.
11. The contract between the council and Carillion was described by the Employment Judge as a framework agreement which enabled the council to call on services as required. The framework agreement provided for a number of different types of work. Those types can be usefully summarised as follows: (1) routine serving, reports and records; (2) repairs and renewals arising from periodic service or breakdown calls, not in excess of £250 in value; (3) a 24-hour breakdown call-out service; (4) repairs or renewals in excess of £250 in value; and (5) large emergency repairs, described as "project work".
12. Of those, the first three guaranteed work to Carillion; work of types (4) and (5) fell within the provisions of the framework agreement; but the council was not obliged to give such work to Carillion and Carillion was not obliged to accept it if offered.
13. Although the Employment Judge said at paragraph 16 that there was no specific provision for planned equipment replacement or installation work as opposed to emergency equipment replacement, renewals up to £250 formed part of work of type (2). In practice, Carillion carried out all repair work or renewals exceeding £250 in value during the period of the framework contract and also carried out all project work, replacements and installation work.
14. The Employment Judge found at paragraph 22 that Mr Crowley was engaged in repair work and replacement of minor equipment required through the medium of the framework contract and that Mr Hyde was engaged mostly in planned replacement and installation work similarly required.
15. In 2010 the council carried out a tendering exercise for work which was almost identical to the scope of Carillion's contract but covered all three areas of the county. Clause 2.2 of the tender document provided as follows:

"The appointed supplier will be required to undertake periodic inspections, servicing, testing and related work to installations, including minor alteration, new installations, planned maintenance and refurbishment works up to £200,000 in value to all directorates of Cornwall Council, or their successors in title. Whilst there is no guaranteed quantity, type or continuity of work or spend, the estimated value is likely to be in the region of £2,000,000 to £4,500,000 per annum for the whole of the three lots offered and proportionally equally divided by three for each individual area."

16. The Employment Judge recorded that the document made provision in respect of minor repairs, breakdown call-out cover and large emergency works in all material respects identically to the provisions in Carillion's contract.
17. LS were and Carillion were not successful in this tendering process; and LS were to, and did, as a result, start providing to the council the services previously provided by Carillion, from 1 April 2011. Before that date there were detailed exchanges between Carillion, LS and the council as to whether TUPE applied. Carillion, unsurprisingly, maintained that they did. LS finally concluded that they did not, in the case of the two Claimants. The exchanges related, too, to the content of work which Carillion had carried out and which would be available to or required of LS, in particular project work, i.e. large works not carried out as part of planned maintenance. The council said that the situation was "largely unchanged from previous years". On 30 March 2011 Mr Baker of LS wrote to each Claimant informing them that, because project work was not part of the Carillion contract and such work would not be part of LS's contract, neither of them would be transferred to LS.

The judgment

18. I have said earlier that, in the circumstances which I have set out, Carillion and LS accepted that there was a service provision change involving the cessation by a contractor (Carillion) of activities carried out on behalf of a client (the council) and the carrying on of those activities instead by a subsequent contractor (LS) on behalf of the council. It was also accepted that, immediately before the change, there was an organised grouping of employees of Carillion which had as its principal purpose the carrying out of the activities concerned on behalf of the council and that it was intended that, following the service provision change, those activities would be carried out by LS. The Employment Judge accordingly set out the issues for determination at paragraphs 55 and 56 of his judgment in these terms:

"First, did the activities, which ceased to be carried out under the Carillion Contract on behalf of Cornwall Council and were to be carried out instead by LS, include the activities carried on by either or both of the Claimants? Second, if so, was there an organised grouping of employees having as its principal purpose the carrying out of activities including those particular activities? Third, if so, did Cornwall Council intend that the particular activities would, following the service provision change, be carried out by LS other than in conection with a single specific event or task of short term duration? If the answer to all these three questions is in the affirmative and there was a relevant transfer, fourth, were the Claimants assigned to the organised grouping of employees that was the subject of the relevant transfer?"

19. There has been no criticism of this identification of the issues which the Employment Judge had to resolve.
20. He addressed the first of these issues at paragraphs 58-62 of his judgment. He recorded LS's argument that the Claimants performed project work which did not fall within either the Carillion contract or the contract awarded to LS. So far as Mr Crowley was concerned, at paragraph 60 he found as follows:

"In Mr Crowley's case the evidence is that he was mostly engaged on repair work and the replacement of minor equipment. LS argues that the Carillion Contract and the contract LS subsequently secured only contemplated one activity for certain, routine servicing. That being the case, that was the sole activity that ceased and LS subsequently took up and Mr Crowley was not part of it. In my view that argument is unsustainable. The Carillion Contract and the contract subsequently secured by LS clearly anticipated repair work and the replacement of minor equipment. LS may have been unhappy about the lack of contractual commitment on Cornwall Council's part but it was for them to price that risk into their tender. Mr Crowley was carrying on activities that ceased to be carried out by Carillion and were instead, to be carried out by LS."

