Pump Court Chambers

TUPE Review 2017

Blog 3rd January 2018


This is a brief round-up of reported TUPE cases from 2017 – perhaps not the most exciting year for TUPE enthusiasts. From my point of view, the most interesting cases are Born London Ltd v Spire (from March, dealing with provision of information); Tees Esk and Wear Valleys NHS Foundation Trust (also March, dealing with the test for the “principal purpose” of an organised grouping); the European cases of Asklepios (April, dealing with “dynamic” clauses in contracts) and Federatie Nederlandse Vakvereniging v Smallsteps (from June, dealing with “pre-packs”). Baker, a personal injury claim from September, is a salutary reminder of how TUPE has practical importance outside of the Employment Tribunals.

The cases

The first case (from February) is a civil case: Buckley v Greenwood Academies Trust [2017] EWHC 957 (Comm), a reported strike-out application in which the Claimant had lodged a Part 8 claim against her former employer. There had been a TUPE transfer and the Claimant’s contract of employment had transferred from Kingswood School to Greenwood Academies Trust. The Defendant claimed that a schedule of agreed measures had been agreed with the transferring staff, and those included changes to the internal procedures: the disciplinary procedures, in particular, would be taken over by the Academy Advisory Council. It was that body which in due course was responsible for the Claimant’s dismissal.

The Claimant argued that her dismissal was void and legally unenforceable, on the basis that (under TUPE as it then was) a purported variation of the contract is void if the sole or principal reason for the variation is the transfer itself, and that this was such a variation. The strike-out application was refused: the Court commented that it would “need to determine when … consultation took place and whether the agreed measures formed part of the contract at the relevant time … [and] whether or not this was a variation which was permitted under sub-paragraphs 4 and 5 of TUPE … [it is] arguable that this was not an organisational reason which “entailed changes in the workforce.” However, the Court expressed concerns about the issue of remedy, and noted (unsurprisingly) that it had no power to order specific performance of a contract of employment.

In March, Born London Ltd v Spire Production Services Ltd UKEAT/255/16 [2017] ICR 998 considered the question of the employee liability information which is to be provided for the purposes of a service provision change. Was the employer required to specify whether the rights and obligations transferred were contractual or non-contractual? It was not (held Eady J). In Born London, the Respondent, when providing employee liability information, had (wrongly) described a bonus entitlement as “non-contractual”. The Appellant complained that the Respondent had failed to provide the information required by Regulation 11 TUPE (because, of course, it was wrong). But the EAT found that the obligation under Reg 11(2)(b) TUPE was to notify the transferee of the particulars that an employer is obliged to give to an employee pursuant to s 1 of the ERA 1996, i.e. a statement of employment particulars. That is not limited to contractual terms and conditions.

There is also a service provision case from March: Tees Esk and Wear Valleys NHS Foundation Trust v Harland UKEAT/0173/16/DM, [2017] ICR 760, in which the EAT considered the test for determining the “principal purpose” of an organised grouping for the purposes of Reg 3(3)(a)(i) TUPE 2006. The critical paragraph is paragraph 43:

“… it is not simply the carrying out of the activities that means that the existence of the organised grouping meets the relevant condition; the carrying out of those activities has to be the principal purpose of that grouping, whether or not it is in fact carrying them out at any particular time. If the grouping in fact carries out other work, that might well point to its organisation being for a purpose other than the activities relevant to the service provision change. Similarly, if the grouping comprises far too many employees than would be necessary for the activities in question, that might suggest either that not all the staff concerned were in fact assigned to it or that the real purpose behind the organisation of the group was other than the carrying out of the relevant activities for the client. These are possibilities that an ET might properly consider relevant to its assessment, but it would not be sufficient to identify the actual activities being carried out by the organised grouping without determining its principal purpose.”

From April we have a pair of European cases:

The first is Unionen v Almega Tjansteforbunden (C-336/15) [2017] ICR 909, authority for the proposition that Directive 2001/23 obliges the transferee to take into account service with the transferor when calculating notice periods. Notice period entitlement is a right of a financial nature, because it carries as a corollary the right to pay for that period of notice. And, as is familiar to all TUPE practitioners (and subject to the usual caveats), employees cannot be subjected to less favourable working conditions than those applicable before the transfer.

