TUPE - No Service Provision Change to Commercial Bus Company

In a recent case (CT Plus (Yorkshire) CIC v Black and Others), the Employment Appeal Tribunal (EAT) provided important guidance on the operation of the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) with regard to the service provision change (SPC) provisions. Regulation 3(1)(b)(ii) states that TUPE applies when activities cease to be carried out by a contractor on a client's behalf and are carried out instead by another person on the client's behalf. The EAT stressed that in this context 'client' means 'an organisation that is in a position to carry out activities either itself or by commissioning them from others to carry out those activities on its behalf'. It is central to all three forms of SPC identified in TUPE that there should be a client or group of clients for whom the service is performed.

CT Plus Limited, a community interest company owned by a charity, had successfully tendered to operate a park-and-ride bus service from a council-owned car park on the western outskirts of Hull to the city centre. The company received a substantial subsidy from Hull City Council to offset the costs of running the service, which operated to a timetable set by the Council. Under the terms of the contract, the Council also had control over the type and age of the buses to be used and their branding.

Stagecoach, which is a much bigger operation than CT Plus, with an extensive depot in Lincoln, decided that it could operate the service profitably, without subsidy, albeit with a reduced service outside peak hours. It therefore gave notice of its intention to the relevant government agency. Since a subsidised service of the kind CT Plus had agreed with the Council cannot be run in competition with a commercial service, its contract was terminated.

Stagecoach declined to take on CT Plus's drivers, arguing that there was no SPC under TUPE. CT Plus disagreed and proceedings were brought before an Employment Tribunal (ET) in order to establish whether there had been a TUPE transfer and who should compensate the employees who had lost their jobs. The ET ruled in Stagecoach's favour.

In ruling on CT Plus's challenge to that decision, the EAT acknowledged that Stagecoach had both a legal and practical relationship with the Council. It paid a monthly sum for use of facilities at the park-and-ride hub and liaised with the Council in respect of a range of matters connected to the service.

However, the EAT noted that Stagecoach used its own buses and drivers. It was performing the service as a commercial venture, for its own benefit, and was not acting on behalf of the Council, which could not be viewed as its client, being no more than an 'interested bystander'. The provisions of TUPE had been applied by the ET in a commonsense and pragmatic manner, without error of law. The appeal was therefore dismissed.