21. As to Mr Hyde, the Employment Judge found at paragraph 61 in these terms:

"Mr Hyde's case is a little different. Mr Hyde was mostly engaged on planned replacement and installation work, which can more easily be seen to be project work. As such, LS's argument is stronger because this sort of work is further removed than repair work and minor equipment replacement from the provisions of the Carillion Contract and the contract subsequently secured by LS. However, Carillion had delivered project work within the framework of the Carillion contract and it was Cornwall Council's and LS's expectation that would continue under the contract awarded to LS. An example is 'Large Emergency Work'. Again, the lack of contractual commitment offered by the framework agreement was something for LS to price into its tender, if it so chose. Mr Hyde carried on activities which ceased to be carried out by Carillion under the Carillion Contract and were to be carried on instead by LS."

22. At paragraph 63 the Employment Judge recorded that, once the scope of activities had been decided, it was not in dispute that the answer to the second question was in the affirmative. At paragraphs 65 and 66 he found against LS's argument that the council intended project work to be done by LS only for single identifiable projects or projects of short duration. This affected only Mr Hyde, because he was performing project work, while Mr Crowley was not, the Employment Judge found; and he continued as follows (paragraph 66):

"In any event, in my view, this argument must fail. What Cornwall Council intended and secured from both Carillion and LS was the ability to call off some, if not all project work. An obvious example of this is 'Large Emergency Work'. Cornwall Council secured this as part of a continuing framework agreement. In that context project work was not in conection with a single specific event or a task of short term duration."

23. He then found that the Claimants were assigned to the organised grouping of employees that was the subject of the relevant transfer, the answer to which question, in the light of the previous answers, was not in dispute. He therefore concluded that there was a relevant transfer, that the Claimants were assigned to the organised grouping of employees which was the subject of that transfer and that the Claimants' contracts of employment had effect after the transfer as if originally made between the Claimants and LS.

Grounds of appeal

24. The Notice of Appeal put forward two grounds. In summary form they were: (1) the Tribunal had in paragraphs 60-61 found that activities in respect of which there was no contractual commitment between the parties could be transferred pursuant to a service provision change, contrary to authority; and (2) the Tribunal failed to identify or to identify correctly or sufficiently the activities carried out by Carillion and then by LS, which, if there were to be a service provision change, had on authority to be fundamentally or essentially the same.

The submissions on behalf of LS

25. In his skeleton argument in support of his first ground, Mr Hersey submitted that the Employment Judge found at paragraph 16 that the only work guaranteed under the framework agreement to Carillion was servicing, repair work up to £250 and breakdown call-out; but neither Claimant did that work; and there was no finding that either of them carried out work required of Carillion by the Carillion contract. Work which was anticipated but not contractually promised could not be part of a service provision change.
26. He further submitted that the evidence before the Tribunal was that all project work had been finished before the contract with Carillion came to an end and no project work was ongoing at the time of the transfer; therefore the Judge had erred in his conclusion that the Claimants carried on activities as a result of which they formed part of the group of employees to which the service provision change applied.
27. However, in his oral argument Mr Hersey modified the force of these submissions. He agreed that it was not necessary that the work on which the Claimants were engaged with Carillion should be work that Carillion were bound to provide to the council (or vice versa, it must follow) and that work which fell within the framework agreement but did not involve mutual commitment until the work was offered and undertaken could form part of the service provision change. What he described as crucial was that there was no work in relation to the Claimant going on at the time of the transfer that was, on the evidence, of a type which LS were going to be asked to perform after the transfer. There must be, he submitted, work upon which the Claimants worked at the material time which was going to continue after the transfer; the Claimants were engaged in project work, and that type of work did not transfer to LS, who had no more than an opportunity or chance of obtaining that type of work in the future.
28. As to ground 2, Mr Hersey submitted that the Employment Judge took too broad-brush an approach to what the Claimants did and did not make any or adequate findings as to what the Claimants did which fell within activities that could be said to transfer; he said that, on the evidence, LS did not invoice the council for any project work until June 2011 and that the work that the Claimants did for Carillion did not go on in the hands of LS. However, he expressly eschewed any argument that the Employment Judge's conclusions in paragraphs 60 and 61 of the Judgment were perverse.
29. Mr Pirani submitted, as the first ground (in summary form) that:

(1) The issue for the Tribunal was whether the Claimants were immediately before the transfer assigned to an organised grouping of employees which had as its principal purpose the carrying out of activities on behalf of the council which the council intended would be carried on by LS other than in connection with a single specific event or task of short duration (see Regulations 3(1) and 3(3)).

