Article / 16 Mar 2021

Split contracts following transfer

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Gateley Legal

McTear Contracts Ltd v Bennett and others

The Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) applies in the UK to a change in service provider whilst the EU Directive it implements is limited to situations where there has been a business transfer. In those circumstances would a ruling by the European Court of Justice that employees could be transferred to multiple transferees apply only to a business transfer? In McTear Contracts Ltd v Bennett and others it was held that it would also apply to service provision changes. 

The employees brought claims that they should have transferred

Amey had a contract replacing kitchens within the social housing stock of North Lanarkshire Council. When the Council retendered the work, it split it along geographical lines into two separate contracts, which it awarded to two new contractors. Some of Amey’s employees who had been working on the contract were not taken on as the new contractors did not consider that they had been sufficiently assigned to the work in their location. The employees brought claims that they should have transferred.

It was held that the ECJ ruling should apply 

The Tribunal considered that there had been service provision change and allocated each of the employees to the new contractors on the basis of where they had done most work. That was overturned on appeal as it was held that the ECJ ruling should apply as it would be undesirable for the same approach not to apply in all transfer situations.  This meant that the employees may transfer to both the new contractors as a result of the service provision change.   

Key takeaway points

This means that following any type of transfer where the work is split up between different contractors, including service providers, an employee who had been full time with the previous contractor might find that they have two or more part time contracts with different contractors. This would appear to cause a number of practical problems in relation to how an employee can carry out work for different employers at the same time and how new employers should manage having part time employees who may also be carrying out work for competitors. It looks highly likely to cause an increase in disputes going forward. 

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