Court ruling throws up loophole in Tupe

Chris Fogarty reports

Contractors may be able to avoid Tupe – Transfer of Undertakings (Protection of Employment) Regulations 1981 – regulations by refusing to employ a previous contractor's work force following a landmark Court of Appeal ruling.

Charles Russell partner David Green, who advised KLM ERA Helicopters in the case Betts & Others v Brintel and KLM ERA Helicopters, said the decision appeared to take the groundbreaking Suzen decision further.

In the Suzen case, the European Court of Justice ruled that the transfer of tangible or intangible assets was the essential minimal characteristic in deciding whether Tupe applied.

But now the Appeal Court has stated that what is required when considering if Tupe applies is to look at various tests originally laid down in the 1986 ECJ decision in the Spijkers case.

One of the critical tests is "whether or not the majority of its employees were taken over by the new employer".

In the Betts case, KLM had successfully won a contact from Brintel to provide helicopter services to oil rigs operated by Shell. The under- taking entity consisted of helicopters, landing strip, prem-ises, buildings and staff. KLM had all its own separate facilities, such as helicopters, and did not take on any of Brintel's existing employees.

It was argued KLM had deliberately chosen not to take on employees. But the Court decided even if Brintel's employees had been taken on, it would have been a small number – not the majority as referred to in the Spijkers judgement.

Green said the Appeal Court stated there was no difference in principle between first and second generation contracting-out and, therefore, Suzen principles would apply equally in first generation cases.

"It's taking it a bit further than Suzen," said Green of the Appeal Court ruling. "This case brings us back to some kind of commercial reality."