Contractual Documentation Helped to Show Service Provision Change

3 mins

Posted on 09 Apr 2014

An employment tribunal was entitled to take account of contractual documentation when deciding that activities carried out before and after a service provision change were essentially the same, despite being carried out in a different way. 

In Qlog Ltd v O’Brien, R was a cardboard manufacturer and entered into an agreement with a haulage contractor to transport and deliver R’s cardboard packaging to customers. R terminated that agreement and chose Q as its new provider. Q was a logistics company. It did not provide transport services itself and instead acted as a middle man between clients and haulage providers. The agreement with Q, signed a year after it started providing the services, stated that R wished to “transfer the provision of part of its transportation, delivery and distribution services from its current provider to Q”. 

Q contended that the haulage contractors’ drivers did not transfer as it did not provide transport services itself. Its activities were not therefore essentially the same as those carried out by the haulage contractor and TUPE did not apply. 

The employment tribunal identified the activities as the transportation of R’s goods from its premises to its customers. Although Q had a very different mode of operating to that of M, the tribunal found that the actual activities which it agreed to carry out were the same as those previously carried out by the haulage contractor. The agreement with Q provided “compelling evidence” of R’s intention that Q should continue the activities previously carried out by the haulage contractor. 

Q appealed, arguing that the tribunal had failed to carry out a detailed examination of the activities actually performed by Q and had merely looked at Q’s contractual responsibilities. The EAT dismissed the appeal. The tribunal was entitled to take the view that Q carried out essentially the same activities as the haulage contractor, despite doing so in a different way. It had been entitled to take account of the way the activities were described in the contractual documentation which evidenced R’s intention that Q would provide the same services as the haulage contractor. In addition, the fact that the agreement was written when the arrangements had been in existence for over a year indicated that they reflected the reality of the relationship. The tribunal had correctly focused on the substance of the activity being undertaken, rather than concentrating on the different modes of operation (as Q had argued it should do). 

Incoming contractors need to be aware that providing services in a different way from the outgoing contractor, and even sub-contracting part of the services, will not necessarily mean that they escape the impact of TUPE, particularly where they have assumed responsibility for the entirety of the service. The key question will be whether the activities are essentially the same. Tribunals have a broad discretion when deciding this question and their decision on the facts will rarely be overturned on appeal.

It is surprising that the agreement in this case was drafted in terms which supported the outgoing contractor’s argument that the new contractor had simply taken over its activities, particularly as it was entered into 12 months later when there was clearly a dispute with the outgoing contractor over whether TUPE applied. This was probably a case of one part of the business not realising the employment law implications, but it emphasises that careful consideration should be given to the drafting of contracts and how the activities are described when TUPE is a factor.

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