The Supply of Goods Exclusion under TUPE

The Employment Appeal Tribunal (EAT) has held in Pannu v Geo W King and others UKEAT/0021/11 that manufacturers working on an assembly line were excluded from the automatic transfer principle under TUPE because their activities consisted of the supply of goods within the meaning of TUPE. TUPE will apply to a "service provision change" involving the transfer of services but it will not apply to the transfer of activities that "consist wholly or mainly of the supply of goods." 

The claimants worked on an assembly line producing car parts for a customer of Geo W King (Geo). Geo went into liquidation and the customer found a new supplier to produce the relevant parts. The claimants claimed that their employment should transfer to the new supplier under TUPE because there was a service provision change. The EAT held that although the claimants were supplying a service to Geo, the activities amounted to a supply of goods to the customer and therefore were excluded from the automatic transfer principle under Regulation 3(3)(b) of TUPE.

This case shows that when considering whether TUPE applies, it is the relationship between the contractor and the client that is relevant, not that between the employee and the contractor. So usually, if the client (here, Geo's customer), receives complete products from the contractor (Geo), the fact that those products are made by the employees of Geo is irrelevant; TUPE will not apply.