In our August TUPE update, we look at a British EAT decision on service provision change.  In Anglo Beef Processors UK v Longland the EAT continues to take a pragmatic and common sense approach to when activities changing hands remain fundamentally the same for the purpose of the service provision change rules.  ICAP Management Services Ltd v Berry is a fascinating decision on the right of employees to object to a TUPE transfer and, thereby, release them from their employment contract.  Finally, in Piscarreta Ricardo, the European Court has considered interesting issues arising from the decision by a Portuguese local authority to close down its trading company and to take over some of its activities and to outsource the remainder.

TUPE, Service Provision Change and activities that remain "fundamentally the same" ⚓︎

In order for there to be a service provision change TUPE transfer under regulation 3(1)(b) of TUPE the activities taken over by the new provider must remain "fundamentally the same" as before the transfer.  This requirement was introduced into the TUPE Regulations 2006 in 2014.  This requirement is not contained in the Service Provision Change (Protection of Employment) Regulations (Northern Ireland) 2006.  But British EAT case law on TUPE 2006 before the amendments were made in 2014 implied this requirement (see Metropolitan Resources Ltd v Churchill Dulwich [2009] IRLR 700).  And so the rule will be familiar to practitioners in Northern Ireland.  The EAT has recently stressed that a common sense and pragmatic approach must be taken to the meaning of the word "activities" in the service provision change definition, and its decision in Anglo Beef Processors UK v Longland UKEATS/0025/15/JW is the latest example of this.

Mr Longland was employed by Meat & Livestock Commercial Services Limited as a carcase service officer.  This meant classifying carcases in an abattoir.  His employer provided these services to Anglo Beef Processors UK under a commercial services agreement.  Mr Longland's duties involved identifying and weighing carcases, recording information, marking carcases and making sure they were classified properly in accordance with statutory regulations.  Although this involved manual classification his employer had used a VIA (video imaging analysis) machine for some time.  This enabled Mr Longland to carry out some of his duties with the assistance of the VIA machine although it was not fully using computer software analysis at this time.  In 2014 Anglo Beef informed MLCSL that it would be moving over to full electronic classification of carcases and would be terminating its agreement with MLCSL accordingly.  In other words it took the service back in house.

Anglo Beef now intended to make the assessment of carcases using the computerised assessment which the VIA machine was capable of producing.  However, some manual input was still necessary.  The machines still needed calibrating every morning.  A physical check was also necessary.  Other aspects of the operation also required a person or persons to be present.  If, for example, the machine missed a carcase then a qualified person would be called on to manually classify the carcase.

The question was whether Mr Longland should transfer to Anglo Beef under TUPE which the latter disputed.  The employment tribunal, however, concluded that the activity which Anglo Beef had taken over-involved, essentially, classifying carcases, whether manually or electronically.  The activity had been carried out by having two employees present at the processing line prior to the transfer and this practice was continued after the termination of MLCSL's contract.  Furthermore, the necessary BCC licence which Mr Longland held for the purposes of manual classification was required by at least one employee on the premises where electronic classification was being carried out.  After the transfer a BCC qualified grader continued to be present on the line.  The employment tribunal concluded that: "there was really very little room for doubt that the activities carried out by [Anglo Beef] after the transfer were fundamentally the same as that carried out by [MLCSL]".

Anglo Beef had also relied on the decision of the EAT in Department for Education v Huke UKEAT/0080/12.  In that case the EAT decided that a tribunal ought to consider, in deciding whether "activities remained the same, not only the character and type of activities carried out but also the quantity, particularly where the contract post transfer involved a substantially reduced service.  In such a situation TUPE might not apply.  However, the ET in Anglo Beef considered that the issue in Huke was that the claimant employee, in that case, was only carrying out the activities which transferred to the putative transferee for around 45% of his time prior to the transfer.  The real issue in Huke was that there was really no activity to be transferred since there had prior to the transfer been a considerable downturn in work and long prior to the insourcing there had been little or no work on the activities insourced for the employee to do.  But here the situation was different.  There was no reduction in quantity as far as the activities previously carried out by Mr Longland were concerned.  The ET made a specific finding that the processing of carcases continued as before with the same throughput rate of around 40 to 45 carcases per hour.

The EAT held that the ET was entitled to make these findings and adopted its reasoning.  In short, there was a service provision change TUPE transfer and Anglo Beef's appeal was dismissed.

Full case decision:
http://www.bailii.org/uk/cases/UKEAT/2016/0025_15_0712.html

TUPE and Garden Leave ⚓︎

A senior executive was placed on garden leave.  Were the circumstances such that a TUPE transfer enabled him to object to it and terminate his garden leave?

No, held the High Court in ICAP Management Services Ltd v Berry.

Mr Berry worked for ICAP Management Services Ltd, which was a service company for the ICAP Global Banking Business.  He gave notice to leave in order to join a competitor, BGB Services (Holdings) Limited.  ICAP put him on garden leave.

During the garden leave, ICAP was the subject of a share sale acquisition by Tullett Prebon plc.  Mr Berry notified ICAP that he considered there was a TUPE transfer and purported to object to it under Reg 4(7) of TUPE.  That would, by virtue of Reg 4(8), have terminated his contract (and his garden leave) forthwith, releasing him to take up his new employment earlier than would otherwise have been the case. ICAP sued to enforce the garden leave.

