OCS Group UK Ltd v. Jones & Ciliza - TUPE and service provision changes

Contrary to the suggestion in Harvey, the answer to whether or not there has been a service provision change for the purposes of the 2006 TUPE Regulations is not dependent, as a pre-condition, on whether there was an organised grouping of employees carrying on the activities in point.

OCS Group UK Ltd provided a number of fully managed service contracts for workers on the BMW Mini assembly plant at Cowley, Oxford.  The services included catering, cleaning, security and pest control.  Mrs Jones and Miss Ciliza (who were bringing test cases as four other OCS employees were also involved) were employed by as chef/supervisors. They spent a great deal of their time in preparing hot meals for the Cowley plant workers.

OCS were losing money on the contract.  They failed in attempts to renegotiate it and another company, MIS, took over the contract from 1st August 2007. In the words of the EAT "There was then, of course, an issue as to whether or not TUPE applied".  If TUPE applied, the ladies' employment automatically transferred to MIS.

The matter came to an employment tribunal.  The tribunal ruled that TUPE (specifically the service provision changes provisions) did not apply. As a result the tribunal found that the two ladies' employment had not transferred to MIS.  The tribunal came to its decision because it found that the activities carried out by MIS were substantially different from those previously carried out by OCS Group.  In particular "… the operation had changed from the provision of a full canteen service where [Mrs Jones and Miss Ciliza] were chefs to them becoming sales assistants in a kiosk."

OCS Group appealed against that ruling as, of course, it wanted to establish that the ladies' employment had automatically transferred under TUPE to MIS. OCS Group have lost their appeal.

At one level the EAT's reasoning was necessarily highly technical, turning on the proper construction of the Transfer of Undertakings (Protection of Employment) Regulations 2006 SI 2006/246  and specifically on the interaction between regulation 3(1)(b) and regulation 3(3). 

Regulation 3(1)(b) provides (in so far as relevant) that there is a relevant transfer of an undertaking if the situation is one in which "… activities cease to be carried out by a contractor on a client's behalf, ...... and are carried out instead by another person (a "subsequent contractor") on the client's behalf ...... and in which the conditions set out in paragraph (3) are satisfied"

Paragraph (3) provides (in so far as relevant) that "The conditions referred to in paragraph (1)(b) are that .... immediately before the service provision change ...... there is an organised grouping of employees situated in Great Britain which has its principal purpose the carrying out of the activities concerned on behalf of the client"

It was argued for OCS Group that paragraph (3) creates a condition precedent and has to be looked at first. In other words, it was argued that the first step is to consider whether " there is an organised grouping of employees situated in Great Britain which has its principal purpose the carrying out of the activities concerned on behalf of the client".  This would be in accordance with a suggestion in the leading text book, Harvey, which (at Division F, para 72) states that "the starting point is that there should be an organised grouping of employees carrying on the activitites.....".  It was argued that only if this condition was fulfilled should one move on to determine whether those activities have moved to a new contractor. 

It was argued for OCS Group that the tribunal had not followed that course and that therefore its conclusion was unsound. 

The EAT did not agree with this line of argument.  The EAT's reasoning followed from the fact that the first requirement of the conditions in paragraph (3) is that "immediately before the service provision change there is an organised grouping" .  This presupposes that it has already been decided that there has been a service provision change. Therefore the conditions in paragraph 3 cannot be considered until after that has been decided.  The EAT said it found support for this reasoning in the previous EAT decisions in Kimberley Group Housing Ltd v Hambley & Ors [2008] ICR 1030 and in Metropolitan Resources Ltd v Churchill Dulwich Ltd (in liquidation), Martin Cambridge & Ors,  [2009] IRLR 700.

At another level, the EAT's reasoning was more a matter of commonsense than of technical construction of the TUPE regulations.  The EAT took the view that, in considering whether or not "activities" had been transferred, the original tribunal had been correct to disregard minor differences in the detail of the services provided by OCS Group on the one hand and MIS on the other.  But the tribunal had identified the activity carried out by OCS Group under the old contract as being substantially different from the activity carried out by MIS under the new contract.   The tribunal had found that OCS had provided a full hot food catering service while MIS merely provided what was described as a "sandwich and salad" regime.  The tribunal had been entitled to conclude that these were two different activities.  The tribunal's conclusion that the TUPE regulations therefore did not apply was one to which it had been entitled to come.

Accordingly the appeal was dismissed.