Before 2012, the last serious analysis had been in the EAT by HHJ Burke QC, in the case of Metropolitan Resources Ltd v Churchill Dulwich Ltd & Ors [2009] UKEAT 0286_08_2406, [2009] IRLR 700. In this case the EAT essentially ruled that:

• The SPC is a wholly new statutory concept, and does not rely on traditional transfer concepts such as ‘economic entity’, as developed by European case law.
• Regulation 3(1)(b) wholly and comprehensively sets down the circumstances in which an SPC is established, and will be one of fact for the tribunal.
• The circumstances are that there was, immediately before the change:
  • an organised grouping of employees; which had as its principal purpose the carrying out of the activities in question;
  • the client intends that those activities will be carried out by the alleged transferee, other than in connection with a single specific event or a task of short term duration, and the activities do not consist totally or mainly of the supply of goods for the client’s use;
  • and those activities cease to be carried out by the alleged transferor and are carried out instead by the alleged transferee.
• the SPC provisions are not subject to a ‘purposive’ interpretation to give effect to the European directive, simply a “straightforward and commonsense application of the relevant statutory words to the individual circumstances”

The seemingly straightforward application of regulation 3(1)(b) has been approved and echoed in every authority since, but judicial ambition that there would be no need to provide more specific guidance on the phrasing in the regulation has not been met.

The first authority of 2012 with which we are concerned is from February: Argyll Coastal Services Ltd v Stirling & Ors (Transfer of Undertakings : Transfer) [2012] UKEAT 0012_11_1502. In this case Lady Smith dealt with the meaning of “organised grouping of employees”, “principal purpose”, and activities (emphasis is mine):

18…It seems to me that the phrase “organised grouping of employees” connotes a number of employees which is less than the whole of the transferor’s entire workforce, deliberately organised for the purpose of carrying out the activities required by the particular client contract and who work together as a team. The reference to “situated in Great Britain” clearly requires that group to be based in Great Britain. Whilst regulation 3(4)(c) makes it clear that, of itself, the fact that a person or persons who are part of that organised grouping of employees work outside the United Kingdom does not prevent the provisions of regulation 3(3)(a)(i) being satisfied, it does not, to my mind, in any way detract from it being a fundamental pre-requisite of a “service provision change” transfer that there be an organised grouping of employees situated in Great Britain.

19. Turning to “principal purpose” there seems to be no reason why the words should not bear their ordinary meaning. Thus, the organised grouping of employees need not have as its sole purpose the carrying out of the relevant client activities, that must be its principal purpose.

20. Regarding “activities” it seems plain from the terms of both regulation 3(1)(b) and 3(3)(a)(i) that Parliament, by using the word “activities” had in mind considering what it was that the client required of the transferor or employer. What exactly was the service that was contracted for?

The EAT’s words at paragraph 18 deal with a conflict of interpretation that has been argued ever since the 2006 regulations came into force: is the correct focus upon what an employee actually does (ie, as a matter of fact he spends most of his time servicing client A), or the purpose for which a team was organised (ie, our employee might spend most of his time servicing client A, but in fact is part of a team of five that is designated as servicing client B). The ratio in Argyll suggests the latter interpretation.

Apparently by coincidence, while Lady Smith was sitting in Edinburgh providing guidance on the language of regulation 3(1)(b) in Argyll Underhill P was sat in London doing the same thing in Eddie Stobart Ltd v Foerman & Ors (Transfer of Undertakings : Service Provision Change) [2012] UKEAT 0223_11_1702, [2012] IRLR 356. This was handed down two days after Argyll, and while two cases seem to be unaware of each other, they happily espouse the same principles. Per Underhill P in relation to “organised grouping”:

18. … In my view that necessarily connotes that the employees be organised in some sense by reference to the requirements of the client in question. The statutory language does not naturally apply to a situation where, as here, a combination of circumstances – essentially, shift patterns and working practices on the ground – mean that a group (which, NB, is not synonymous with a “grouping”, let alone an organised grouping) of employees may in practice, but without any deliberate planning or intent, be found to be working mostly on tasks which benefit a particular client. The paradigm of an “organised grouping” is indeed the case where employers are organised as “the [Client A] team”, though no doubt the definition could in principle be satisfied in cases where the identification is less explicit.

