Pannu & Ors v Geo W King Ltd & Ors (Transfer of Undertakings : Service Provision Change)

For a service provision change under regulation 3(1)(b) of the TUPE Regulations 2006, the activities must satisfy the statutory conditions, including that they do not consist wholly or mainly of supplying goods for the client’s use. An organised grouping of employees is a prerequisite, but the fact that those employees provide services to their employer does not determine the goods-or-services question. The focus is on the contractor’s relevant activities for the client. Whether goods are supplied using materials paid for by the client, or whether the subsequent contractor performs similar work, does not by itself alter that analysis. The question is essentially one of fact for the Employment Tribunal, and an appellate challenge based on perversity faces a high hurdle.

The claimants worked on an axle assembly line operated by Geo W King Ltd (GWK). GWK supplied completed axle assemblies and related parts to IBC Vehicles Ltd under arrangements involving goods and services. After GWK ceased production and entered liquidation, IBC contracted with Premier for assembly work at IBC’s premises.

The Bedford Employment Tribunal found that no transfer occurred under regulation 3(1)(a) and that the service provision change provisions were excluded because GWK’s activities consisted wholly or mainly of supplying goods. The claimants appealed, arguing that the relevant activity was the provision of assembly services and that the Tribunal’s conclusion was perverse. The central issue was the proper application of regulation 3(3)(b).

1. Appeals dismissed. The Employment Tribunal was entitled to find that GWK’s activities consisted wholly or mainly of supplying goods for IBC’s use, so regulation 3(3)(b) excluded a service provision change.
2. An organised grouping of employees carrying out activities on behalf of the client is a prerequisite under regulation 3(3)(a). However, the fact that the grouping provides services to its contractor employer does not answer the separate question under regulation 3(3)(b).
3. The relevant focus is the contractor’s activities for the client. GWK’s activity was the production and supply of finished axles, struts and corners, notwithstanding that assembly involved work performed by an organised group of employees. The Tribunal was entitled to regard the overall process, including sourcing and acquiring components, as principally directed to supplying goods.
4. The late-2008 arrangement under which IBC paid suppliers directly did not change the nature of GWK’s activities. It was a matter of commercial expediency and did not make the contractual funding arrangements the focus of the statutory inquiry.
5. The arrangements between IBC and Premier after GWK’s closure could not retrospectively alter the character of GWK’s activities before the relevant date. If the activities changed, the statutory continuity requirements would not be met; if they remained the same, the goods exclusion applied.
6. The question was essentially factual. The challenge alleging perversity failed because the Tribunal’s conclusion was reasonably open on the evidence. The high hurdle applicable to such an appeal was illustrated by Yeboah v Crofton [2002] IRLR 634.

• Bedford Employment Tribunal: By a judgment with reasons promulgated on 14 October 2010, held that the claimants’ employment had not transferred to Premier or IBC. The claims succeeded against GWK in liquidation only.
• Employment Appeal Tribunal: Dismissed the appeals and upheld the Tribunal’s conclusion that regulation 3(3)(b) excluded a service provision change.