RCO Support Services Ltd v Unison

Whether a service undertaking has transferred under the Transfer of Undertakings (Protection of Employment) Regulations 1981 depends on whether the economic entity retains its identity. In contracting-out cases, continuity of activities or services alone is insufficient. The court must assess all the circumstances, including the undertaking’s nature, assets, workforce, customers, organisation and operating methods. The absence of transferred assets or employees is relevant but not automatically decisive. The context of an incoming contractor’s refusal to take on staff may be considered objectively. A willingness to re-employ them on new terms may support continuity. A transfer can therefore exist despite no direct transfer of the former workforce.

Former cleaning and catering staff supplied support services at Walton Hospital. In-patient services were moved to nearby Fazakerley Hospital. The cleaning contract passed from Initial Hospital Services Limited to RCO, which did not take on the former cleaners but offered them employment if they resigned first. The Trust’s catering service was also reorganised, with some staff and equipment moved.

The Employment Tribunal held that the cleaning and catering activities were economic entities which retained their identity and transferred under TUPE. The Employment Appeal Tribunal dismissed RCO’s appeal; its judgment is reported at [2000] ICR 1502. RCO appealed, arguing that Suzen made the absence of transferred assets or employees conclusive and that the circumstances of non-takeover were irrelevant. The central issue was whether the Tribunal had erred in law.

Lord Justice Mummery gave the leading judgment. Lady Justice Hale and Lord Justice Pill agreed. The appeal was dismissed.

1. Retention of identity. Under article 1(1) of the Acquired Rights Directive 77/187/EEC, and TUPE, the decisive question is whether the economic entity retains its identity. The approach in Spijkers [1986] ECR 1119 remains good law. The court must make an overall assessment of all the circumstances, including the type of undertaking, tangible and intangible assets, workforce, customers, similarity of activities and any interruption. No single factor is determinative.
2. Contracting out. Suzen [1997] ICR 662 limits the proposition that the same or similar service, by itself, establishes a transfer. It does not mean that the absence of transferred assets or employees is conclusive in every contracting-out case. Those matters remain relevant factors within the overall assessment.
3. Non-takeover of employees. The decision not to take on the predecessor’s workforce must be assessed in its context. The objective circumstances are relevant; subjective motive to avoid TUPE is not a separate test. The offer to re-employ the Walton workforce after resignation, on RCO’s terms, was relevant evidence pointing towards continuity and retention of identity. This was consistent with ECM (Vehicle Delivery Service) Limited v Cox [1998] ICR 631, its Court of Appeal decision [1999] ICR 1162, and the majority approach in ADI (UK) Limited v Willer [2001] IRLR 542.
4. Application. The Employment Tribunal considered more than the similarity of the services. It considered the dedicated workforce, training, established operating methods, specialist support functions and the replication of the hospital infrastructure at Fazakerley. It was entitled to find that both entities retained their identity. There was no error of law.

RCO was ordered to pay the first and fourth respondents’ appeal costs. Permission to appeal to the House of Lords was refused.

1. Court of Appeal (Civil Division): In [2002] EWCA Civ 464, the court dismissed RCO’s appeal from the Employment Appeal Tribunal.
2. Employment Appeal Tribunal: On 4 July 2000, the Tribunal dismissed RCO’s appeal from the Employment Tribunal. The judgment is reported at [2000] ICR 1502.
3. Employment Tribunal: The Tribunal’s Extended Reasons, sent on 2 November 1998, held that the cleaning and catering support services were transferred undertakings.