Also in February, Langstaff J had been analysing a case relevant to what some would say is the increasing tendency of employers to split (or “fragment”) their services, avoiding a SPC. The case, Johnson Controls Ltd v Campbell & Anor (Transfer of Undertakings : Service Provision Change) [2012] UKEAT 0041_12_1402, turns on its facts, but is an informative example:

7. … The employee’s work involved him, on his own description, as taking bookings from members of staff of UKAEA, advising on the timings for the journeys they wished to undertake, reviewing booking data, combining jobs and pick-ups to ensure the best use of available transport, allocating jobs to subcontractors (two taxi companies were regularly used for the purpose), checking the invoices from those subcontractors against the orders of UKAEA, dealing with booking queries, entering the costs of the subcontractors onto a database, carrying out checks on suppliers, and arranging for security passes for suppliers…

8. In 2010 UKAEA made a decision to review the taxi booking service provided by Johnson Controls. It needed to reduce costs, and one of the cost-cutting measures identified was to make changes to the service. Since it was established that most of the secretaries employed by UKAEA could book taxis directly with the taxi firms rather than utilising the services of the taxi booking service administrator, the UKAEA decided that was what would happen thereafter. It was against that background that the question arose whether in so determining the UKAEA were effecting a service provision change from Johnson Controls to the UKAEA of the contract of employment of Mr Campbell, or such that the contract of employment of Mr Campbell continued with UKAEA.

The EJ, in effect, held against there being an SPC as the element of centralisation involved pre-transfer was important nature of the services provided. That element of centralisation had ceased to exist post-transfer, which resulted in the conclusion:

After 1 March there was no longer any centralised service. What [Johnson Controls] describes as the ‘core elements’ continue and are carried out by, in the main, [UKAEA]‘s employees. However, in [UKAEA]‘s hands, the service is no longer centralised. It is the absence of this centralisation which, in my view, is an important component in coming to the conclusion that it is not essentially the same activity as that performed by the Claimant prior to 1 March.”

The EAT add little other than the judge had clearly applied the right test, and that the first instance findings were permissible.

In April the principle of Argyll was quickly taken to its logical extreme in the April case of Seawell Ltd v CEVA Freight (Uk) Ltd & Anor (Transfer of Undertakings : Transfer) [2012] UKEAT 0034_11_1904. In Seawell the employer, Ceva, serviced a number of clients including Seawell from a warehouse. The warehouse was organised into ‘Inbound’ and ‘Outbound’. The Claimant in the ET, Mr Moffatt, worked in the ‘Outbound’ section. It comprised eight people. Mr Moffatt spent 100% of his time working on behalf of Seawell. Four other people each spent between 10% – 30% of their time performing tasks for Seawell. When Seawell took the task in-house, Ceva argued that Mr Moffatt had transferred to them under a service provision change.

Given that Mr Moffatt spend all of his time performing work for the putative transferee, this might be thought to be an easy argument. No. Per Lady Smith:

41. Dealing first with the issue of whether or not Mr Moffat’s employment transferred to Seawell, we refer to our discussion of the relevant law above and observe that, on the Tribunal’s findings, the only deliberately organised grouping of employees was that which was identified at para 27, namely an “outbound” operation and an “inbound” operation. Mr Moffat was part of the “outbound” operation. On the Tribunal’s findings, that grouping comprised eight employees, one of whom (Mr Moffat) spent all his time on Seawell work and two of whom spent all their time on work for another client, Diamond Offshore. There are no findings as to what work was done by the other five employees in that grouping. Moreover, on no view could the findings about the “outbound” grouping amount to it having had the carrying out of activities on behalf of Seawell as its principal purpose. The “outbound” grouping could not, accordingly, have satisfied the requirements of reg 3(3)(i); whilst it does appear to have been a deliberately organised grouping of employees, there are no findings to indicate that it was organised for the purposes of the Seawell contract or that Seawell work was its principal purpose.

42. Was it sufficient, for the purposes of reg 3(3)(i) that Mr Moffat spent all his time on Seawell work? We conclude that it was not.

43. First, that a particular employee happens to spend all his time on one client’s contract does not, we consider, show that he was an “organised grouping of employees”, for the reasons we explain above; there is no indication in any of the findings in fact that Ceva specifically formed a grouping consisting of Mr Moffat to carry out the Seawell work.

