Change of client prevented transfer from being a service provision change under TUPE

Hunter v McCarrick (UKEAT/0617/11); Nottinghamshire Healthcare NHS Trust v Hamshaw and others (UKEAT/0037/11)

In Hunter  v McCarrick, the Employment Appeal Tribunal held that there is no service provision change under regulation 3(1)(b) of TUPE 2006 , where there is not only a change of contractor but also a change of client.  The same issue had arisen in Nottinghamshire v Hamshaw in different circumstances but had not been decided. 

The EAT in Hunter held that a literal interpretation of regulation 3(1)(b) should be adopted and that the reference to “the client” in that regulation means the specific client on whose behalf the contractor carries out its relevant activities. The EAT rejected the argument that the purpose of regulation 3 is to preserve employees’ terms and conditions and continuity of employment in circumstances where the activities on which they are engaged by one contractor are carried out not only by a different contractor but also for a different client.

The EAT accepted that it was possible that a transfer that was not a service provision change may still be a transfer of an undertaking within regulation 3(1)(a) (a business transfer).  However, on the facts of both Hunter and Nottinghamshire v Hamshaw it held that no business transfer under regulation 3(1)(a) had occurred.

Implications

The facts in Hunter were relatively unusual in that the transfer occurred when receivers appointed by a mortgagee took control of Mr Hunter’s portfolio of properties and appointed new managing agents.

However, Nottinghamshire v Hamshaw involved a more typical outsourcing situation.  In that case a residential home operated by the NHS Trust was closed, new care providers were appointed and at the same time responsibility for providing the care transferred from it to Nottinghamshire County Council.

So, by analogy, if the statutory responsibility for providing a service transfers from A to B and B simultaneously appoints a new contractor to provide the services, the employees of the old contractor cannot argue that they have transferred to the new contractor as a result of a service provision change.  They may still seek to argue that a transfer of an undertaking had occurred under regulation 3(1)(a), but that is likely to be a difficult argument on the facts.

For further information on this article please contact Adam Williams adam.williams@dmhstallard.com or T: 020 7822 1587

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