Under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE), there is a service provision change (SPC) when activities cease to be carried out by one contractor and are carried out instead by another contractor “on the client’s behalf”. In CT Plus (Yorkshire) CIC v Stagecoach and ors, the Employment Appeal Tribunal (EAT) held that if there is a change in the identity of the client post transfer, there cannot be an SPC.
Basic facts
CT Plus Ltd, a community interest company owned by a charity, took over the park and ride service outside Hull in 2009 from another operator and accepted its employees under TUPE. The company received a subsidy from the Council to run the service.
However, any commercial company can run a service on the same route as long as it gives notice to the relevant government agency (in this case, the Vehicle Operator and Service Agency, VOSA). Once this happens, the subsidy to the other company has to cease.
Stagecoach formed the view that it could run the service commercially without a subsidy, albeit with a reduced service outside peak hours (despite the Council’s misgivings). In July 2013 it gave the requisite notice which meant that the Council had to give notice to CT Ltd to terminate the subsidised contract. Stagecoach refused to take on CT’s drivers saying there was no TUPE transfer.
The company argued that Stagecoach was carrying out the same activities “on the client’s behalf” under Regulation 3(1)(b)(ii).
Tribunal decision
The tribunal disagreed, however, holding that as the identity of the “client” had changed post transfer, there could not be an SPC.
Although Stagecoach was carrying out the activity of providing a park and ride service, it no longer did so on behalf of the Council. Instead it was acting on its own behalf as it had no contract with the Council and received no subsidy from it. All that it had to do was to give notice to VOSA of its intention, after which it could run the service as it wanted. “There simply was no client anymore”, with the Council reduced to an interested bystander. The company appealed.
EAT decision
The EAT dismissed the appeal. Although “in ordinary parlance” the word client refers to the beneficiary or end-user of a service, that is not what it meant in relation to the SPC provisions. In that context, it referred to a situation where a client contracts out a service, takes it back in-house or transfers the service from one person to another. As such, “client” means an organisation that is in a position to carry out activities either itself or by commissioning them from others to carry out those activities on its behalf.
In this case, the tribunal had considered the relevant issues in a “broad, pragmatic way”. In particular, it had taken into account the fact that Stagecoach could disregard the reservations of the Council in determining the frequency of service as it was running the route as a commercial venture for its own benefit, not that of the Council.
It was not therefore perverse of the employment judge to refer to the Council as an “interested bystander” as it was well aware that the Council continued to be an interested party but was now one which had “ceded control of the carrying out of the activities”.