In this HR Briefing, we pull together some of the more important recent judgments from the Employment Appeal Tribunal on the topic of TUPE.
Provisions dealing specifically with service provision changes (SPCs) were introduced into the 2006 TUPE Regulations. Some six years later, in 2012, several useful decisions of the appellate courts have started to seep through on the important issue of when the SPC provisions are likely to apply. In this HR Briefing, we pull together some of the more important recent judgments from the Employment Appeal Tribunal on this topic.
The 2006 TUPE Regulations were drafted to try and cover the situation where a client engages as contractor to do work on its behalf, engages a different contractor to do that work in place of the first contractor, or brings the work in-house.
But it is important to look at the letter of the law - an SPC will occur where:
- activities cease to be carried out by a client on its own behalf and are carried out instead by another person on the client’s behalf; or
- activities cease to be carried out by a contractor or subcontractor on a client’s behalf and are carried out instead by a subsequent contractor on the client’s behalf; or
- activities cease to be carried out by a contractor, subcontractor or subsequent contractor on a client’s behalf and are carried out instead by the client on its own behalf
. . . as long as certain additional conditions are complied with. One of these is that immediately before the SPC, there is ‘an organised grouping of employees’ situated in Great Britain whose ‘principal purpose is carrying out those activities on behalf of the client’.
It is very important for both parties to try and establish ahead of time whether TUPE applies, so that they can properly comply with, and assess, their respective duties and liabilities, e.g. to understand which employees will transfer and to comply properly with the information and consultation provisions.
In these recent cases, the EAT has considered the meaning of ‘organised grouping of employees’,‘principal purpose’ and ‘activities’. We hope that our summaries below will help make the job of trying to decide whether there is a SPC easier for you, but of course you should always discuss this with your EEF adviser, whether you are the incoming or outgoing contractor.
Eddie Stobart Ltd v Moreman and others
Argyll Coastal Services Ltd v Stirling and others
Seawell Ltd v Ceva Freight (UK) Ltd and another
Johnson v Campbell and another
Taurus Group v Crofts & another - developments on the effect of a change in client
Eddie Stobart Ltd v Moreman and others – EAT gives useful steer on the meaning of ‘organised grouping’
ES employed the 35 claimants at a depot which closed in April 2009. At the time of closure, ES was providing logistics services to two clients. Day shift employees worked mainly on a contract for Vion and night shift employees worked mainly on a contract for a different client. The Vion contract was awarded to FJG.
ES concluded that day shift employees and employees who spent more than 50% of their time on Vion-related work over the previous 90 days were ‘assigned’ to the Vion contract and that their employment transferred to FJG. The incoming contractor did not accept that TUPE applied. The claimants were dismissed by ES.They brought employment tribunal claims against both ES and FJG (it is very common for claimants to bring claims against both parties).
The ET decided that TUPE didn’t apply as the claimants did not constitute an ‘organised grouping of employees’. It held that the reason why the claimants spent most of their time on the Vion contract was because of the way ES organised its shift patterns, not because they were organised into a team whose principal purpose was to carry out work for Vion. It was this issue that the EAT focussed on.
ES argued that to satisfy the ‘organised grouping’ test, the employees did not need to be organised as members of a Vion team. The EAT, rejecting this argument, stated that there were two distinct questions. First, was there an ‘organised grouping of employees’. If so, the second question arose of whether the employees in question were assigned to that grouping?
The EAT stated that an ‘organised grouping’ was not simply a group which, without any deliberate planning or intent, mostly worked on tasks that benefitted a particular client.
The EAT’s judgment in this case has far reaching consequences. It illustrates that the question of whether employees are deliberately organised into an identifiable client grouping must be answered before moving on to ask where employees are assigned.It shows that it is not enough that employees carry out most of their work for a particular client.
There may not be an ‘organised grouping of employees’, for example, if the contractor uses different employees each week to provide the service, or the employees provide services to numerous clients, for example in shared services.
The next case in this feature adds further helpful commentary on this issue.
Argyll Coastal Services Ltd v Stirling and others – EAT gives helpful information on various strands of the SPC definition
The approach taken in Eddie Stobart was also taken in Argyll Coastal Services Ltd v Stirling and Others. The facts in Argyll are not particularly illustrative, but the case is important and worthy of mention because of the helpful observations made by the judge on the correct approach to determining whether an SPC has occurred, and understanding the phrase ‘organised grouping of employees . . . whose principal purpose is carrying out those activities on behalf of the client’.
The phrase ‘organised grouping of employees’ connotes a number of employees which is less than the whole of the transferor’s entire workforce, deliberately organised for the purpose of carrying out the activities required by the particular client contract and who work together as a team to carry out the activities required by the particular client contract;
It also said the term ‘principal purpose’ should bear its ordinary meaning and not be interpreted to mean ‘sole’ purpose.
A single ‘organised grouping of employees’ cannot consist of employees with different employers. TUPE is envisaged to cover the situation where an employer puts together a group of employees to carry out particular work for a particular client, who are subject to the same employer control and direction, client confidentiality arrangements, duties of care etc. They can be regarded as bound together in a single joint enterprise to fulfil their employer’s contractual duties to the client.