“The second is Asklepios Kliniken Langen-Seligenstadt GmbH f Felja (C-680/15) [2017] IRLR 654, dealing with “dynamic” clauses in contracts of employment and their function in a TUPE situation. The Court stated that, where there is a transfer of a business, the continued observance of the rights and obligations of the transferor arising from a contract of employment extend to a “dynamic” clause according to which the relationship is governed not only by collective agreements in force on the date of transfer, but also by amending agreements subsequent to the transfer, provided that national law permits the transferee to make adjustments both consensually and unilaterally. That is a contrast with Alemo-Herron and ors C-426/11, in which the CJEU had considered that “Article 3 of Directive 2001/23 [precluded] a Member State from providing, in the event of a transfer of an undertaking, that dynamic clauses … are enforceable against the transferee, where that transferee does not have the possibility of participating in the negotiation process of such collective agreements concluded after the date of the transfer (para 37). But the Court in Asklepios Kliniken noted a proviso: because in the case of a “dynamic” clause Directive 2001/23 does not aim solely to safeguard the interests of employees in the event of a transfer, but seeks to ensure a fair balance between the interests of those employees, on the one hand, and those of the transferee, on the other, the transferee must be in a position to make adjustments and changes necessary to carry on its operation (para 22 of the Court’s judgment).”

June gave us a triad of cases, the most significant of which is clearly Federatie Nederlandse Vakvereniging v Smallsteps BV (C-126/16) [2017] ICR 1316, dealing with so-called “pre-packs”, i.e. “pre-packaged insolvency sales” involving a transfer of the assets of an undertaking in difficulties which was prepared before the commencement of insolvency proceedings with the assistance of an administrator, and which was usually implemented immediately after the commencement of insolvency proceedings. The question was whether the pre-pack arrangement fell within the concept of “bankruptcy proceedings or any analogous insolvency proceedings” within the meaning of Article 5(1) Directive 2001/23/EC, which provides an exception to the general rules under Articles 3 and 4 of the Acquired Rights Directive (i.e. which protect workers where there is a relevant transfer).

The Court found that the pre-pack procedure could be covered by the concept of “bankruptcy proceedings or any analogous insolvency proceedings” within the meaning of Article 5(1) of Directive 2001/23/EC: although it was prepared before the declaration of insolvency, it was put into effect after the declaration. However, Article 5(1) required the bankruptcy proceedings (etc) to be instituted with a view to liquidation of the assets of the transferor; the pre-pack procedure did not fall within this category, nor was it carried out under the supervision of a public authority as required by Article 5(1) (it is, for instance, not a statutory insolvency scheme); accordingly, there could be no derogation from the scheme in Articles 3 and 4 of the 2001 Directive.

The summary paragraph of the Judgment is paragraph 59 of [2017] ICR 1316.

June also provided Swissport Ltd v Exley UKEAT/0008/16/JOJ, a case in which the first instance proceedings had resulted in a costs award against the unsuccessful Respondent on the basis that various defences, including an ETO defence to a claim of unfair dismissal, had had no reasonable prospect of success. That aspect was upheld on appeal (although the ET was found to have fallen into an error in respect of Polkey, in failing to consider whether the Claimants would have continued in employment and if so on what terms).

The third June case is a civil case: ICAP Management Services Ltd v Berry and anor [2017] EWHC 1321 (QB) [2017] 3 Costs LR 531 per Garnham J. Although in substance a TUPE matter, the case is more remarkable for the judicial criticism attracted by the parties: skeleton arguments in the region of 150 pages which made many redundant points; 14,000 pages of documents of which only 100 were referred to; and six volumes of authorities. The provision of that sort of volume of material in a four day case was, Garnham J commented, “absurd”.

In July, Xerox Business Services Philippines Inc Ltd v Zeb UKEAT/0121/16/DM involved the transfer of the work of a Finance Accounting Team from a UK Company in Wakefield to a Philippines company, and in turn offshore to Manila. There was, it was agreed, a TUPE transfer. The Claimant stated that he wished to relocate to the Philippines on UK terms and conditions; the Respondent dismissed him for redundancy stating that it was only prepared to transfer him on local terms and conditions. The Tribunal judge found that there was a variation of his contract by which he was entitled to work in the Philippines on UK terms and conditions and that he was not redundant.

Allowing the appeal against the Tribunal judge’s finding, the EAT gave some helpful guidance about Regulation 7 TUPE (which, of course, provides that a dismissal is unfair if the sole or principal reason for the dismissal is the transfer).

