In Mustafa and Steen v (1) Trek Highways Services Limited (2) Amey Services Limited (3) Ringway Jacobs Limited UKEAT/0063/15/BA Simler J reviewed the law on business transfers and service provision changes, overturning an employment tribunal decision which displayed errors in applying the law to the facts of the case.  It is a decision which helpfully re-affirms a number of important principles.

This was a very considerable piece of litigation.  The evidence was heard over five days and the bundle of documents consisted of 1,666 pages.

Amey was appointed as main contractor by Transport For London (TFL) to carryout highway maintenance services in the North London region from 2007 to 31st March 2013.  In November 2011 Amey entered into a subcontract with Trek under which Trek provided traffic management services on Amey's behalf for TFL in North London, which was, itself divided into the North East and North West regions.  The claimants transferred from Amey to Trek as a consequence, working wholly or mainly in the North East traffic management service as they had before, as employees of Amey.

In late 2012, with Amey's main contract due to terminate on 31st March 2013, TFL carried out a re-tendering exercise, having divided London into four regions, North East, North West, Central and South.  In November 2012 contracts were awarded for the North East to Ringway Jacobs and for the North West to another company, FM Conway.  Amey was to cease to have responsibility for these services from 1st April 2013.  At the time it was accepted by Ringway Jacobs and FM Conway that employees principally engaged on traffic management services in those regions would transfer under TUPE.

However, in early March 2013 a dispute arose between Amey and Trek.  Amey stopped payment to Trek.  As a result Trek suspended operations and staff were told to go home and wait to be contacted.

On 20th March 2013 through a settlement reached between Amey and Trek, Trek's subcontract was terminated by consent with effect from that date.  Trek informed its North East region employees that their employment would transfer to Amey with effect from 21st March 2013.  On 26th March 2013 Trek went into administration and administrators sold off certain of Trek's assets to another company.  Ringway Jacobs informed Trek and the Trek employee representatives for employees assigned to the North East part of the traffic management subcontract that the service provision change rules only applied to a situation where Amey terminated Trek's contract at the request of TFL and that, since the reason for the termination of Amey's contract with

Trek was a commercial dispute, Ringway Jacobs did not accept that any employees used by Trek to deliver services to Amey had a right to transfer to it. Employees who wanted to transfer were turned away from the premises of both Amey and Ringway Jacobs.

The employment judge held there was no business transfer or service provision change arising out of any aspect of this process and further concluded, in the alternative, that the claimants were not in any event employed 'immediately before' any transfer, having been dismissed on 20th March 2013.

The EAT overturned the employment judge on a number of points:

1. The employment judge was wrong to say that the interval in operations between 8th and 21st March due to a dispute between Trek and Amey was fatal to a transfer of an undertaking between Trek and Amey on 21st March 2013.  This was a temporary cessation of work.  The employment judge was wrong to conclude that the economic entity operated by Trek had ceased to exist simply because no work had been carried out during the very short period between 8th March 2013 and 20th March 2013.  In this regard the employment judge had not followed the European Court's judgment in Landsorganisation Danmark v Ny Molle Kro [1989] IRLR 37 and the EAT's decision in Wood v Caledon Social Club Limited [2010] All ER(D) 79.

2. The employment judge was also wrong to find there was no service provision change from Trek to Amey.  He had considered, similarly, that because of the shutdown the Trek traffic management staff had ceased to be an organised grouping of employees before the putative service provision change.  However this conclusion was reached without the benefit of the recent EAT decision in Inex Home Improvements Limited v Hodgkins [2016] ICR 71 where the EAT held that there was nothing to suggest that a temporary cessation of activities would preclude the continued existence of an organised grouping of employees.  Simler J approved Inex and followed it.

3. The employment judge went wrong in saying, in the alternative, that the service provision rules did not apply because of the short term single specific event or task exception (regulation 3(3)(a)(ii) of TUPE 2006/regulation 3(2)(a)(ii) of the NI SPC Regs).  The employment judge held that Amey's involvement in succession to Trek would be a matter of 'short term duration because of new contracts coming into force on 1st April'.

This was challenged by counsel for the claimants.  She submitted that the short term nature of Amey's involvement had no relevance in circumstances where TFL's requirement was for traffic management services to be provided on a continuous and ongoing basis, even after 1st April; and the traffic management service which Amey was contracted to provide under its contract with TFL was never intended to be a task of short term duration.  The EAT agreed that the employment judge went wrong here too:

"The employment judge inferred an intention on the part of TFL that Amey's involvement would be of short term duration.  But the question to be considered under the regulations was not whether TFL intended Amey's involvement to be of short term duration.  The question was whether the task in respect of which Amey was to be involved was intended to be of short term duration.  That question was not addressed.  Accordingly the employment judge's decision on this point could not stand."

4. The employment judge had further found that the claimants were not employed 'immediately before' any transfer to Amey.  However, there was insufficient evidence pointing towards a dismissal of the claimants in mid-March as opposed to their being laid off or subject to a repudiatory breach of contract.  The notes of evidence did not show that unambiguous words of dismissal were used; nor did they support an inevitable finding that a reasonable person would have understood the words to amount to a dismissal or that the claimants plainly understood they were being dismissed rather than laid off.

5. Because of his conclusions that there was no transfer of an undertaking or any service provision change from Trek to Amey the employment judge found it unnecessary to deal with the question of whether there was a subsequent transfer from Amey to Ringway Jacobs.  However there was no evidence that the claimants had been dismissed and therefore their employment was still in being for the purposes of a subsequent transfer from Amey to Ringway Jacobs.

6. The employment judge also found there was no transfer of an undertaking from Trek to Ringway Jacobs on 1st April 2013; but it was incumbent on the employment judge to examine Ringway Jacobs' reasons for not taking on employees undoubtedly assigned to the North East region.  This was a case where it was at least arguable that the employment judge might be required to deem the workforce transferred for the purposes of carrying out the multi-factorial assessment required.

The EAT therefore ruled that the employment judge's decision must be set aside in terms of its findings:

a) that there was no relevant transfer of an economic entity that retained its identity from Trek to Amey;

b) that there was no service provision change from Trek to Amey;

c) that there was no transfer of an economic entity that retained its identity from Trek to Ringway Jacobs;

d) that there was no service provision change from Trek to Ringway Jacobs.

The case was remitted to the same employment judge to reconsider the issues in accordance with the guidance of the EAT.

Full Case Decision:

http://www.bailii.org/uk/cases/UKEAT/2016/0063_15_2901.html