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Transferring to a new service provider

Amaryllis v McLeod

When a new provider takes over a service, employees of the original service provider may transfer over under TUPE. But only those who, immediately before the transfer, were part of an organised grouping of employees with the principal purpose of carrying out the particular activities for the particular client qualify.

The employees in this case worked for Millbrook, which had a contract to renovate and supply furniture to the Ministry of Defence (MOD). When that contract was lost to Amaryllis, the Millbrook employees weren’t taken on.

Had they transferred under TUPE? Yes, all bar one, said the tribunal. The department had been set up to fulfill the renovations contract and that fact remained, despite work being also carried out for others. The department hadn’t changed from being one that mainly serviced the MOD contract to one that mainly serviced the needs of all customers, the major one of which happened to be the MOD. And the activities were fundamentally the same.

That was overturned on appeal. It’s not enough to say ‘here’s a department and it does this renovation work – and it’s mainly for the MOD’. At the relevant time (which means immediately before the transfer, as opposed to historically) had the department been organised for the principal purpose of carrying out the activities for that client? The tribunal had focused too much on what had happened in the past when it ought to have assessed the situation as it stood just before Amaryllis took over the MOD contract.

In transfer situations, there will always be questions about whether or not the new service provider will inherit some or all of the existing provider’s employees. This case has highlighted that some sort of deliberate effort to organise a team (an ‘organised grouping’) to carry out certain work for a certain client is crucial to TUPE applying and to employees transferring. And whether that’s the case or not must be judged just before the point at which the new service provider takes over. Important things to consider, whichever side of the transfer you’re on.