Kimberley Group Housing Ltd v Hambley and others; Angel Services (UK) Ltd v Hambley and others EAT/0488/07 & EAT/0489/07

transfer of undertakings | service provision changes

The Employment Appeal Tribunal (EAT) has held that an employment tribunal was correct to find that a service provision change was a relevant transfer under the Transfer of Undertakings (Protection of Employment) Regulations 2006, but it erred in apportioning liability on a percentage basis between the new providers.

On 6 April 2006, the Transfer of Undertakings (Protection of Employment) Regulations 2006 introduced into statute for the first time a definition of a service provision change for transfer of undertakings purposes. Under the Transfer of Undertakings (Protection of Employment) Regulations 1981, European Court of Justice case law had established that the test was whether or not there was a 'transfer of an economic entity retaining its identity'. This is the first EAT decision to consider the new provisions on service provision changes.

Leena Homes Ltd had a contract with the Home Office to provide accommodation and related services for asylum seekers awaiting determination of their applications for asylum. Leena Homes Ltd lost the contract to Kimberley Group Housing Ltd and Angel Services (UK) Ltd. The two new providers did not believe that TUPE applied and employees of Leena Homes Ltd lost their jobs. Six of them brought tribunal claims.

An employment tribunal found that there had been a relevant transfer under the Transfer of Undertakings (Protection of Employment) Regulations 2006. Regulation 3(1)(b) defines a service provision change as a situation in which 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 client's behalf. The tribunal went on to hold that, although the employees and their contracts of employment could not be 'split' between the new service providers, the liabilities under the contracts could be split, based on a percentage of the number of asylum seekers who were provided with services by each provider.

The EAT agreed with the employment tribunal that there had been a relevant transfer under the Transfer of Undertakings (Protection of Employment) Regulations 2006. However, it overturned the employment tribunal's findings on the effect of there being a service provision change. There is no precedent in statute or common law for the tribunal's approach of dividing the liabilities under a contract between two transferees on a percentage basis. Although this might work where employees have been dismissed, it would not be practical in situations where employment continues. It would lead to an untenable position where two transferees are liable for a percentage of, for instance, an employee's pay or even sums that might arise as a result of a subsequent dismissal that is not the fault of one of the parties.

The EAT said that the employment tribunal should have adopted the approach set out in Botzen v Rotterdamsche Droogdok Maatschappij BV [1986] Case C-186/83 ECJ to establish which transferee had taken up the activities to which each employee was assigned. If it had done so, it would have been bound to find that all six claimants had transferred to Kimberley Group Housing Ltd, which had taken on the vast majority of the activities.

Case transcript of Kimberley Group Housing Ltd v Hambley and others; Angel Services (UK) Ltd v Hambley and others (Microsoft Word format, 126K) (on the EAT website)

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