When assessing what is meant by ‘activities’, you have to look at what was required of the employer by the client. What exactly was the service that was contracted for?
Seawell Ltd v Ceva Freight (UK) Ltd and another – EAT assesses whether a single employee constituted an ‘organised grouping of employees’ in the circumstances
TUPE specifically states that a single employee can constitute an ‘organised grouping of employees’. In Seawell, the EAT assessed whether, on the facts involved, a single employee did in fact constitute an ‘organised grouping of employees’.
Mr Moffatt was employed by Ceva as a logistics co-ordinator in its warehouse. The business involved freight forwarding and management logistics. The workforce was organised into two distinct parts, one for inbound one for outbound goods. Mr Moffatt was included in the eight employees which comprised the outbound group, but unlike the seven other employees who spent somewhere between 0 and 30% of their time on an account for Seawell Ltd, he spent all of his time on that one account.
When Seawell decided to bring in house the Ceva work, there was a dispute as to whether there was an SPC and TUPE applied. Ceva argued there was, Seawell that there was not.
The EAT stated that the fact that TUPE specifically states that a single employee can be an organised grouping did not automatically mean that an employee who spent all their time working for a single client was necessarily an organised grouping.
The EAT referred again to the issue addressed in both the Eddie Stobart and Argyll cases, namely that an organised grouping connotes a deliberate putting together of a group of employees for the purpose of a client’s work.
In this case, the only deliberately organised grouping of employees was the outbound operation and inbound operation. Ceva did not specifically form a grouping consisting of Mr Moffat to carry out the Seawell work nor was the outbound group organised for the purposes of the Seawell contract. The outbound group could not be said to be carrying out activities on behalf of Seawell as its principal purpose and so the requirements under TUPE were not met.
This is another useful decision, highlighting the importance of asking the right questions and assessing whether there has been a conscious grouping of employees for the purpose of a client’s work.
Johnson v Campbell and another – EAT gives guidance identifying ‘activities’
Johnson Controls Ltd employed Mr Campbell as a taxi administrator. In practice, he took bookings for taxis from clients including UKAEA. He also advised on journey timings, reviewed booking data, combined jobs and pick-ups to ensure the best use of available transport, allocated jobs to subcontractors and checked invoices, carried out checks on suppliers and arranged security passes for them. He claimed 80% of his time was spent on taxi activities for UKAEA. UKAEA stopped using Johnson for booking taxis and it used its own secretaries to book taxis directly with the taxi firms. Mr Campbell was dismissed. He claimed unfair dismissal and a redundancy payment from Johnson.
The EAT needed to consider whether UKAEA was performing essentially the same activity as that carried out by Johnson. It reiterated the key question to decide is – what an activity is? This involves a holistic assessment. It ruled that the question cannot be answered purely by ‘enumerating tasks and identifying whether the majority of those tasks quantitatively is the same as the majority was’ prior to the supposed transfer. The EAT agreed with the ET’s decision that the element of centrality, coupled with some particular features of the job that Mr Campbell had undertaken, no longer existed after the job of booking taxis was taken on by the various secretaries. There was, therefore, no SPC.
Each and every case where it is alleged that there is an SPC must be looked at individually as no two cases are exactly the same. The decision in Johnson is of course fact-specific. But this case is useful as it shows that there may not be an SPC for the purposes of TUPE even where most of the tasks carried out prior to, and after, the alleged transfer are the same. What is important to remember is that the nature of the activity as a whole must be scrutinised.
Taurus Group v Crofts & another- -developments on the effect of a change in client
Mr Crofts was employed by Reliance Security to guard a building in Nottingham for Ely properties. Ely got into financial difficulties and Mansion properties acquired this property. Mansion decided to use Taurus group instead of Reliance Security. Reliance told Mr Crofts he would be transferring over automatically pursuant to TUPE but Taurus disagreed and refused to employ him. The ET ruled that there was a TUPE transfer and that Mr Crofts had been unfairly dismissed by Taurus.
In Hunter v McCarrick, the EAT had previously decided that for there to be a transfer under TUPE, activities carried out by different contractors before and after the transfer must be carried out for the same client. Consequently, in this case, the EAT decided that there was no TUPE transfer as there was a different client.
We understand that Hunter v McCarrick is subject to an appeal on the basis that that the protection of TUPE would be lost every time there was a change of building ownership and that this cannot have been the intention of this legislation. It is possible to see the current position being reversed. The Court of Appeal is due to hear the Appeal in October and we will report to you as soon as we know the outcome.
Recent case law demonstrates the importance, when trying to decide if there is an SPC, of drilling down and scrutinising the activities which were carried out before and after the change and of assessing exactly how the work is being organised for the client. Remember too, the effect of a change in client.
Whether you are the outgoing or incoming contractor, or the client bringing services back in house, always discuss the facts and circumstances with your EEF adviser so that we can advise you as fully as possible on the likelihood or otherwise of TUPE applying.