(2) That issue was a question of fact (see the decision of the EAT in Metropolitan Resources Ltd v Churchill Dulwich Ltd UKEAT/0286/08, judgment 24 June 2009, and subsequent cases).

(3) The Employment Judge at paragraphs 39-43 of his judgment found as fact that the activities that the Claimants carried out were intended to be transferred to LS and were so transferred. If it were correct – and there was no finding to this effect – that LS did not invoice project work until June, that did not undermine the Employment Judge's findings, which were open to him to reach.

30. As to ground 2, Mr Pirani relied on the Employment Tribunal's findings of fact in relation to the Claimants' activities, which, he submitted, placed both Claimants plainly within the grouping of employees carrying on transferred activities; no more was needed.
31. Ms McColgan adopted Mr Pirani's submissions and drew my attention to the absence of any finding that there were no activities other than the compulsory activities going on before or after the relevant transfer. The Judge found at paragraph 49 that, since the transfer, less project work had been done by LS than was previously the case when the Carillion contract was in place but that some replacement work had been done by LS.

Conclusions – ground 1

32. Both Mr Pirani and Ms McColgan addressed, briefly, the point taken in Mr Hersey's skeleton argument, but not pursued at the oral hearing, as to the absence of any commitment on the part of the council to give to Carillion or on the part of Carillion to carry out work other than that falling within the first three of the categories which I have identified in paragraph 11 above. I too propose to touch on that issue only briefly; for it did not ultimately form part of Mr Hersey's argument, and rightly so. If he had maintained the point, I would have decided it against him. Before the Employment Judge he relied on Ward Hadaway Solicitors v Love and Ors UKEAT/0471/09, where the appellant solicitors had a relationship with the Nursing and Midwifery Council ("NMC"), pursuant to which they were allocated cases by the NMC to investigate and act on NMC's behalf; but there was no obligation on NMC to allocate any work to the appellants or on the appellants to accept it. The appellants appealed against the Employment Tribunal's conclusion that, when NMC ceased to allocate work to them and allocated all work to a different firm of solicitors, there was no service provision change failed, on the basis of the Employment Tribunal's findings of fact. The lack of commitment on the part of NMC and the appellants did not form the basis of the Employment Tribunal's finding or of the rejection of the appeal; that decision would not have supported Mr Hersey's original argument. Nor does any other appellate decision support Mr Hersey's point.
33. The essential questions for a Tribunal in a service provision change case have been well established by a chain of authorities from Churchill Dulwich and were summarised by HHJ Peter Clark in Enterprise Management Services v Connect-Up Ltd UKEAT/0462/10, Judgment 21 December 2011, in this way:

"(1) The prospective SPC in this case arises under reg. 3(1)(b)(ii), that is where 'activities' cease to be carried on by a contractor (here, Enterprise) on a client's (LCC) behalf and are carried on instead by a subsequent contractor (Connect).

(2) The expression 'activities' is not defined in the Regulations. Thus the first task for the Employment Tribunal is to identify the relevant activities carried out by the original contractor: see Kimberley [Housing Group Ltd v Hambley [2008] ICR 1030], para. 28; [Churchill Dulwich], paras. 29-30. That was the issue on appeal in OCS [Group UK Ltd v Jones UKEAT/0038/09] where the appellant's challenge to the activities identified by the Employment Tribunal failed.

(3) The next (critical) question for present purposes is whether the activities carried on by the subsequent contractor after the relevant date, here 1 April 2009, are fundamentally or essentially the same as those carried on by the original contractor. Minor differences may properly be disregarded. This is essentially a question of fact and degree for the Employment Tribunal ([Churchill Dulwich], para. 30).

(4) Cases may arise (e.g. Clearsprings [Management Ltd v Ankers UKEAT/0054/08]) where the division of services after the relevant date, known as fragmentation, amongst a number of different contractors means that the case falls outside the SPC regime, as explained in Kimberley (para. 35).

