TUPE and SPCs exception

An important exception from the TUPE Regulations applies to short term contracts but we have, until recently, had very little guidance on how this should be applied. Victoria McMeel looks at a case which sheds some light on this issue and outlines how the exception now works in practice.

28/11/2013

An important exception from the TUPE Regulations applies to short term contracts but we have, until recently, had very little guidance on how this should be applied.  Victoria McMeel looks at a case which sheds some light on this issue and outlines how the exception now works in practice.

The background

One of the key employee protections contained in the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) is the 'automatic transfer principle, under which transferred employees' employment passes to an incoming employer without any adverse effect on their employment rights.

This covers two broad situations:

  • a traditional ‘business transfer’: where one organisation is transferred into the hands of another organisation; and
  • a ‘service provision change’ (SPC): where activities are transferred between contractors, including reassigning such a contract (whether by contracting out, outsourcing or re-tendering), or bringing the work ‘in-house’.

However, the SPC provisions in TUPE will not apply where the activities in question are intended by the client to be in relation to a “single specific event or task of short-term duration” (Regulation 3(3)(a)(ii)).

There is no definition of either a ‘single specific event’ or a ‘task of short-term duration’ in the Regulations; neither is there any indication as to whether these two aspects of the exemption (‘single event’ and ‘task of short term duration’) should be read together or separately – i.e. does ‘single specific event’ qualify the phrase ‘task of short term duration’?

The question of the meaning of an SPC in the context of the task / event exemption to TUPE was dealt with this month in the case of Swanbridge Hire & Sales v Butler and others – and, in line with the constantly changing nature of TUPE case law – the EAT departed from the reasoning in another case, Liddell's Coaches v Cook, which looked at the same exemption this time last year (please click here for a summary).

The facts

This case related to a contract to undertake insulation and cladding work on five boilers at Pembroke Power Station on behalf of Shaw Group Limited.  The work was contracted to a company called Kitsons who commenced the work and then, following a disagreement with Shaw Group, the contract was transferred to Swanbridge Hire & Sales.  The work in connection with the insulation and cladding took eighteen months in total; and eight months from the point at which Swanbridge took over.

An employment tribunal held that the employees working on the boilers had TUPE transferred from Kitsons to Swanbridge because an 18 month contract was an 'event' which was sufficiently lengthy to fall outside of the 'short term' exemption in the TUPE Regulations. 

Swanbridge appealed against that finding.

The decision

The Employment Appeal Tribunal (EAT) allowed the appeal and found the following.

  • It is the intention of the client that is relevant in the context of whether the 'short term' exemption applies, and the Employment Judge failed to consider that question.
  • The contract should have been characterised as a 'task' rather than an 'event'.
  • The Employment Judge had wrongly focussed on the 18 month duration of the whole task in question (the insulation and cladding of boilers).  The correct approach was to look at the client's intention in relation to the eight months during which Swanbridge was contracted to undertake the work.  The Employment Judge should have taken into account that 80% of the work on the boilers had been completed when Swanbridge took over the contract, and then the employment tribunal should have considered whether the period of time covered by the incoming contractor was of 'short-term' duration.
  • The EAT departed from the view of Lady Smith in Liddell's Coaches (see above) and said that it is not self-evident that a 'task' is of short-term duration; therefore, the phrase 'of short-term duration' in Regulation 3 qualifies both "task" and "event".
    The case was remitted back to a new employment tribunal to be re-considered.

What does this mean for me?

This case highlights that employment tribunals (and, by extension, employers) will be able apply the SPC exemption where a task or event is of short term duration; but it will not apply to 'events' which are not short term (going against the decision in Liddell's Coaches that we reported last year). It had been thought that it was self-evident that an 'event' would be of short-term duration but the EAT in Swanbridge gave the hypothetical example of an oil pipe leak: this is an 'event', but it could take place over a considerable period of time.  Although the Swanbridge and Liddell's Coaches are both EAT decisions (and therefore of equal status) it seems likely that employment tribunals will prefer the approach in Swanbridge as it also follows some obiter (i.e. non-binding) comments made on this point in another case: SNR Denton UK v Kirwan. 

The Swanbridge case is also a reminder that, when considering whether a contract might fall into the SPC exception from TUPE, it is

  • the intention of the client that is relevant 
  • in relation to the duration of the work intended to be undertaken by the incoming contractor (not the duration of the overarching task, as a whole, that the client has contracted out). 
     

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