The High Court rejected Mr Berry's arguments.  TUPE requires a change of employer.  A share sale does not involve a change of employer.  This was not the kind of exceptional case envisaged in Millam v Print Factory (London) 1991 Ltd [2007] EWCA Civ 322 where, after a share sale, there had been a de facto TUPE transfer because of the supreme control exercised by the new owner.  Here it was business as usual.  The operating and service companies carried on in the same way as before the share sale.  There was, therefore, no TUPE transfer, and nothing to object to.  ICAP succeeded in its application for an injunction to enforce the garden leave.

For TUPE aficionados there is (at paras 24-102) an excellent discussion of some key legal issues in the law on transfer of undertakings, including “the concept of the employer”, the legal requirement of change of employer, and the indicia of a TUPE transfer.

Full case decision:
http://www.bailii.org/ew/cases/EWHC/QB/2017/1321.html

TUPE: Dissolution of local authority trading company and onward transfer of assets and activities ⚓︎

In Luís Manuel Piscarreta Ricardo v Portimão Urbis, E.M., SA, in liquidation, Município de Portimão Emarp – Empresa Municipal de Águas e Resíduos de Portimão, EM, SA (Case C-416/16) the European Court has discussed two important issues arising from a decision by a local council to wind up its trading company and continue its activities by other means.  Was this a transfer of an undertaking within the meaning of the EU Acquired Rights Directive?

The Municipality Portimão is a local authority on the Algarve in Portugal.  It had a trading company called Portimão Urbis.  It employed Mr Piscarreta Ricardo as a director.  Portimão Urbis was concerned with all manner of tourist matters, including street trading and cultural services.  The Council, as principal shareholder of Portimão Urbis, decided to wind it up.  Some of the activities were taken over by Portimão Council and the remainder of these activities were outsourced to Emarp (of which the Council was also the sole shareholder).  There was an arrangement to transfer the staff to the Council and Emarp, but Mr Ricardo was not included in these plans.  He was informed his employment would end on the final closure of Portimão Urbis.  He therefore brought an action arguing that there had been a transfer of an undertaking from Portimão Urbis to Portimão Council and Emarp.  A further complication was that he had been (at his request) on unpaid leave for the last three years.  So even if there were a transfer of a business, was he in scope to transfer because of the suspension of his employment contract?

The transfer of undertakings point

The key question was whether a trading company owned by local authority, which was wound up at the insistence of the local authority, which had assumed part of the services previously carried out by the trading company and outsourced others, was a transfer of an undertaking.

The essential distinction when considering transfers concerning public authorities is to examine whether there is a transfer of an economic entity (ie of an undertaking engaged in economic activities) or an administrative reorganisation of public administrative authorities or the transfer of administrative functions between public administrative authorities.  The first of these is a transfer of an undertaking.  The latter two are not.

In Piscarreta Ricardo the Court usefully summarised the distinction between public sector transfers which are not covered by the Directive and those which are.  Thus:

"The Court has made clear in that regard that the notion of economic activity encompasses any activity consisting in offering goods or services on a given market. Activities which fall within the exercise of public powers are excluded as a matter of principle from classification as economic activity. However, services which are carried out in the public interest and without a profit motive and are in competition with those offered by operators who seek to make a profit may be classified as economic activities for the purposes of [the ARD]."

In the present case the court considered that the various activities engaged in by Portimão Urbis and taken over by Portimão Council and Emarp did not fall within the exercise of public powers, and so they were capable of being classified as economic activities for the purposes of the ARD.  Nor did it matter that the transfer resulted from a unilateral decision of the local authority rather than a consensual transfer.  Of course, said the Court:

"It is necessary in this regard to consider all the facts characterising the transaction at issue in the main proceedings, including, in particular, the type of undertaking or business in question, whether or not its tangible assets, such as buildings and movable property, are transferred, the value of its intangible assets at the time of the transfer, whether or not the majority of its employees are taken over by the new employer, whether or not its customers are transferred, the degree of similarity between the activities carried on before and after the transfer, and the period, if any, for which those activities were suspended. However, all those circumstances are merely single factors in the overall assessment which must be made and cannot, therefore, be considered in isolation."

This is a matter for the national court to determine.

The employee status point

The next question was whether a person such as Mr Ricardo, who was suspended and not actually performing his duties, was covered by the concept of "employee" within the meaning of the ARD and whether his employment contract should transfer to the transferee.

The Court noted that any person who, in the Member State concerned, is protected as an employee under national employment law is considered to be an "employee".  That employment contract of course must exist at the date of the transfer.  Whether there is a contract of employment in existence at the time of transfer must be assessed on the basis of national law, subject to the compliance with the mandatory provisions of the ARD concerning protection of employees from dismissal as a result of the transfer.

Under Portuguese national law, Portuguese legislation provides that whilst an employment contract is suspended, the rights obligations and safeguards of parties who are not required to be in active service are maintained.  Therefore, said the Court, in such a case the ARD will protect an employee who is not actually performing his duties because his employment contract is suspended.  But this would always be a matter for the national court to verify.  Thus:

"…a person…who, because his employment contract is suspended, is not actually performing his duties is covered by the concept of "employee" insofar as that person is protected as an employee under the national law concerned…"

Full case decision:
http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:62016CJ0416

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Note: Legal-Island is running a practical TUPE seminar on Tuesday 24th October 2017. For more information and to book, please visit our 'Understanding TUPE - A Practical Seminar' webpage. Places at this seminar are limited, and will be allocated on a first-come, first-served basis.