In a recent case on service provision change the Employment Appeal Tribunal has examined the requirement, under the TUPE Regulations 2006, that the activities carried out by a new service provider must be fundamentally the same as the activities carried out by the previous service provider in order for there to be a service provision change TUPE transfer.

TUPE and service provision change: similarity of activities

By virtue of regulation 3(2A) of TUPE, for a service provision change, the activities being carried out by another person in succession to a previous provider (or client) must be activities which are "fundamentally the same" as the activities carried out by the person who has ceased to carry them out.  This rule was introduced by the Collective Redundancies and Transfer of Undertakings (Protection of Employment) (Amendment) Regulations 2014.  Reg 3(2A) has not (yet) been incorporated into the Service Provision Change (Protection of Employment) Regulations (Northern Ireland) 2006.  But case law prior to the British 2014 Regulations establishes the same condition (see, e.g. Churchill Dulwich Ltd (in liq) v Metropolitan Resources Ltd [2009] IRLR 700).  This was the rule under consideration in the EAT case of The Salvation Army Trustee Company v Coventry Cyrenians Limited UKEAT/0120/16/RN.

Coventry Cyrenians Limited (CCL) is a charity.  The claimant employees were employed by CCL in its adult services team.  CCL had a main contract with Coventry City Council to provide a range of services to homeless people.  This involved providing 25 units of accommodation over 10 sites as well as support work.  This included assessment of potential service users, allocation to houses of multiple occupation, producing a support plan and supporting individuals under that plan.  The Council had subcontracted its requirements for services to the homeless through a network of 22 separate contracts with different providers.  It wanted to do away with these 22 separate contracts and merge the provision of homelessness and ex-offender support through a single point of access it therefore tendered out a contract for this purpose.

It was awarded to The Salvation Army Trustee Company (SAT).  For a while it seemed likely that CCL would be taken on by SAT as a subcontractor.  But in the end this did not occur.  SAT operated the service in a slightly different way, with an assessment centre or hub that dealt with all referrals.  If the individual were to be supported by accommodation it would be in one of two large hostels.  Support services could be delivered more efficiently at 2 sites than in accommodation over 10 sites.  So support work did continue, but at 2 sites and not 10.  There were other differences.  For example, the service was provided to those over the age of 25 rather than over the age of 18, as was the case before.  The service was to be delivered in supported accommodation for 112 days rather than the longer period (up to 12 months) which applied before.  The usual hours of support workers also changed.  At the employment tribunal hearing a key submission from SAT was that the services were no longer provided through what SAT described as "dispersed accommodation", that is to say that 10 multiple occupation sites that CCL operated in Coventry.

The employment judge described the activities prior to the putative service provision change as the "provision of accommodation based support for the homeless men and women".  He found that the claimant employees constituted an organised grouping of employees, having, as its principal purpose, the carrying out of these activities.  The key issue was whether the activities carried out by SAT in succession to CCL were fundamentally the same as those carried out by CCL.  The employment judge examined the differences above described but did not consider them fundamental.  Nor, in particular, did he consider that the fact that so called "dispersed accommodation" was offered before and hostel accommodation offered afterwards, constituted a fundamental difference in the activity.  The employment judge therefore concluded that the activities that CCL ceased to carry out on behalf of Coventry City Council were fundamentally the same as the activities carried out instead by SAT on behalf of the Council.

On appeal, SAT argued that the employment judge's description of the activities concerned was too general and simplistic.  As to the meaning of activities, he needed to derive support from OCS Group UK Limited v Jones UKEAT/0038/09 (where a distinction was made between the provision of food via a restaurant and the provision of food via cold cabinets and a conclusion reached that the two activities were not fundamentally the same).  The EAT however considered that the employment judge had approached the question correctly.  The word "activities" in regulation 3(1)(b) of TUPE was to be given its ordinary, everyday meaning.  "Activities" must be defined in a common sense and pragmatic way.  On the one hand, they should not be defined at such a level of generality that they do not really describe the specific activities at all (thus, referring to OCS Group it would be wrong to characterise a fully catered canteen as merely the provision of food to staff).  On the other hand, the definition should be holistic having regard to the evidence in the round, avoiding too narrow a focus.  A pedantic and excessively detailed definition of "activities" would risk defeating the purpose of the SPC provisions.

According to the EAT the employment judge "[steered] a correct course between the dangers of over generalisation and pedantry".  Nor did the employment judge go wrong by asking whether there were fundamental "differences" between the services concerned, as opposed to assessing whether they were "fundamentally the same".  SAT's contention on this point was also rejected by the EAT.  Thus, said HHJ Richardson:

"I consider that it is entirely plain from the employment judge's reasons as a whole, and from paragraph 37 in particular, that he used the language of "fundamental difference" in antithesis, in direct opposition, to the phrase "fundamentally the same"."

The judge used the terms in question as direct opposites and "he never strayed from the correct legal test".