44. Secondly, the Tribunal’s approach to this issue focussed on the fact that he did nothing other than Seawell work and found that the requirements of the regulation were satisfied on the basis that, put shortly, that work was his principal purpose and under the interpretation provisions of TUPE (reg 2) an “organised grouping of employees” could comprise a single employee. However, reg 3(3)(i) requires that the organised grouping of employees carried out “the activities concerned” which, in the circumstances of this case, is a reference back to reg 3(1)(iii); the “activities concerned” are whatever activities are, after the change, carried out by the client on his own behalf instead of by the contractor. Here, Seawell took “in-house” the whole of the receipt, storage and supply to the oil platforms of goods and materials. That is, they took over all aspects of the work that they had formerly had carried out for them by Ceva, not just those aspects of it which were carried out by Mr Moffat. Accordingly, the “activities concerned” in this case comprised the entirety of the work carried out by Mr Moffat, the General Manager, the Manager and the two warehousemen. Mr Moffat was not carrying out “the activities concerned” albeit that he was carrying out part of them. Rather, the activities concerned were carried out by several people, one of whom did only Seawell work. We observe that those people would appear, between them, to have contributed significantly to the work required by the Seawell contract (the Tribunal’s findings as to the amount of their time spent on it demonstrate that together, they applied something in the region of 90% of the working time of a single employee).

There are lessons here for practitioners, whether arguing for or against the existence of an SPC. The focus should always been on how the employer has organised its employees with reference to the particular client’s activities. In Seawell the tribunal had simply not reached the findings of fact necessary to sustain an argument that the employee had been so organised. There is likely to be fertile ground for argument at first instance as to what level of organisation is the correct one. In Seawell there was obviously the central argument that the employer had organised its grouping of employees into “Outbound” and “Inbound”, but could the argument have been deployed that the particular manager of each had created further groupings within those teams to service particular clients as their principal purpose?

Of course, once the appropriate grouping is identified, it must be determined whether or not an employee was assigned to that grouping. This was dealt with in July, in yet another TUPE appeal heard by Lady Smith: Edinburgh Home-Link Partnership and others v City of Edinburgh Council and others [2012] UKEATS/0061/11/BI:

19. Turning to the relevance of reg 4, the issues of (a) whether or not there existed an organised grouping of employees which satisfied the requirements of reg 3(3)(a)(i) and (b) whether or not a particular Claimant or Claimants were assigned to that grouping are, as was observed by the President in the case of Eddie Stobart Ltd v Moreman & Ors UKEAT/0223/11/ZT at para 16, analytically distinct and require to separately examined. Regarding the reg 4 issue of assignment, the question has to be asked in respect of each individual employee. It is not to be assumed that every employee carrying out work for the relevant client is assigned to the organised grouping. It is not difficult to envisage circumstances involving an organised grouping of employees whose principal activity is the provision of the service for which a particular client has contracted where an individual employee working with them at the date of transfer could not be said to have been assigned to the grouping since he normally did other work and was only helping out, on a temporary basis. Likewise, whilst at first blush it might be thought that all employees of the transferor in a “single client” case would be assigned to the carrying out of the activities the client requires, it may, on closer examination, be found that that is not the case. If, for instance, an employee’s role is strategic and is principally directed to the survival and maintenance of the transferor as an entity, it may then not be established that that employee was so assigned. It will all be a matter of the facts and circumstances of the individual case, as has been stressed in the authorities: Buchanan–Smith v Schleicher & Company International Limited UKEAT/1105/94 where, relying on Morison J in Duncan Web Offset (Maidstone) Limited v Cooper & Others [1995] IRLR 633 Mummery J said:

“There will often be difficult questions of fact for industrial tribunals to consider when deciding who was ‘assigned’ and who was not. We were invited to give guidance to industrial tribunals about such a decision, but declined to do so because the facts will vary so markedly from case to case. In the course of argument a number were suggested, such as the amount of time spent on one part of the business or the other; the amount of value given to each part by the employee; the terms of the contract of employment showing what the employee could be required to do; how the cost to the employer of the employee’s services had been allocated between different parts of the business. This is, plainly, not an exhaustive list….”

