Hogan Lovells

Split the difference - CJEU decision on fragmentation applies to service provision changes

When a contract is retendered, services that were originally provided by a single contractor may be divided between two or more new contractors. This leads to difficult questions about whether the original contractor’s employees transfer to the new providers under TUPE. Historically tribunals have taken a fairly pragmatic approach, either finding that the services are so fragmented that there is no transfer, or that employees transfer to the contractor that has taken the largest share of the services. However, the decision in McTear Contracts Ltd v Bennett indicates that this is no longer the correct approach in light of a recent CJEU decision.

Amey had a contract with North Lanarkshire Council to replace kitchens in the Council’s housing stock. Amey’s employees were allocated to one of two teams, which worked independently of each other. Both teams covered the Council’s whole geographical area. When the contract was retendered, it was split into a north and a south region and different contractors were appointed to each region.

Amey “mapped” each team to the region where it had spent most time working recently and argued that the employees in that team TUPE transferred to the contractor appointed to that region. A number of Amey employees were not taken on by either of the new contractors and brought unfair dismissal claims against Amey and the new contractors as a result. The employment tribunal found that there had been a service provision change, with one team transferring to one contractor and the second team to the other. It relied on existing case law that employees could not be divided between transferees so as to have two different employers after a transfer.

However, after the tribunal issued its decision, and during the Brexit implementation period, the CJEU handed down its decision in ISS Facility Services NV v Govaerts. This found that employees could in principle be transferred to more than one transferee where services were split, in proportion to the tasks performed. The incoming service providers appealed the tribunal’s decision, arguing that the decision in Govaerts meant that the tribunal’s approach was wrong.

The EAT concluded, in the absence of any contrary argument, that the Govaerts decision applies to the service provision change requirements in TUPE, even though these are domestic rules that do not have their source in the underlying Acquired Rights Directive. It would be undesirable for there to be a different approach depending on whether a tribunal was considering an “ordinary” business transfer or a service provision change. There was no reason in principle why an employee could not have two contracts of employment with different employers after a transfer. The case was remitted for reconsideration in light of Govaerts and the individual position of each employee said to have transferred.

Wrong question - right to make change did not mean it was not substantial or a detriment

Under TUPE, a transferring employee has the right to treat themselves as dismissed if a relevant transfer results in a substantial change in working conditions that is to their material detriment. The EAT decision in Lewis v Dow Silicones UK Ltd is a reminder that it is irrelevant that the employer has a contractual right to make the change in question.

Mr Lewis was “insourced” to Dow Silicones UK Ltd under TUPE. After Dow introduced new job responsibilities and made changes to the way in which standby and call out arrangements worked, he resigned and brought an unfair dismissal claim. He argued that the new arrangements were a fundamental breach of contract and a substantial change in working conditions that was to his material detriment. The employment tribunal found he had not been dismissed and his claim failed.

He appealed to the EAT, which found that the changes were not a fundamental breach of contract because they could be made within the express terms of his existing contract. However, the tribunal had overlooked the fact that something does not stop being a change just because an employer has a right to introduce it. In this case a new requirement to provide rostered instead of voluntary overtime was clearly a substantial change. Even though Mr Lewis had often worked overtime voluntarily, he considered the shift to compulsory overtime detrimental and that was a reasonable position. He was entitled to treat his contract of employment as terminated and his unfair dismissal claim was remitted for further consideration.

Health and safety protection extended to workers

Late last year, in the case R (on the application of the Independent Workers’ Union of Great Britain) v Secretary of State for Work and Pensions, the High Court found that the government had not properly implemented various EU health and safety protections. In particular, workers were entitled not to be subjected to a detriment because they had taken appropriate steps in the event of serious and imminent danger to their safety or that of other people. At the moment, the Employment Rights Act 1996 limits protection against detriment in those circumstances to employees.

In response to the Court’s decision, the government has issued draft Regulations correcting the position. From 31 May 2021, both employees and workers will have the right not to be subjected to a detriment if they:

  • Leave or refuse to return to the workplace; or
  • Take appropriate steps to protect themselves or others
in circumstances of danger that they reasonably believe to be serious and imminent and which they could not reasonably be expected to avert.

Once the Regulations come into force workers will be able to bring an employment tribunal claim that they have been subjected to a health and safety detriment and obtain compensation if they are successful in the usual way. The extension of the protection to workers is obviously potentially significant given the continuing impact of Covid-19 and the gradual re-opening of businesses after the latest lockdown.
 

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