Splitting employment contracts post TUPE: an explosive concept?

It is almost a matter of relief that “normal” might be on the horizon when we return to the machinations of TUPE and its protections for employees!

A European Court of Justice (ECJ) judgement on a case heard in March this year has certainly put the cat amongst the proverbial pigeons – it ruled that, contrary to 35 years of other case law, where a business transfer involves multiple transferees, a worker’s existing contract of employment may be ‘split’ and transferred to each of the transferees in proportion to the tasks being performed. They therefore might not, as UK existing case law determines, transfer their working hours in their entirety with whichever part of the transferring business/service they are closely linked. Although this ruling clearly represents a significant change to our understanding of ‘business transfers’ under reg 3(1)(a), it remains unclear as to what extent it will apply to ‘service provision change’ transfers under reg 3(1)(b).

Facts

In ISS Facility Services NV v Sonia Govaerts & Atalian NV, Ms Govaerts was employed by ISS who held cleaning contracts with the City of Ghent for the cleaning and maintenance of various buildings across the Belgian city. The work was divided into three lots, each lot relating to different types of buildings. Ms Govaerts was the project manager overseeing the work in each of these lots, with 85% of her work relating to Lots 1 and 3. Following a retendering process, ISS lost the cleaning contract with Lots 1 and 3 being awarded to Atalian NV and Lot 2 being awarded to Cleaning Masters NV. ISS asserted that Ms Govaerts transferred to Atalian as they were inheriting over 85% of her workload. Atalian disputed this. The Higher Labour Court (Belgian equivalent to our Employment Appeal Tribunal) asked the ECJ to rule on whether Ms Govaerts’ employment should be ‘split’ between the two new contractors, or whether it should transfer only to the contractor that acquired the lots on which she was mainly employed; i.e. Atalian.

Judgement

The ECJ found that the rights and obligations arising from a contract of employment may be transferred to multiple transferees “in proportion to the tasks performed by the employee concerned”. Ms Govaerts’ full-time contract could therefore be ‘split’ into two part-time contracts with her duties in respect of Lots 1 and 3 transferring to Atalian, and Lot 2 to Cleaning Masters.

The ECJ caveated this by saying that an employee’s contract may only be ‘split’ between transferees provided that the division of the contract of employment is possible, and that neither causes a worsening of working conditions nor adversely affects the safeguarding of the employee’s rights. If the ‘split’ is not possible, or would adversely affect the employee’s rights, then the contract may be terminated and the termination must be regarded as the responsibility of the transferee(s), even where that termination is initiated by the employee.

Unfortunately, the ECJ did not address how, in practical terms, the division of a role into part-time ones, working for different employers, could be achieved. Instead, it left it to the national courts to decide this question, suggesting that only they could consider the ‘economic value’ or time to which the worker devoted their time to each part of the contract as ‘factors to consider’.

Application

As is often the case with these complex TUPE decisions handed down from the ECJ, the judgement raises more questions than it answers.

Does it have any effect in a post Brexit Britain?

Under the Withdrawal Agreement, nearly all EU law still applies, as does the jurisdiction of the European Courts until the end of the implementation period (31st December 2020). With that in mind, it is highly likely that this case is relevant and can be applied in UK TUPE disputes going forward.

Does the judgement apply to Service Provision Changes (SPC)?

The trickier issue is whether this decission will apply to SPCs under reg 3(1)(b) of TUPE. This case concerned the European Acquired Rights Directive (“ARD”) which is narrower in its scope than TUPE. The UK adopted TUPE in order to implement the ARD, but the UK set itself apart from many other European jurisdictions by extending employee transfer protection rights beyond the minimum scope required by the ARD. The ARD applies to ‘business transfers’, whereas TUPE covers both business transfers (under reg 3(1)(a)) and SPCs (under reg 3(1)(b)). Many commentators have argued that as SPCs are unique to the UK, they therefore exist outside of the scope of the ARD. It is therefore possible that his ruling will therefore only apply to TUPE business transfers (under reg 3(1)(a)) but not SPCs (under reg 3(1)(b)). It is our view that this analysis does not represent the full picture. SPCs and business transfers are not mutually exclusive; there exists a considerable degree of overlap between the two whereby some SPCs would be covered by the business transfer definition in reg 3(1)(a). Although a given transfer may fall more neatly into the SPCs definition, transferring parties should not assume that any such transfer would therefore be unaffected by this ruling. Instead, consideration will have to be given to whether the transfer would be covered by the ARD business transfer definition. If the answer is “yes”, the ruling is likely to apply.

What practical steps are necessary?

Sadly, although somewhat predictably, the ECJ did not address the practical aspects of this decision for transferees; the division of contracts into part-time roles and working for different employers. In the absence of more practical assistance, we would advise the following;

• Always assess whether this case is likely to apply where there is a fragmentation of services;
• As transferor, be prepared to consider whether certain contracts of employment need to be split into several part time roles on transfer. Ideally when the transfer is envisaged in the future ensure there is documentation showing how the employees work is allocated/split;
• As transferee, be aware of the possibility of inheriting part-time employees that also work for another transferring provider and consider the practical arrangements that will be required in place following the transfer. Where possible, ensure that indemnities in the transfer agreement extend to protection against claims associated with ‘split’ contracts.

What’s Next?

Until we have further case law on this new departure, the answer to this question is to follow the practical steps noted above. TUPE cases are invariably complex and fact-specific, and we would also recommend seeking legal advice before embarking on a TUPE transfer exercise.

For more information

Please contact Doug Mullen from our employment and pensions team for more details and/or advice.

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