(5) Even where the activities remain essentially the same before and after the putative transfer date as performed by the original and subsequent contractors an SPC will only take place if the following conditions are satisfied:

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

(ii) the client intends that the transferee, post-SPC, will not carry out the activities in connection with a single event of short-term duration;

(iii) the activities are not wholly or mainly the supply of goods (rather than services) for the client's use.

See reg. 3(3). (Neither of (ii) and (iii) arise in this case.)

(6) Finally, by reg. 4(1) the Employment Tribunal must decide whether each Claimant was assigned to the organised grouping of employees."

34. These questions focus the attention of the Tribunal on what was actually being done before and after the claimed service provision change; whether the work being done before the transfer was work which the client was bound to give to the contractor or the contractor was bound to accept if offered it is not a relevant consideration. To put it in the vernacular, the focus must be upon what was actually going on "on the ground".
35. I therefore turn to what was, ultimately, the Appellant's case as opposed to what was not. Although all the authorities in the chain to which I have just referred and beyond it were contained in the authorities bundle put before me, no detailed analysis of them was undertaken; and for good reason. The words of Regulations 3(1)(b) and 3(3) do not need judicial construction; they are straightforward words. The questions which an Employment Tribunal has to ask in a Regulation 3(1)(b) case are those that are set out in the Churchill Dulwich, at paragraphs 27-30 of the EAT's judgment, and are helpfully summarised by HHJ Peter Clark in Enterprise Management Services as set out above. The answers to those questions are factual answers which cannot be disturbed on appeal save on the grounds of perversity, which was not advanced in this case. It was not in law necessary for Mr Crowley or Mr Hyde or anybody else actually to be carrying out the type of work that was said to have been subject to the service provision change on the day or in the days before the transfer and on the day or during the days after the transfer. The question that Mr Hersey described as crucial was not at all crucial; the crucial questions were set out in the authorities to which I have referred.
36. The Employment Judge found as a fact, at paragraph 60, that Mr Crowley was mostly engaged in repair work and the replacement of minor equipment and that the Carillion contract and the contract subsequently secured by LS clearly included repair work and the replacement of minor equipment. Mr Crowley was carrying on activities which ceased to be carried out by Carillion and were instead to be carried out by LS. At paragraph 61 the Employment Judge found that Mr Hyde was mostly engaged in planned replacement and installation work which had been delivered by Carillion within the framework of the Carillion contract and that it was the council and LS's expectation that that would continue under the contract awarded to LS. Thus Mr Hyde carried on activities which ceased to be carried out by Carillion under the Carillion contract and were to be carried out instead by LS. Thus the Employment Judge found as fact that both were engaged in activities which were carried on by Carillion for the council before the transfer and were intended to be, and were – or, in the case of project work, when it came up, would be – carried out instead by LS.
37. Once those findings were made, the existence of an organised group of employees having as its principal purpose the carrying out of activities that included those activities was not in dispute (see paragraphs 63 and 64). The Employment Judge then found that, in relation to project work, the council intended that LS would carry it out on a broader basis than in connection with the single specific event or task of short-term duration.
38. The above findings resolved the dispute in favour of the Claimants. It was accepted, given those findings, that the Claimants were assigned to the organised grouping of employees that was the subject of the relevant transfer.
39. Accordingly, Mr Hersey's first ground must fail. The relevant issues were all determined against LS by findings of fact which are not attacked as perverse and that were open to the Employment Judge to reach.

Conclusions – ground 2

40. As to ground 2, Mr Hersey's criticisms of the Employment Judge are, in my judgment, not made out. The Employment Judge identified at paragraphs 20, 21, 60 and 61 precisely in what activities both Claimants were engaged. There was no need for any further detail. The fact that, as it turned out, LS did not obtain all of the project work that was expected and did not invoice the council until June 2011 (a point that may not have been part of the evidence, but it does not matter) may have been unfortunate for LS; but the Employment Judge was entitled to make the clear findings he reached as to the Claimants' activities and as to what was secured by LS under their contract. At paragraph 62 the Employment Judge said:

"Not only did Carillion not retain any work in progress, but the Carillion Contract and contract secured by LS both made specific provision for the call off of work on which the Claimants were engaged, be that repair and minor replacement work or project work such as 'Large Emergency Work'."

41. For these reasons, ground 2 also does not succeed.

Disposal

42. Accordingly, this appeal is dismissed.