TUPE Service Provision Change - Look At What Is Going On 'On The Ground', As Well As The Contract

In the recent case of Lorne Stewart plc v Hyde and others, the EAT made clear that it is important not to get side-tracked by the details of formal written contracts which are in place between the parties before and after a potential TUPE transfer, if such details do not reflect reality. Rather, it is essential to consider whether, in practice and on the facts, there is a service provision change and, if so, whether the employees in question are assigned to an organised grouping of employees which has as its principal purpose the carrying out of the activities concerned.

The facts of the case

In a situation common to many local authorities, Cornwall County Council ("the Council") had been outsourcing its heating and boiler installation and repair work under a contractual arrangement known as a framework agreement. Under the framework agreement, the Council could call on its contractor, Planned Maintenance Engineering Ltd ("Carillion"), to carry out work as and when it was required. The framework agreement specified five different types of installation/repair work: three of these types were guaranteed work for Carillion, but the Council was under no obligation to offer to the company the remaining two types of (more high-value) work, and Carillion was under no obligation to accept any such work offered. In practice, however, during the life of the agreement the Council did offer and Carillion did accept all such work.

This arrangement continued until April 2011 when, following a re-tender of the services, the Council appointed a new contractor, Lorne Stewart plc ("LS") to replace Carillion. The new contract was largely on identical terms to the original framework agreement between the Council and Carillion, and so it was Carillion's view that there was a clear service provision change, and that those employees carrying out the works on behalf of the Council should transfer to LS. LS accepted that there was a service provision change, and even accepted that most of the employees of Carillion who were carrying out the services for the Council would transfer to it under TUPE. However, LS considered that two employees (Mr Hyde and Mr Crowley) should not transfer: because they were carrying out the second type of works - those which were not guaranteed by the contract - LS considered that they were carrying out activities which were not provided for under the framework agreement, and those activities were therefore outside the scope of the...