In September Lady Smith returned again to ‘activities’ in Edinburgh Home-Link Partnership & Ors v The City Of Edinburgh Council & Ors (Transfer of Undertakings : Transfer) [2012] UKEAT 0061_11_1007 – this confirmed previous authorities, and further provided that the volume of work in services provided was a factor that tribunals could take into account in determining whether they had changed.

Lastly the Court of Appeal gave judgment in McCarrick v Hunter [2012] EWCA Civ 1399. This case dealt with an ambitious argument that an SPC occurred in a set of circumstances where the identify of the client was different post-transfer. Elias LJ held that Metropolitan Resources was right to reject the sort of purposive interpretation which would have been necessary to bring this within the regulations. However, he did urge some flexibility:

22. I do not dispute that there may be issues where a purposive interpretation is appropriate with respect to service transfer provisions and where the courts should approach matters as they would similar issues relating to transfers of undertakings. For example, it may be necessary not to be too pedantic with respect to the question whether the activities carried on before and after the transfer are sufficiently similar to amount to the same service; or to take a broad approach to the question whether an employee is employed in the service transferred: see Kimberley Group Housing Ltd v Hambley [2008] ICR 1030. But I agree with HH Judge Burke QC that there is no room for a purposive construction with respect to the scope of regulation 3(1)(b) itself. So far as that is concerned, there is in my view no conflict between a straightforward construction and a purposive one: the natural construction gives effect to the draftsman’s purpose. There are no underlying EU provisions against which the statute has to be measured. The concept of a change of service provision is not complex and there is no reason to think that the language does not accurately define the range of situations which the draftsman intended to fall within the scope of this purely domestic protection.

My view is that the Court of Appeal is too generous to Kimberley Group Housing Ltd v Hambley, and that it would not be decided the same way today following application of Eddie Stobart: an authority also approved in McCarrick.

And finally…

The picture accompanying this post is of Daddy’s Dance Hall, the setting for both a well known referral to the ECJ on transfers of undertakings, and a grisly incident just a few years before. I recently found the below, translated here by Google from the original which you can find here:

Friday the 11th November 1977 at. 03:00, was the 18 year old Johnny Jensen (8 April 1959), who was a member of the biker group Filthy Few, shot down and killed at the disco, as he sat at a table at the restaurant “Daddy’s Dance Hall” on Axeltorv at West Gate Station Copenhagen.

He was hit by a shot directly in the lung, and then he fell on the floor. Injuries were so severe that his life could not be saved.

The perpetrator who fled the scene, was rocker Lars Paul Welling (30 September 1958). He was wounded by two pistol shots fired by Ralph Theodore Vidito Alexander (February 23, 1950 in Barbados), which was a bouncer at the disco. He was charged with attempted murder.

Clearly members of the Filthy Few shooting each other was not enough to raise interest in Daddy’s Dance Hall to an international level, and a mere six years later Denmark was forced to refer a thorny question of TUPE to the ECJ in order to really raise the club’s profile.

“Words may be spoken or actions expressed in temper or in the heat of the moment or under extreme pressure (“being jostled into a decision”) and indeed the intellectual make-up of an employee may be relevant (see Barclay). These we refer to as special circumstances. Where special circumstances exist it may be unreasonable for an employer to assume a resignation and to accept it forthwith. A reasonable period of time should be allowed to lapse and if circumstances arise during that period which put the employer on notice that further enquiry is needed to see whether the resignation was really intended and can properly be assumed, then such enquiry is ignored at the employer’s risk.”

This authority has given us “heat of the moment” resignations and dismissals. Under the strict contract law position, an employee who bellows “that’s it, I quit” at his boss and stomps out of the factory, has resigned. Perhaps his boss yells back “good!” The employee could not then, according to contract law, cool off and change his mind. Not in employment law. The special circumstances mentioned above mean that in some cases resignation can be withdrawn – our angry employee might have bellowed “that’s it, I quit”, but during his drive home, knuckles white as a grips the steering wheel in rage, he may suddenly remember his mortgage, wife, children and re-think things. So he telephones his boss, explains he lost his temper, and that he is on his way back to work. He might well be successful in showing that his employment was revived by his change of heart.

