Ahmed & 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 relevant activities must not consist wholly or mainly of supplying goods for the client’s use. The fact that an organised group of employees provides services to its contractor employer does not determine that question. The focus is the contractor’s activity for the client. A contractor manufacturing and supplying finished goods may therefore fall within the regulation 3(3)(b) exclusion, even where it uses a dedicated workforce and performs assembly work. Changes in the funding of component parts, or the later contractual arrangements, do not necessarily alter the nature of the activities. Whether the exclusion applies is essentially a question of fact for the Employment Tribunal, subject to the high threshold for a perversity challenge.

The claimants worked on an axle assembly line operated by Geo W King Ltd (GWK). GWK supplied assembled vehicle 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 the claimants’ employment had not transferred under regulation 3(1)(a) or regulation 3(1)(b) of the TUPE Regulations 2006. It held that GWK’s activities consisted wholly or mainly of supplying goods for IBC’s use, so the regulation 3(3)(b) exclusion applied. The claimants appealed, arguing that the relevant activity was the provision of assembly services.

1. The appeals were dismissed. The Employment Tribunal was entitled to conclude that the claimants’ employment did not transfer to Premier or IBC.

2. An organised grouping of employees carrying out activities on behalf of a client is a prerequisite for a service provision change under regulation 3(1)(b), through regulation 3(3)(a). However, the fact that those employees provide services to their contractor employer does not answer the separate question under regulation 3(3)(b).

3. The relevant focus is the activity carried out by the contractor for the client. GWK’s activity was the production and supply of finished axles, struts and corners to IBC. Although assembly involved work and GWK employed a dedicated group of employees, the activity could properly be characterised as wholly or mainly the supply of goods for IBC’s use.

4. The change from GWK to Premier did not assist the claimants. If the nature of the activities changed, the requirements of regulation 3(1)(b) were not met. If the activities remained the same, regulation 3(3)(b) excluded the alleged transfer.

5. IBC’s later payment of suppliers directly for components was a funding and supply-chain arrangement. It did not alter the nature of GWK’s activities, which remained the supply of finished goods. The contractual arrangements formed part of the factual matrix but were not themselves the focus of regulation 3.

6. The question whether activities consist wholly or mainly of supplying goods is essentially one of fact for the Employment Tribunal. The challenge based on perversity failed because the Tribunal’s conclusion was open to it on the evidence and the appellate threshold was not met.

• Employment Appeal Tribunal: appeals from the Bedford Employment Tribunal were dismissed. The Tribunal’s judgment and reasons had been promulgated on 14 October 2010.