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First snap of the TUPE trap
00:00 23 Apr 1997
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On 9 April 1997 I reported the case of Ayse Suzen -v- Zehnacker in
which the European Court threw the Transfer of Undertakings
regulations (TUPE) into confusion.
The case of Betts -v- Brintell, decided in the Court of Appeal on 26 March 1997, applied the Ayse Suzen principles and is now the leading UK authority on the application of TUPE to contracting out situations.
The TUPE regulations seek to preserve the employed status of an employee when there has been a transfer of an undertaking between businesses.
The history of the Betts case is interesting. For about 10 years Brintell had provided helicopter services to Shell in the North Sea. Brintell successfully re-tendered for two out of three contracts, but a the third was awarded to a competitor, KLM Helicopters.
Proceedings were brought by seven employees of Brintell who claimed that they should become employees of KLM. They argued that the works being won by KLM under this so-called "second generation" contract amounted to a transfer of undertaking.
The High Court held that there had been a transfer of undertaking between these two companies, notwithstanding that there was obviously no contract between them, and that the former employees were entitled to seek redress through the Industrial Tribunal.
The Court of Appeal reversed the position, holding that, whilst the helicopter operation was an undertaking or economic entity, the facts proved that there had been no transfer.
No employees went over to KLM and there was little by way of assets transferred. A number of principles emerged from this decision.
First, the Court expressed the view that there can be no distinction between the principles applicable to first and to second generation contracting out.
Secondly, while labour-intensive undertakings might well be considered differently, a helicopter transport service - which could not be said to be labour intensive - would require a more wide ranging enquiry before a decision could be taken.
Another factor considered was the motive for the non transfer of employees. KLM had deliberately chosen not to take on any employees in order to minimise the risk that TUPE would apply. This, they said, was a factor pointing towards there being a transfer.
The Court sidestepped this question by holding that in any event the transfer of employees in this situation would not have been sufficient to establish a relevant transfer. It did not therefore need to decide the issue of principle concerning the reason for non recruitment.
Here then established into English law is the TUPE trap. Contractors might win contracted-out public services where TUPE is applicable. But if, at a later stage, that contract is lost to a competitor they may find that TUPE is held not to be applicable.
They will then be unable to off-load to the incoming contractor the burdens of employees taken on specifically for the project itself.n
The case of Betts -v- Brintell, decided in the Court of Appeal on 26 March 1997, applied the Ayse Suzen principles and is now the leading UK authority on the application of TUPE to contracting out situations.
The TUPE regulations seek to preserve the employed status of an employee when there has been a transfer of an undertaking between businesses.
The history of the Betts case is interesting. For about 10 years Brintell had provided helicopter services to Shell in the North Sea. Brintell successfully re-tendered for two out of three contracts, but a the third was awarded to a competitor, KLM Helicopters.
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Proceedings were brought by seven employees of Brintell who claimed that they should become employees of KLM. They argued that the works being won by KLM under this so-called "second generation" contract amounted to a transfer of undertaking.
The High Court held that there had been a transfer of undertaking between these two companies, notwithstanding that there was obviously no contract between them, and that the former employees were entitled to seek redress through the Industrial Tribunal.
The Court of Appeal reversed the position, holding that, whilst the helicopter operation was an undertaking or economic entity, the facts proved that there had been no transfer.
No employees went over to KLM and there was little by way of assets transferred. A number of principles emerged from this decision.
First, the Court expressed the view that there can be no distinction between the principles applicable to first and to second generation contracting out.
Secondly, while labour-intensive undertakings might well be considered differently, a helicopter transport service - which could not be said to be labour intensive - would require a more wide ranging enquiry before a decision could be taken.
Another factor considered was the motive for the non transfer of employees. KLM had deliberately chosen not to take on any employees in order to minimise the risk that TUPE would apply. This, they said, was a factor pointing towards there being a transfer.
The Court sidestepped this question by holding that in any event the transfer of employees in this situation would not have been sufficient to establish a relevant transfer. It did not therefore need to decide the issue of principle concerning the reason for non recruitment.
Here then established into English law is the TUPE trap. Contractors might win contracted-out public services where TUPE is applicable. But if, at a later stage, that contract is lost to a competitor they may find that TUPE is held not to be applicable.
They will then be unable to off-load to the incoming contractor the burdens of employees taken on specifically for the project itself.n
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