309: TUPE transfers: splitting employees between multiple new employers

The EAT has ruled that on a service provision change (SPC) involving multiple transferees, the contract of a transferring employee can be split between each of those transferees in proportion to the tasks performed by each employee (McTear Contracts Ltd v Bennett and others; Mitie Property Services UK Ltd v Bennett and others). This extends the scope of the ECJ’s ruling in the earlier case of ISS Facility Services NV v Govaerts and Atalian NV which only applied in the context of TUPE business transfers, not SPCs.

The claimants were employed by Amey Services Ltd on a contract to fit kitchens into social housing for a local authority. They were divided into two teams, which usually worked independently, each covering the full range of trades needed to fit kitchens. When the contract was retendered, the council decided to split the work into two lots based on geographical location (north and south). The contract was then awarded to two different contractors, McTear Contracts Ltd and Mitie Property Services UK Ltd who each took one region. On the basis that TUPE applied, Amey allocated employees to either McTear or Mitie based on the time they had spent in each region over the past 12 months. However, McTear and Mitie argued that TUPE did not apply and refused to take on all of the employees. A number of employees brought claims against Amey, Mitie and McTear.

The Employment Tribunal found that there had been an SPC under TUPE and agreed that employees should be allocated to McTear or Mitie on the basis of Amey’s geographic analysis. However, on appeal, the EAT held that the ECJ’s decision in ISS Facility Services NV v Govaerts should apply to SPCs as well as business transfers. In this case, the ECJ had confirmed that where a TUPE transfer involves multiple transferees, the contracts of employment of transferring employees can transfer to each transferee in proportion to the tasks performed by the employee. The work attributable to each contract must be clearly separate and identifiable from the work on other contracts. If it is not possible to divide the tasks in this way, or it would adversely affect the employees, then all transferees would be liable for any termination costs. Although there is no legal requirement for the ECJ’s decision to apply, the EAT considered that applying different approaches to business transfers and SPCs was undesirable.

The EAT therefore upheld the appeal and remitted the case to the same Tribunal, which will now need to consider how the employees should be allocated between Mitie and McTear, taking into account the ECJ’s judgment.

Deciding how to deal with employees where there is more than one transferee is now likely to be even more complex, both legally and practically. The EAT’s ruling marks a shift in approach, from identifying one transferee to whom the employee should transfer, towards possibly dividing their employment contract between different transferees. Any transfers involving multiple transferees must now be carefully scrutinised well in advance to decide how employees should be organised, and to consider how employees’ time and salary could be split. This will be difficult if there is no agreement between transferees, or if they do not wish to take on an employee who is also working for a competitor. It will also be vital for all parties to ensure that appropriate indemnities and warranties are included in any relevant the transfer agreement.