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

The Service Provision Change (SPC) exclusion in regulation 3(3)(b) of the TUPE Regulations 2006 applies where the contractor's activities consist wholly or mainly of supplying goods for the client's use. The enquiry focuses on the nature of the contractor's activity, not merely on the fact that an organised group of employees provided services. Commercial arrangements such as who paid suppliers do not, of themselves, change the character of those activities.

The Employment Tribunal at Bedford found that the claimants' employment did not transfer under reg. 3(1)(b) because the activities consisted wholly or mainly of the supply of goods to the client. The claimants appealed to the Employment Appeal Tribunal challenging that conclusion under reg. 3(3)(b) of the TUPE Regulations 2006. The ET's judgment was given on 14 October 2010. The central issue on appeal was whether the ET was entitled to find that the contractor's activities were principally the supply of goods, thus excluding an SPC transfer.

1. Outcome: The appeals are dismissed. The Employment Tribunal's factual conclusion that regulation 3(3)(b) applied was not perverse and stands (see paras [24]; [25]).
2. Scope of an SPC: An SPC under reg. 3(1)(b) requires an organised grouping of employees carrying out activities on behalf of a client. That requirement does not resolve the separate question in reg. 3(3)(b) whether the activities consist wholly or mainly of supplying goods (paras [6]–[9]; [21]).
3. Primary focus of the reg. 3(3)(b) enquiry: The tribunal must assess the nature of the contractor's activities as a whole. The relevant enquiry concerns the contractor's activity, not only the fact that an organised group of employees provided services to the contractor (paras [21]–[23]).
4. Commercial or funding arrangements: A change in funding or payment routes for components does not, without more, alter the character of the activities carried out by the contractor (paras [22]; [23]).
5. Application to the facts: On the findings of fact, GWK's overall activity was the supply of finished goods (assembled axles, struts and corners) to IBC. The tribunal was entitled to hold that the activities consisted wholly or mainly of supplying goods and that reg. 3(3)(b) therefore excluded an SPC transfer (paras [11]; [40]–[43]).
6. Standard of review: The challenge on perversity faced a high hurdle. The EAT found no basis to characterise the ET's conclusion as perverse (paras [24]–[25]).
7. Order: Appeals dismissed (para [25]).

• Employment Appeal Tribunal: Appeal from the Employment Tribunal, Bedford. The ET gave judgment with reasons on 14 October 2010. This court dismissed the appeals (see paras [24]–[25]).
• Employment Tribunal (Bedford): First-instance hearing over five days; judgment promulgated 14 October 2010 (see para [4]).