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Issue 39 (October 1999)

Contents

TUPE still delivers
Up close and personal for company directors
Part-timers lose out in redundancy calculations
Works Councils arrive
Redefining redundancy
Two bites at the cherry
Hopes rise after AG delivers opinion

 

TUPE still delivers

ECM (Vehicle Delivery Service) Ltd v Cox [1999] IRLR 559 (Court of Appeal) s38 Employment Relations Act 1999

The application of TUPE to contracting out continues to attract the attention of the courts and the government.

The government will shortly be publishing a consultation document on the revision of the Transfer of Undertakings (Protection of Employment) Regulations 1981. This will do more than merely implement the revisions to the Acquired Rights Directive agreed last year. It will go further and make specific provision for the application of the Regulations to changes of service provider in the UK. The Government has taken the power to do this in section 38 of the Employment Relations Act. This enables the Government to make Regulations which go beyond the Directive and also to issue regulations applying TUPE to particular public sector transfers. This has already been employed to provide protection on the transfer of rent officer functions.

The motive force behind the Government's approach is a desire to clear up the uncertainty left by the Suzen decision (see Issue 10 of LELR). This led to a number of examples of employers attempting to avoid TUPE and a number of rogue court and tribunal decsions (see for example Betts v Bristol Helicopters [1997] 361 and North East Lincolnshire v Beech and Others(IDS 644)).

The President of the Employment Appeal Tribunal has shown a similar desire and this has now been matched by the Court of Appeal in a very welcome decision in the ECM case.

This was a situation where a vehicle delivery contract changed hands. The work was to be carried out from a different site, with different arrangements for delivery and administration. The new contractor, ECM, refused to offer employment to any of the 24 employees. The Employment Tribunal decided this was because ECM wanted to avoid TUPE.

The employers argued that, following Suzen, there was no transfer as there had not been a transfer of significant assets or a major part of the workforce. This argument was rejected by the EAT and the Appeal Court.

The Court of Appeal upheld the view that the customers were essentially the same and the work that was going on was essentially the same. The identity of the economic entity was retained following the transfer.

Very helpfully, the Court went on to set Suzen into context. The Court re-emphasised the continuing importance of the earlier decisions, including Spijkers, and the necessity to make a factual appraisal of all the facts characterising the transaction. The Court said that the importance of Suzen was over-stated. It did set limits to TUPE, but these were not relevant to the ECM situation. ECM was not a case where it was asserted that the mere change of contractor of itself amounted to a transfer, nor did it depend merely on a comparison of the activities before and after the change. The Tribunal was entitled to conclude that the operation continued in different hands.

Significantly, the Court said that it was relevant to consider why the employees were not taken on. This allows Tribunals to see through avoidance schemes by employers who refuse to take on staff in the hope that they can escape the application of TUPE.