This is a sensible rule, but has never come with hard and fast time limits attached. In Kwik-Fit Wood J described a reasonable period as “relatively short, a day or two”. A recent EAT case, Willoughby v C F Capital Plc [2010] UKEAT 0503_09_1307 has helpfully confirmed:

1. the doctrine applies equally to a heat of the moment dismissal as it does to a resignation [although it would seem clear that each would require a different assessment as to what was reasonable];
2. that a 14 day delay (even with Christmas in the middle) was far too long for special circumstances to exist.

James Medhurst has helpfully tied together an analysis of this case with the ruling of Roberts v West Coast Trains Ltd [2004] EWCA Civ 900, which gives the employer a right to unilaterally reinstate following an appeal, or even perhaps without one. This does, as he says, potentially alter the balance between employer and employee, as the former could always “cure” his heat of the moment dismissal by reinstating whereas the employee is stuck with his resignation.

It should always be remembered by employers that an offer of reinstatement, even if refused, can be tactically beneficial in reducing compensation to an employee who, it can be argued at the tribunal, has failed to mitigate his loss by taking up the offer.

• dealt with over 900 collective actions (usually industrial action or collective redundancies);
• provided conciliation in over 85,000 employment tribunal actions – its highest ever number, and 13% more than in 2008/2009;
• received over 1 million calls to its helpline;
• dealt with over 10,000 “pre-claim” conciliations – this is where the Acas is asked by the parties to conciliate a claim before a tribunal action has been commenced.

In relation to the last figure, Acas claim that in over 70% of these cases tribunal proceedings were prevented. They quote a study which shows that getting to the stage where an ET3 is filed can already have cost a business £2,000, so the savings are substantial.

There seems to be no indication yet as to whether Acas will be facing significant cuts under the coalition’s spending plans, but it is well-placed to avoid these given it is an organisation that saves other people money. Acas chair Ed Sweeny is quoted as saying:

“We continue to deal first hand with the effects of recession and the immense strain it places on workplace relations. We are seeing signs of improvement with employers and unions taking a more pragmatic approach by working together, looking at ways to try and save jobs and avoid redundancy. This is in stark contrast to previous recessions.

Overall Acas provides excellent value – every pound of taxpayers’ money invested in it creates a return of up to £16.”

Indeed, there can be little doubt that this recession has been marked by that more “flexible” approach to reducing staff costs than the large-scale redundancy exercises of the past. Social and economic changes over the last two decades are the main contributors, but Acas has certainly had an important role to play in disseminating the alternatives to employers.

Read the Acas 2009/2010 annual report here:

http://www.acas.org.uk/index.aspx?articleid=1473

Costs were not awarded, due to a finding by the ET that the Claimant “did not act unreasonably” in bringing the claim. Lady Smith finds this conclusion perverse. This goes further than the recent line of cases – see my post last year on two authorities deprecating tribunals’ refusals to award costs against lying Claimants.

This case is rather fact sensitive, but will be grist to the mill for many Respondent representatives trying to recoup the cost of meritless or vexatious claims. Another important point comes from Lady Smith’s rejection of the notion that it is legitimate to bring a claim for unfair dismissal simply to obtain a finding that it was so – there is a declaratory power in discrimination legislation, but not in Part X of the Employment Rights Act 1996. Many many clients have told their lawyers in conference that “it’s not about the money, it’s the principle”, but this EAT judgment will strengthen that lawyer’s warning that courts and tribunals do not usually look at it that way.

A group of BA flight attendants is claiming that the removal of discounted travel from strikers discriminates indirectly against employees based in Scotland, Ireland and mainland Europe who use the scheme to commute to and from Heathrow airport. The group, called Crew Defence, is representing 75 employees who are lodging cases with an employment tribunal in Reading and plan to sue for compensation if their claim is upheld.

This is a bold claim, but it may be successful in crossing the first hurdle of showing that BA are applying a provision, criteria or practice which is applied equally but puts (for example) Scottish people at a disadvantage. It would then be for BA to show that the treatment is justified. Much will depend on the nature and context of the scheme and its removal. To use an example, if a factory in Carlisle provides a free employee bus from Kendal, can a wannabe employee in Dumfries make a complaint?