From paragraph 34

“… Section 139(1)(b) [i.e. s 139 ERA 1996, whether dismissal is by reason of redundancy] required two questions to be asked and answered in order to determine whether the reason for dismissal was redundancy. The first question was whether, as a matter of fact, the requirements of the Respondent’s business for employees to carry out work of a particular kind in the place where the employee was employed by the employer, had ceased. The Employment Judge did not specifically address this question in her conclusions, but her findings of fact are only consistent with an answer that those requirements had ceased. Transfer was effected so that the Respondent would take the entire function offshore to Manila, leaving no Finance function in Wakefield and all other members of the Finance Team either left or had their employment terminated. The second question was whether this cessation of requirement was the principal reason for dismissal. (emphases added)

But in a case of this kind, the EAT observed that Regulation 7 cannot be ignored by an ET which is considering unfair dismissal in the context of TUPE: it is a “core part of unfair dismissal law in such a case”, and in such a case, therefore, the ET ought to consider whether the sole or principal reason for the dismissal is the transfer.

In September, the matter of Dafioghor-Olomu v Community Integrated Care UKEATS/0001/17/JW clarified the meaning of “successor” employer for the purposes of s 235 ERA 1996 – relevant when re-engagement is being considered under s 115 ERA 1996. For those purposes, the Tribunal is to take into account (amongst other factors) the practicability of re-engagement (s 116 ERA 1996). A “successor” employer is:

“… a person who in consequence of a change occurring (whether by virtue of a sale or other disposition or by operation of law) in the ownership of the undertaking, or of the part of the undertaking, for the purposes of which the employee was employed, has become the owner of the undertaking or part”

A personal injury case in the same month – Baker v British Gas Services (Commercial Ltd) [2017] EWHC 2302 (QB) – demonstrates the often critical importance of TUPE in the civil courts. In Baker, an employee who had been injured after a TUPE transfer but as a result of a breach of duty committed before the transfer by his previous employer, was entitled to recover damages from the new employer. As made clear at para 68: “… tortious liabilities transfer whether they are fully accrued or contingent [at the point of transfer]. To hold that an employee who is injured after the transfer but as a result of a breach of duty committed before the transfer cannot recover against the transferee would frustrate the whole purpose of the Regulations and the underlying Directive.”

Until Dafioghor-Olomu, however, the meaning of the phrase “change in the ownership of the undertaking” had not been spelled out. It was argued that this phrase included or was co-extensive with a TUPE transfer. But the EAT noted that the definition of “successor employer” dated back to 1974 and so pre-dated TUPE. So (paras 38 and 39) the requirement was not to be interpreted as co-extensive with a relevant (TUPE) transfer or service provision change. On the facts of Dafioghor-Olomu, there had been a service provision change when Aberdeen City had terminated the service provided by one company (CIC) and awarded the service contract to another (Cornerstone). So Cornerstone was not a successor employer.

November gave us Graysons Restaurants Ltd v Jones UKEAT/0277/16/JOJ (Simler P) the EAT considered the questions of (i) whether a claim for equal pay arrears is a claim for “arrears of pay”, and (ii) whether liability limited to the debt does not transfer from an insolvent employer (or transferor) to the transferee under Reg 8 TUPE 2006.

In relation to the first question, where a contract of employment is deemed by statute to incorporate an equality clause, then a claim based on that incorporated clause is “no less a claim in contract than a claim based on an express term” (para 53). So entitlement to that pay is treated as having accrued pay-day by pay-day. The entitlement to arrears of pay under an equality clause arises automatically.

In relation to the second, where there are insolvency proceedings, then to the extent that the liabilities exceed the statutory limits in Part XII ERA 1996, liability transfers to the transferee.

Also in November, the matter of Guvera Ltd v Butler UKEAT/0265/16/DM Lavender J considered the question of whether there had been a relevant transfer, for the purposes of TUPE, of Blinkbox Music Business to Guvera on 12 May 2015, in circumstances where there had been a sale of shares. The first ground of appeal which was in fact advanced before the EAT was that the Tribunal had wrongly ignored various factors – i.e. it had failed correctly to apply the “multi-factorial” test familiar from Spikjers. The Appellant contended that there can be no transfer unless the transferee assumed the responsibilities of the employer. That contention was roundly rejected by the EAT as being (para 28) “reminiscent of Stanley Baldwin’s phrase from the 1931 election campaign: ‘power without responsibility – the prerogative of the harlot throughout the ages.'”

Secondly, Guvera complained that the Tribunal had not identified with any precision, and as a result erred as to, the date the transfer took place. That, too, was dismissed.

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