Court of Session provides guidance on TUPE service provision changes

In DLA Piper’s case of the week, the Court of Session has provided guidance on what constitutes an “organised grouping of employees” on a service provision change for TUPE purposes.

Ceva Freight (UK) Ltd v Seawell Ltd

Facts

Mr Moffat was employed by Ceva Freight (UK) Ltd, a freight-forwarding and management-logistics company. Its workforce was organised into two groups, one dealing with “inbound” goods and one dealing with “outbound” goods. Mr Moffat, a logistics coordinator, together with seven other employees, worked on the outbound division. Of those working on the outbound side, five employees, including Moffat, worked on the Seawell Ltd contract. While Moffat spent 100% of his time working on the Seawell contract, other members of the outbound team spent much less time working on the Seawell account, varying from just 10% to 30% of their time.

In late 2009, Seawell decided to bring back in-house the work that had been carried out on its behalf by Ceva. Ceva asserted that Moffat had transferred to Seawell by operation of the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE). This was disputed by Seawell. Moffat claimed unfair dismissal against both Ceva and Seawell.

There was no dispute as to whether or not the activities had transferred. Therefore, the key issue for the tribunal was to ascertain whether or not Moffat had transferred pursuant to reg.3(3) of TUPE. Was there an organised grouping of employees that had as its principle purpose the carrying out of the activities concerned on behalf of Seawell?

At first instance, the employment tribunal concluded that, as the definition of an “organised grouping of employees” in TUPE includes a single employee and Moffat’s role had the principle purpose of carrying out the relevant activities, he had transferred pursuant to TUPE. Seawell was therefore liable for unfair dismissal.

Seawell appealed to the Employment Appeal Tribunal (EAT). The EAT overturned the tribunal’s decision as it found that the tribunal had applied the wrong test when deciding whether or not there had been an organised grouping of employees. It decided that, although TUPE specifies that a single employee can be an organised grouping, this does not mean that an employee who spends 100% of his or her time on work for a particular client automatically constitutes an organised grouping. It concluded that, as arrangements were not deliberately made for Moffat to work on the Seawell contract and he did not perform the entirety of the Seawell activities on his own, there was no organised grouping. As a result, he had not transferred to Seawell.

Ceva appealed to the Scottish Court of Session.

Decision

Dismissing the appeal, the Court of Session confirmed that Moffat was not an organised grouping of employees. As a result, there was no TUPE transfer.

The Court of Session followed the EAT decision in Eddie Stobart Ltd v Moreman and others [2012] IRLR 356 EAT and highlighted that the notion of an “organised grouping” suggests that there is an element of deliberate organisation of employees that has as its principal purpose the carrying out of the relevant activities. In the Ceva case, the activities were organised by reference to the type of service being provided (eg inbound and outbound service) and not by the identity of the client. Although Moffat spent all of his time on the Seawell contract, other employees also performed the activities in question. As the outbound team in which Mr Moffat worked did not amount to an organised grouping that had as its principal purpose the carrying out of activities for Seawell – in other words, it was not organised as a “Seawell team” doing wholly or mainly Seawell work – Moffat’s individual 100% time commitment to working on the Seawell contract was irrelevant.

In addressing Ceva’s argument that an organised grouping can include a single employee, the Court of Session held that that definition was not relevant to this type of case, but to cases where the activities in question can be, and are, carried out by a single individual. The examples that the Court of Session gave were those of a cleaner working for one single client or a firm of solicitors providing a single qualified solicitor to advise full time a client such as an insurance claims handler. Indeed, the Court of Session noted that “where the activities are carried out by a plurality of employees, the reference in the definition to a single employee does not in our view, warrant disaggregation of that group of employees”.

Implications

This case reinforces that when considering whether or not employees will transfer pursuant to TUPE, it is not enough just to consider the activities that employees carry out. It is also imperative to consider whether or not the employees have been deliberately organised according to the requirements of the client. Also, where an individual spends all of his or her time working for a particular client, it should not automatically be assumed that he or she will transfer to that client on a service provision change.

Lisa Hodgson is an associate with DLA Piper

Practical guidance from XpertHR on TUPE and service provision changes
How to deal with the situation where the transferee disputes that TUPE applies If TUPE applies to the transfer of an undertaking, reg.3 ensures that the employees who are assigned to the transferring entity will transfer to the new service provider, or purchaser of the business, automatically, as this XpertHR “how to” guidance explains,What is a service provision change under the TUPE Regulations 2006? XpertHR answers this frequently asked question on TUPE.Service provision changes: case law Precedent-setting cases from the EAT and appellate courts relating to service provision changes, reported on XpertHR.
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