The employer is likely to agree that its practice of failing to provide a bus from Dumfries affects far more Scottish people than English, but would argue that it has a legitimate objective (attracting and retaining employees), and it is proportionate to achieve that objective by providing that one bus from Kendal. The employer might well claim, if it is small, that it can only afford the one bus and clearly that bus will either set off in England or set off in Scotland. That itself could constitute justification, but would be bolstered by a rational explanation of why Kendal was chosen in the first place.

• Purporting that a written warning was issued in 2007, when in fact you used a 2008 proforma but tippexed out the 2008, only to humiliatingly be asked to hold it up to the light in front of an employment tribunal;
• Posting how much you hate your boss on Facebook, only for him to read it and dismiss you.

Here we’re concerned with the twitter feed @gillianmckeith – after a series of spats about McKeith’s qualifications, as derided by Ben Goldacre’s book Bad Science, the feed referred to his book as “lies”. Goldacre smelled a libel and tweeted back, only for the next tweet to read:

do you really believe this is real Twitter site for the GM?

As Goldacre puts it:

Yes, replied the geeks. The Twitter account @gillianmckeith is linked to gillianmckeith.info, explained some. Then that link was deleted. Ah, explained others: only half-deleted. If you look at the “source code” for the page, the link is there, just temporarily inactivated. And that Twitter account is still linked from gillianmckeith.tv, Gillian’s YouTube page.

Read Ben Goldacre’s article here.

So again, a gentle reminder to everyone out there: there is always someone out there with a stronger sense of smell than you, and they’ll sniff you out. Oh, and a second honourable mention for the Queen of forensic IT errors, the lady who purported that a letter was written in 1999, when it had clearly been typed in Office 2007.

“We should be able to get there in this parliament.”

There is not yet a clear coalition line. David Cameron’s pre-election promise to look at the issue was criticised as a rather last-minute sop to a community many of which feel distrust towards the Conservative party. Pink News quotes gay Tory MP Nick Herbert as saying:

“It’s not something we’ve got immediate plans to change, but we recognise that there are views that say that the name is important.”

So changes may well be towards the end of this parliament, or indeed a promise for the next one.

Usefully Employed has produced a web-based version of the table, which will be amended to include links explaining what the changes mean to employers, employees, and practitioners.

Visit the page here:

http://blog.usefullyemployed.co.uk/equality-act-2010/table-of-changes/

The Acas table, useful to print out as a ready reckoner, can be found here as a pdf:

http://www.acas.org.uk/CHttpHandler.ashx?id=2840&p=0

In fact, despite neither party having a crystal ball as to what would really happen, it is now accepted that the NMW’s protection vastly outweighs its effect on unemployment figures. A 2006 study by the London School of Economics found that:

The consensus is that the minimum wage has not cost jobs, either in the aggregate economy or in the low wage industries and occupations.

..despite this outcome being contrary to the predictions of conventional economic theory. Read a summary of the study here:

http://cep.lse.ac.uk/pubs/download/CP217.pdf

David Cameron, and the coalition government, are cautious converts to the NMW, and have accepted the proposals of the Low Pay Commission that rates be increased as follows, effective 1st October 2010:

New National Minimum Wage rates

• Adult rate: £5.93 (up from £5.80)
• Development rate: £4.92 (up from £4.83)
• 16-17 year old rate: £3.64 (up from £3.57)
• Apprenticeship rate: £2.50

Note that the Adult rate now applies from age 21 instead of 22. The Development rate thus applies to 18, 19 and twenty-year-olds. The apprenticeship rate is a new development – a 37 hour week would now pay £92.50. There was already a de facto minimum of £95 per week, but the introduction of an hourly rate is designed to stop abuses of apprentices by having them work excessive hours.

“Work” means employment, contract work, a position as a partner, a position as a member of an LLP, a pupillage or tenancy, being taken as a devil, membership of a stable, an appointment to a personal or public office, or the provision of an employment service; and the references in subsection (1) to offering a person work are, in relation to contract work, to be read as references to allowing a person to do the work.

This is, apparently, the terminology used for the Scottish equivalent of pupil barristers. But you can bet there’ll be a fair bit of head scratching by lawyers and HR staff when reading this section. A stable, if you were wondering, is a Scottish chambers, like this one. Apologies for this article to Usefully Employed readers North of the border.