The Employment Appeal Tribunal has provided guidance on whether post-transfer events can be taken into account when deciding whether to apply the exemption from the TUPE Regulations for tasks of "short-term duration". Anne Palmer reports on this development and its practical implications.
Regulation 3(1)(b) of the Transfer of Undertakings (Protection of Employment) Regulations 2006 ("the TUPE Regulations") preserves an employee's terms and conditions when there is a service provision change.
A service provision change can occur in any of the following circumstances:
- a new service provider is appointed
- an existing external provider is replaced
- services are brought back in-house
In these circumstances, the transferee (incoming employer) effectively steps into the shoes of the transferor (outgoing employer) assuming the rights, liabilities, powers and duties of the transferor. This means that the relevant employees employed by the transferor immediately before the TUPE Regulations transfer automatically become employed by the transferee, from the time of transfer on the same terms and conditions of employment.
There are a number of exceptions to regulation 3(1)(b) which are set out in Regulation 3(3). In particular, regulation 3(3)(a)(ii) states that there will no service provision change if the client intends to use the contractor for a single specific event or task of short term duration.
In ICTS UK Limited v Mahdi, the Employment Appeal Tribunal (EAT) considered a security provider's argument that the "short term duration" exception applied where their client had asked them to secure a site on an interim basis, pending expected building works.
ICTS employed a group of employees as security guards to provide security services at Middlesex University campus. In 2012, the campus closed down and in July 2013, the site was purchased by a Malaysian university ("AUCMS") who were planning on refurbishing the campus. ICTS continued to guard the vacant site until the contract was tendered to First Call Secure Group Limited ("First Call"). First Call took over on 11 November 2013 and refused to employ any of ICTS's employees, as it said that there had been no relevant transfer under the TUPE Regulations.
In its response to claims brought by ten ICTS employees, First Call argued that it had entered into a contract to only secure the site during the refurbishment process. Consequently, First Call's contract was to provide security services for a short-term duration until the refurbishment was complete. Therefore, the short term exception under Regulation 3(3)(a)(ii) of the TUPE Regulations applied.
The employment tribunal considered that the correct approach was to determine AUCMS's intention as at 11 November 2013 (the relevant date of transfer) and not look back at previous events or look at subsequent events. On this basis, the tribunal found it logical to infer that the relevant "task" (the provision of security) was for a limited amount of time; ie whilst the refurbishment was being carried out. Therefore, there was no relevant transfer under the TUPE Regulations. ICTS appealed the decision.
The EAT held that the employment tribunal was mistaken in wholly ignoring events occurring after 11 November 2013. For example, judge disregarded the fact that, even by the date of the tribunal hearing, no planning permission was granted for any major building project at the site and no building work had taken place.
Consequently, this error may have affected the tribunal's findings by casting doubt on whether AUCMS really intended the task to be short-term.
The EAT remitted the case back to the employment tribunal.
What does this mean for me?
If your organisation is considering the application of the TUPE Regulations on a service provision change, this case illustrates that, in order to evaluate whether the 'short term task' exemption applies, evidence of events after the transfer may be taken into account by an employment tribunal.
However, this is only to the extent that post-transfer events cast light on the employer's decision making process – the decision in Mahdi does not mean that a tribunal can evaluate a client's intention by reference to the ultimate outcome as at the hearing date (this would be likely to be an error of law).
Interestingly, the facts of the Mahdi case are similar to those in the 2014 case of Horizon Security Services Limited v Ndeze, in which a security services contract of 8-9 months pending a building's demolition did fall within the 'short term' exemption under the TUPE Regulation (please click here to read our summary of the Ndeze case). However, the judge in the Mahdi case said that his decision was not inconsistent with Ndeze; it is simply that evidence of post-transfer events may be useful in analysing the client's intention.
If your organisation is considering an insourcing, outsourcing or restructure to which the TUPE Regulations might apply, or if you want to find out more about how the outcome in the Mahdi case could impact your organisation, please contact me or your usual contact at Bevan Brittan.