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TUPE and Property Management

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27th April 2015

Service provision change involving multiple maintenance contracts

It is well known that where the management or ownership of property passes from one company to another, the employment of staff engaged in property management or maintenance may transfer with it under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (“TUPE”). However, it is not unusual for several different managed service contracts simultaneously to transfer from one contractor to another or for a number of sub-contracted maintenance contracts to be taken in-house by a property management company. A recent case has considered how TUPE applies in these circumstances involving multiple contracts.

In Ottimo Property Services v Duncan & Anor [1] the Employment Appeal Tribunal (“EAT”) considered the situation where several different blocks of residential housing in an estate, each with a separate management company, which sub-contracted their property maintenance work to the same company under different contracts, transferred responsibility for that work to a new provider. Although this had the appearance a service provision change (“SPC”), which would mean that employees and liabilities relating to them transferred under TUPE, r.3(1)(b) of TUPE requires that the activities being transferred from one contractor to another are carried out on “a client’s behalf”, in the singular. In this case there were several different clients with independent contracts. This had led an employment tribunal to find that TUPE did not apply, because the words in the singular in the regulation could not include the plural. However on appeal, the EAT held that it could apply to several distinct contracts.

The facts

The case concerned Britannia Village, an estate which comprises different blocks of residential housing, each one with a separate residents’ management company constituting a separate legal entity. There were 12 blocks plus a general management company which dealt with the common parts of the estate (pathways, parking etc.). Mr Duncan was employed as a Site Maintenance Manager by a company called Chainbow Ltd who initially had contracts to provide property management services for all but one of the blocks and the common parts. Chainbow then sub-contracted their property maintenance work to Ottimo, and with it Mr Duncan’s employment transferred to Ottimo under TUPE.

Over time, the management contracts for various units transferred to other companies, but in 2012, Warwick Estates Property Management acquired Ottimo’s seven remaining property management contracts and employed their own property manager, having been advised that TUPE did not apply. Ottimo gave Mr Duncan a P45 but told him that he should have been transferred to Warwick. He claimed unfair dismissal against both Ottimo and Warwick in the employment tribunal. The issue was whether liability for his dismissal transferred to Warwick under TUPE.

The appeal raised a novel point: whether “a” or “the” client for the purpose of a SPC transfer under r.3(1)(b) was to be understood solely in the singular or whether it could allow for there to be more than one client (providing they remain identical). Although earlier cases had dealt with the meaning of the word “client” under TUPE, none of them had had to address the question whether, allowing no changes in the end users (ie the “clients”) before and after the SPC, the singular should not include the plural. The employment tribunal at first instance had taken the literal approach and decided that the regulation could not cover the transfer of multiple separate contracts with several distinct legal entities.

The decision

In deciding that the employment tribunal had erred in law, and that the word could be read in the plural, the EAT relied on several different factors:

• Firstly, this case did not require any reference to be made to EU law, because the SPC provisions in UK TUPE were domestic in origin did not derive from EU regulation.
• Section 6 of the Interpretation Act 1978 provides that “words in the singular include the plural and words in the plural include the singular”, “unless the contrary intention appears”.
• In any event, it was possible that the words “the client” could comprise more than one legal entity, and so might more properly be described as the “clients”. There would though need to be some link or some commonality between them to permit the identification of their intention. It is a requirement of r.3(3)(a)(ii) that the client intends that the activities (meaning “fundamentally the same activities”) will be carried out by the transferee following transfer.
• Intention might be harder to demonstrate where there is no umbrella contract defining the clients, but that did not mean there must be a single contract between the legal entities. For example, the various “clients” could have demonstrated a common intent in entering into the contract(s) or intention might be discernable from the terms of the contract itself.
• It was not fatal in the particular circumstances that the separate contracts had separate start and end dates.

In this case, having erred in their interpretation of the statute, the employment tribunal had not considered whether there was commonality of intention, and therefore the case was remitted back to them by the EAT for further consideration of the facts.

This decision gives welcome clarity on a point which frequently arises in practice.

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[1] UKEAT/0321/14/JOJ

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