The EAT has confirmed that what happens ‘on the ground’ is more important than what a contract says
A recent case has highlighted how Tupe might still apply even if a contract doesn’t specifically guarantee the work in question. The case arose when a portfolio of services was re-tendered by a local authority, and two employees found themselves without a job because their work wasn’t contractually assured under either the new or the old arrangements.
In the case Lorne Stewart v Hyde, Carillion had been providing boiler repair and maintenance services to Cornwall Council. The local authority re-tendered the work and Carillion was replaced by Lorne Stewart.
Under the council’s contract with Carillion, the routine maintenance and repair services were guaranteed and Lorne Stewart accepted that the employees working on these guaranteed services transferred to it under Tupe.
However, under the contract, higher value repair and maintenance services, as well as any large emergency repairs, were not guaranteed to be given to Carillion. The council was able to ask another provider to do these services if it wished and Carillion was able to refuse to provide the higher value and large emergency repairs if it wished.
In practice, the local authority always asked Carillion to do this type of work and Carillion always carried it out. These services were carried out regularly and there was an expectation from both the council and Carillion that this would be the case.
The contract with Lorne Stewart was the same – in other words, the higher value repairs and maintenance and any large emergency repairs were not guaranteed to be given to the contractor. But the council envisaged that Lorne Stewart would do them after the re-tender.
Two Carillion employees worked on the non-guaranteed services and Lorne Stewart argued that these two employees did not transfer to its organisation when the contract changed hands. This claim was contested by Carillion. The two employees turned up to work for Lorne Stewart on the first day after the re-tender but were sent away. Afterwards they brought claims for unfair dismissal.
The employment tribunal and Employment Appeal Tribunal both decided that it did not matter whether the services were guaranteed contractually or not. The tribunal looked at the services that were provided before and after the re-tender and found they were essentially the same. What mattered was what happened ‘on the ground’.
Both contractors accepted that the two employees were assigned to the organised group of employees doing the work for the council. Therefore, once the employment tribunal and EAT had decided that the non-guaranteed services transferred, the employees had to be transferred along with it.
The tribunal acknowledged that there was a risk involved for Lorne Stewart over whether the non-guaranteed work would be offered to it and how much work of this type it would be offered. It pointed out, however, that Lorne Stewart was able to price its tender to take account of this risk. The key point was that the employees were carrying out activities that had clearly transferred from Carillion to Lorne Stewart.
Employers should remember this point when bidding for contracts and considering which employees will transfer. The focus should be on the services that are actually being provided by the outgoing contractor and which services a new provider will be expected to do, rather than merely what the contract says.