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Employment Law

Legal guidance - compliance - software

Veale Wasborough Vizards , 24 MAR 2015

Service provisions changes - moving towards a purposive interpretation 

Service provisions changes - moving towards a purposive interpretation 
Charlotte Williams
Solicitor, Veale Wasbrough Vizards

A recent Employment Appeal Tribunal (EAT) decision has found that, in certain circumstances, there can be a service provision change under TUPE in cases where 'a client' is comprised of more than one legal entity and the services are being provided under multiple contracts.

This marks a change from a literal to a purposive interpretation of Regulation 3 (1) (b).

In Ottimo Property Services Ltd v Duncan and another, Mr Duncan was employed as a site maintenance manager by Ottimo, which was sub-contracted to provide on-site property maintenance work at a number of separate residential blocks. Each of the blocks was a separate legal entity which had entered into a separate contract.

Between May and August 2012, another company, Warwick, acquired the contracts to provide the work for most of the sites which had previously been maintained by Ottimo. Warwick did not consider that TUPE applied to the transfer and did not take Mr Duncan on as an employee. He was subsequently dismissed by Ottimo in July 2012.

Mr Duncan brought tribunal proceedings, arguing that his employment had transferred to Warwick. The Employment Tribunal (ET) held that TUPE did not apply and dismissed Mr Duncan's claim. The ET stated that recent cases had made it clear that Regulation 3(1)(b) of TUPE is to be given a literal interpretation. It concluded therefore that the regulation only applied where there was 'a client' in the singular, finding that it was "not permissible for a number of contracts with different clients to be added together to make one overall service provision change".

However, upholding an appeal by Mr Duncan, the EAT found that a service provision change could involve more than one client. The EAT held that the ET had erred in adopting such a strict interpretation of the regulation in this context. However it emphasised that for individual service provision changes to be considered together, there has to be some common intent between the clients. This intention would be more likely to be demonstrated where there was an umbrella contract in place, however the absence of this would not necessarily be fatal to establishing commonality.

Best practice

This case is the first to establish that the service provision change rules can apply where there is more than one 'client'. It marks an apparent departure from previous decisions on TUPE by applying a purposive, rather than literal, interpretation of the provisions. The decision therefore may make it harder for employers to decide if there is a 'relevant transfer' for the purposes of TUPE.

Employers are reminded to look at the facts of the situation in question and seek further advice at the initial stages.
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