TUPE: Service Provision Change

Thanks to Dr John McMullen of Wrigleys Solicitors LLP for preparing this case summary

For a service provision change TUPE transfer, there must have been, prior to the change, an organised grouping of employees, the principal purpose of which was to carry out the relevant activities for the relevant client.

In Amaryllis Ltd v McLeod the EAT considered that the principal purpose of any organised grouping of workers must be assessed at the point immediately before the change of provider, and not historically.

Millbrook Furnishings Ltd carried out work for the Ministry of Defence (MoD) for many years renovating wood and metal furniture. Between 2003 and 2008 it did so as a sub-contractor to Amaryllis. From December 2012 the MoD awarded new contracts under a framework agreement. In 2014 the furnishings renovations contract was retendered among four contractors on the framework agreement. Millbrook was unsuccessful on the retender and, instead, the contract was awarded to Amaryllis.

The question was whether there was an organised grouping of employees in place prior to the transfer to work to Amaryllis, the principal purpose of which was to carry out the activities concerned on behalf of the MoD.

It was accepted that Millbrook's employees were spending just shy of 70% of their time on the MoD renovations contract. Nonetheless the Employment Judge considered that it was appropriate to consider evidence relating to the past. The Employment Judge was satisfied that the department had originally been set up with the specific purpose of servicing the MoD contracts, and although that grouping now serviced other customers, the MoD was still the largest customer. He found TUPE applied.

Amaryllis appealed. The EAT upheld the appeal. It was not sufficient that a department carries out significant work for a client. It must be organised for the principal purpose of carrying out that work for the client. The relevant time is immediately before the transfer.

The Employment Judge was wrong to look at the matter on an historic basis. And it was incorrect to take into account work done on furniture renovation by Millbrook between 2003 and 2008 when Millbrook was a subcontractor of Amaryllis. During this time the MoD was not a client of Millbrook. Millbrook's client for this work was Amaryllis. That period could not be taken into account since, even if there were, during that period, an organised grouping of employees, the grouping concerned was not dedicated to carrying out the activities for the relevant client.