No Asylum for TUPE Seekers

2 April 2009

Clearsprings Management Ltd v (1) M Ankers and others (2) Angel Services UK Ltd (3) H Elaby (T/A United Property Management Ltd) (4) Priority Properties (NW) Ltd (5) Happy Homes UK Ltd

Background
The National Asylum Seekers Service awarded a contract to Clearsprings Management Ltd (Clearsprings) and other private contractors for the provision of accommodation and pastoral care to asylum seekers in the North West of England. As the end of those contracts drew to a close, a new tendering process was carried out with a view to entering into further contracts. However, the new contracts would not be entered into by the date of expiry of the old contracts. Short-term contracts were, therefore, entered into with Clearsprings and the other service providers. The new contracts were awarded after the expiry of the old contracts but before the expiry of the short-term contracts.

Clearsprings was not awarded a new contract for the North West. Instead, new contracts were awarded to United Property Management Ltd (“UPM”), Priority Properties Ltd (“P”) and Happy Homes Ltd (“HH”). On the date that the new contracts were awarded, Mrs Ankers and the other Claimants were employed by Clearsprings. As the number of asylum seekers accommodated by Clearsprings gradually decreased, they were randomly distributed amongst UPM, PP and HH. The Claimants claimed at the Employment Tribunal (“ET”) that their contracts of employment had been transferred from Clearsprings to UPM or PP by virtue of the Transfer of Undertakings (Protection of Employment) Regulations 2006 (“TUPE”).

The ET held that the changes in the provision of accommodation and pastoral care constituted a “service provision change” for the purposes of TUPE but, as no individual transferee could be identified as having taken over that activity, TUPE could not be said to operate. The ET also added that the fact that it was hard to pinpoint a fixed transfer date demonstrated that the activity had become so fragmented as to fall outside the scope of TUPE.

Clearsprings appealed on the grounds that a relevant transfer by means of a service provision change could occur where there was more than one transferee and that the contracts of employment of Mrs Ankers and the others should have been transferred from Clearsprings to UPM or PP.

The Employment Appeal Tribunal (“EAT”)
The EAT held that Clearsprings’ proposition that a service provision change could take place where there was more than one transferee was correct.

The EAT held that a service provision change occurs under regulation 3 of TUPE where activities cease to be carried out by a contractor on a client’s behalf and are carried out instead by a subsequent contractor on the clients’ behalf, provided that:

• there is an organised grouping of employees with the principal purpose of carrying out the activities on behalf of the client; and
• the client intends that the activities will be carried out by the transferee following the service provision change, other than in connection with a single specific event or a task of short duration.

However, the EAT also established that the issue of fragmentation, which arose out of Kimberley Group Housing Ltd v Hambley (2008), had to be considered. Based on this, the EAT held that the allocation of asylum seekers showed no obvious pattern of re-allocation to the incoming contractors and, therefore, the activity carried on by Clearsprings, the putative transferor, was so fragmented that no relevant transfer took place within the meaning of regulation 3 of TUPE.

Comment
This case illustrates that when a service provision change occurs in a fragmented manner, regulation 3 of TUPE can be circumvented, despite the fact that the consequences are those that it was intended to prevent.