TUPE and fragmentation
In McTear Contracts Ltd v Bennett and others; Mitie Property Services UK Ltd v Bennett and others the Employment Appeal Tribunal (EAT) has followed the decision in ISS Facility Services NV v Govaerts where the European Court of Justice (ECJ) held that where a transfer of an undertaking involved more than one transferee the rights and obligations under an employment contract are transferred to each of the transferees, in proportion to the tasks performed under the contract.
AS Ltd undertook an analysis of the geographical areas in which each team had worked during the preceding 12 months and compared the results with the geographical areas allocated to the new contracts. A spreadsheet was produced identifying the locations at which work had been undertaken during the final period of AS Ltd's contract with the Council and AS Ltd allocated one team to MC Ltd and the other to MPS Ltd.The companies did not take on all of AS Ltd's employees and some went on to bring tribunal claims.
The tribunal concluded that there had been a service provision change and allocated employees to each of MC Ltd and MPS Ltd according to which team they were in with AS Ltd. Both of the companies appealed to the EAT arguing that the tribunal had erred in the allocation of employees.
The EAT held that the case now had to be read in light of the Govaerts decision (this had been handed down between the tribunal's judgment and the hearing of the appeal). The EAT noted that, as a result, there was no reason why an employee may not, following a transfer, hold two or more contacts of employment with different employers at the same time. This was subject to the proviso that the work attributable to each contract is clearly separate from the work on the other(s) and is identifiable as such. The EAT remitted the case to the same tribunal for it to consider whether the claimants had transferred to MC Ltd or MPS Ltd.
Take note: The EAT's decision confirms that it's possible for an employee who works across more than one part of a business to have their contract divided up between more than one transferee taking the proportions of the time they spend, and the value they add to the different parts of the business, into account. This will lead to a change in approach in fragmentation cases as a tribunal will have to consider whether an employee's contract will have to be divided up between more than one transferee. For a more in-depth discussion of this case and its implications please refer to our recent bulletin: TUPE and fragmentation: a change of approach?