Last year the European Court of Justice handed down a judgment in ISS Facility Services NV v Govaerts ("Govaerts"). The case concerned the transfer of contracts of employment under the Acquired Rights Directive (which the TUPE Regulations implement in the UK) where there are multiple transferees. The ECJ held that the rights and obligations arising from a contract of employment are transferred to each transferee in proportion to the tasks performed by the worker concerned. That was subject to the proviso that division of the contract is possible and neither causes a worsening of working conditions nor adversely affects the rights of the worker. In other words, following a business transfer, employees could end up with more than one employer.
The ECJ in Govaerts did not consider whether the same principle would apply to a Service Provision Change ("SPC"), as an SPC is a purely UK construct and therefore was not relevant in the Belgian case. In McTear Contracts Limited v Bennett & Others ("McTear") the EAT has considered whether the same principle should be applied to an SPC.
The employment tribunal heard the McTear case before the Govaerts judgment was handed down, so could not take it into account. Instead, at that time, they were bound by an EAT judgment - Kimberley Group Housing Ltd v Hambley and others ("Kimberley") which established that when an SPC takes place an employee can only transfer to one transferee - whichever one that took on the greater part of the pre-transfer activities.
In McTear, a local authority had re-tendered work for replacement of kitchens within its social housing stock. Pre-transfer the work was carried out by a single contractor. Latterly the contractor had split the employees carrying out the work into two autonomous teams. When the work was re-tendered the local authority split it on geographical lines into two contracts which were awarded to two new contractors. The new transferee contractors did not take on all the transferor's employees and some brought tribunal claims. The employment tribunal found there had been an SPC and allocated the employees to the new contractors according to which team they were in while working for the transferor.
Both transferees appealed arguing that the tribunal had failed to consider the individual position of the employees and that some of them may not have transferred at all. When the Govaerts judgment was handed down a further ground of appeal was added arguing that the proposition in Kimberley regarding transfer to only one employer must now be in doubt.
As the Govaerts judgment did not consider SPCs, it did not set a precedent that had to be followed. However, the EAT "saw considerable force" in the argument that it would be undesirable for there to be a difference in approach taken in the application of TUPE dependent upon whether the relevant transfer in question was a business transfer or an SPC. The EAT held that there was no reason in principle why an employee may not, following an SPC, hold two or more contracts of employment with different employers at the same time, provided that the work attributable to each contract was clearly separate from the work on the other(s) and was identifiable as such. The case was therefore remitted back to the employment tribunal to consider the application of the principle in Govaerts to each of the claimants.
This case has the potential to take what is already a complicated area of the law and make it more so. In Govaerts, the ECJ caveated the judgment to the extent that if a division of the contract was impossible or would adversely affect the rights of the employee, then the transferees would be regarded as responsible for any consequent termination of employment. This proviso is likely to be significant as it seems likely that in many cases division of the contract of employment would cause a worsening of employees' working conditions or have an adverse effect on their rights. As terminations in these circumstances may well be considered automatically unfair in the absence of an ETO reason, transferees will need to ensure they have adequate indemnities in place to protect their position.
