The concept of service provision change under the TUPE Regulations is often straightforward. There is a service provision change where a particular service or function is outsourced to an external provider, awarded to a new external provider following a re-tender, or brought back in-house at the end of an outsourcing contract. What happens, however, when the service is split up at some point in this process?  This was the issue considered by the EAT in the recent case of Arch Initiatives v Greater Manchester West Mental Health NHS Foundation Trust.

Facts

The case involved a contract between the Trust and Bolton Council for the provision of a support service to alcohol and/or drug dependent adults. When the Council put the service out for re-tender, it split the service into two component functions, namely case management and intervention, and awarded a contract to two new providers. Arch Initiatives was awarded a contract for the provision of the case management function and Lifeline Project Ltd was awarded a contract for the delivery of the intervention function. 

Employees of the Trust who had been involved in the case management side of the service argued that their employment transferred under TUPE to Arch Initiatives because Arch was taking on the case management aspect of the service, resulting in a service provision change. When they were not taken on by Arch they brought claims of unfair dismissal against both the Trust and Arch. It was concluded by the Employment Tribunal that there had been a TUPE transfer, and liability for the dismissals rested therefore with Arch.

EAT Decision

In the EAT, Arch argued that there could be no service provision change because the service had not transferred in its entirety. Whereas the TUPE Regulations expressly refer to the transfer of part of an undertaking in the context of a business transfer, there is no equivalent provision for the transfer of part of a service in the context of service provision change. A service provision change is a transfer of activities which remain fundamentally the same after the transfer. When you compare the activities before and after the transfer, “activities” is the same as and can be equated with the word “service”.

The EAT rejected these arguments. It concluded that “there is nothing in the Regulations that expressly requires that the relevant activities should constitute “all of the activities” carried out by the outgoing contractor” and that activities and service were not one and the same. In the context of providing a service, there may well be more than one activity, and it may be that only some of the activities which make up a service are transferred. The question is whether activities are transferred, those activities are fundamentally the same before and after the transfer, and there is an organised grouping of employees whose principal purpose is to carry out the relevant activities. The EAT commented that there may be more than one organised grouping of employees carrying out activities as part of the overall service.

Comment

This decision makes it clear that where a service or contract is split into two or more component parts prior to a tender exercise, this will not necessarily mean that TUPE does not apply. The question in each case will be what is the activity which is being transferred?  Where, as in this case, the part of the contract which is being transferred is made up of a distinct and identifiable sub-activity then there will be a service provision change if there is an organised grouping of employees carrying out that sub-activity and the sub-activity remains fundamentally the same in the hands of the new provider.  

Arch Initiatives v Greater Manchester West Mental Health NHS Foundation Trust UKEAT/0267/15