TUPE: Court of Appeal on service provision change

11 December 2012

The case of McCarrick v Hunter reached the Court of Appeal recently. Mr McCarrick worked for a company which managed several commercial properties. The company was in financial difficulties and a mortgagee (Aviva) assumed control of the properties and appointed receivers to manage them. The receivers asked Mr Hunter to manage them and he employed Mr McCarrick to do so. Less than a year later, Mr Hunter dismissed McCarrick.

Mr McCarrick wished to argue that he had at least one year’s continuity of employment. He argued that there had been a service provision change (SPC) under Regulation 3(1)(b) of TUPE. The Employment Tribunal upheld his claim but the EAT reversed that decision.

Regulation 3(1)(b)(ii) of TUPE provides that a “second-stage” SPC occurs where activities cease to be carried out by one contractor on a client's behalf and are, instead, carried out by a subsequent contractor on the client's behalf. That, said the EAT, had to be read as meaning the same client. Here the properties had changed hands and the client was not the same.

The Court of Appeal agreed. Mr McCarrick argued that a purposive approach ought to be applied to Regulation 3(1)(b) to protect employees. However, the court considered that there was no basis for giving the word ‘the client’ an artificial or expanded meaning. Mr McCarrick’s claim failed.

Points to note


• The law is now clear that there will be no service provision change SPC for the purposes of second-stage outsourcing where the activities carried out by different contractors before and after the change are not for the same client.

• But note that the court did say that it might be necessary "not to be too pedantic" with respect to the question of whether the activities carried on before or after an SPC are sufficiently similar. Likewise, a broad approach could be taken to the question of whether an employee is employed in the service transferred.

• Could Mr McCarrick have argued that, even if there was no SPC, there was still a TUPE transfer under regulation 3(1)(a) – a transfer of an undertaking? He did not do so. The court acknowledged that there does not seem to be any authority on the point.

• While the arrangements in this case were unusual, the decision is particularly relevant to property transactions, where ownership or management of a commercial property changes at the same time as the service providers change (for example, cleaning staff or security guards) do.


Other cases in our December 2012 UK employment Law update:

> Emails are not automatically company property
> No duty not to dismiss while employee receives PHI benefits
> How to deal with previous written warnings when considering dismissal