In the recent case of Mustafa v Trek Highways and others the EAT considered whether a relevant transfer was prevented by the cessation of activities by a subcontractor immediately prior to the putative transfer date.
Previous case law shows that a temporary halt in business activity will not necessarily preclude a relevant transfer under the TUPE Regulations (TUPE). In Landsorganisationen I Danmark v Ny Mølle Kro, it was held that there was a business transfer despite the fact that no staff were working and no business activity was going on in the two-month period prior to the transfer.
More recently, in Inex Home Improvements Ltd v Hodgkins and others it was held that an organised grouping of employees could remain organised for the purposes of a service provision change, even if they were not actually engaged in the relevant activity immediately before the transfer.
The Second Respondent, (Amey) provided road maintenance services in North London to Transport for London (TFL). Amey subcontracted with Trek Highways to perform traffic management services on its behalf for TFL. Consequently, the Claimants transferred from Amey to Trek under TUPE, and mainly worked in North-East London.
TFL carried out a retendering exercise in 2012 and gave road maintenance contracts to different contractors by region. Ringway Jacobs (RJ) won the contract for the North-East London region and FM Conway (FM) for North-West London. RJ and FM accepted that employees principally engaged in traffic management services in those areas would transfer to them under TUPE.
In early March 2013, as a result of a dispute between Amey and Trek, Trek suspended its operations on 8 March 2013 and sent its staff home. The subcontract was terminated by consent and Trek informed its employees in North-East London that their employment would transfer to Amey with effect from 21 March 2013. It went into administration shortly afterwards. The employees were subsequently turned away from both Amey and RJ. An Employment Tribunal held that there had been: (i) no relevant transfer from Trek to Amey; (ii) no subsequent business transfers from Amey to RJ or FM; and (iii) no relevant transfers from Trek directly to RJ or FM.
The EAT held that the Tribunal had been wrong to focus on the cessation of activity by Trek employees immediately prior to the putative transfer to Amey. Although no work was being carried out, the subcontract remained in place, along with the organised grouping of staff, vehicles and equipment carrying out the traffic management services. The Tribunal had failed to separate the entity from the activity it carried out.
There was also nothing in TUPE to suggest that an organised grouping of employees needed to be carrying out the activities at the point of transfer to satisfy the service provision change test. The grouping could remain organised and dedicated to those activities even when it was temporarily not performing them.
The EAT further rejected the Tribunal's suggestion that there could be no subsequent transfer from Amey to RJ or FM. The Tribunal was relying on the fact that there was no apparent intention by RJ or FM to deploy Trek's resources other than employees in the provision of traffic management services. To "set the employees to one side" was an error of law. The Tribunal had also relied on the fact that the traffic management function had become completely integrated in RJ's operations, to the extent that it was no longer an independent part of the business. This was irrelevant; as long as it could be shown that that function continued after the transfer, the business transfer test could be met. Furthermore, the fact that there had been a temporary interruption in work did not mean that there could be no service provision change.
This decision demonstrates that a temporary cessation of business activities will not necessarily be fatal to a finding that there has been a relevant transfer under TUPE. It will be just one of a number of factors to be considered in the round.
When considering whether there will be a relevant transfer under TUPE, it is a mistake to focus only on the activity that is being carried out, and not to consider whether an economic entity or organised grouping of employees remains in place. The fact that the activity has stopped will not mean that the group of employees loses its qualities of organisation or dedication to the activities in question.
Similarly, an organised grouping of resources (employees, equipment, assets etc) is still capable of remaining as such and continuing to have as its objective the pursuit of an economic activity, even if it is not carrying out that activity.