When does TUPE apply in an administration scenario?

The recent EAT case of SNR Denton v Kirwan considered whether a service provision change under TUPE had taken place where administrators appointed solicitors to do work previously carried out by the company’s in-house lawyer.

Ms Kirwan was the Director of Legal at Jarvis Accommodation Services Ltd which provided facilities management to buildings built by Jarvis. When the group experienced financial difficulties, Ms Kirwan was principally concerned with disposing of service contracts from Jarvis to outside purchasers. In 2010, administrators were appointed and they instructed Denton Wilde Sapte (now SNR Denton) to act as their solicitors in the administration. Shortly after, Ms Kirwan was made redundant. Ms Kirwan issued a claim in the tribunal claiming that there had been a service provision change under TUPE because after the appointment of SNR Denton, they were engaged in the disposal of service contracts previously carried out by her. She claimed that her employment had been transferred to them as a result of the service provision change.

The employment tribunal found there had been a service provision change under TUPE and upheld Ms Kirwan’s claims: the disposal of the service contracts was carried out for the same client, Jarvis. The activities of disposing of the contracts were not deemed to have been carried out in connection with a single specific event or a task of short-term duration and therefore TUPE applied.

SNR Denton appealed on the basis that there had been no service provision change. They argued, amongst other things, that the employment tribunal was wrong to conclude that the activities were carried out on behalf of the same client and that given the statutory limits on the duration of an administration, the activities were carried out in connection with a single specific event or task of short term duration (which would mean that TUPE would not apply).

On appeal, the president of the EAT overturned the decision and held that the administrator’s solicitors were not carrying out the services for the same client.  In considering the issue of the “single client”, the EAT looked at the objectives of the administrator and concluded that not every contract entered into by an administrator is a contract with the company. In order for a company to be party to a contractual relationship with the administrator’s solicitors there would need to be a specific act or instruction by the administrators.   The EAT emphasised that there may be circumstances where administrators (and their professional advisors) do act on behalf of the company and these will need to be considered on a case by case basis.

The EAT did not make any ruling on the submission by SNR Denton that an administration was a single specific event/task of short term duration but indicated that had this determination been required, the matter would have been referred back to the tribunal to determine this point of fact.

Ms Kirwan was given extended time to appeal to take account of the decision in McCarrick –v- Hunter which has recently been handed down by the Court of Appeal. The Court of Appeal was asked to consider whether TUPE would apply to a service provision change if, in addition to the change of service provider, there was a change of client. The Court of Appeal dismissed the appeal, agreeing with the EAT’s interpretation of the legislation that the client must be the same. The Court of Appeal considered the legislation to be straight forward and that there was no basis upon which to artificially expand its meaning. This decision means that unless Ms Kirwan appeals the determination that the administrators were a separate client to Jarvis, there is limited scope for her claim to proceed further.

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