Eddie Stobart Ltd v Moreman and others
Eddie Stobart Ltd (Stobart) operated a meat warehouse. Originally, the company had contracts with five suppliers at the site, but by 2009 only two remained: Forza, which supplied meat to Asda; and Vion, which supplied meat to various supermarkets. Retailers had various arrangements for when orders would be placed, resulting in night-shift employees working primarily on the Forza contract and day-shift workers working primarily on the Vion contract.
In 2009, the site closed and it was Stobart’s belief that Vion arranged for the work to be taken over by another logistics business, FJG Logistics Ltd (FJG). Stobart took the view that this was a service provision change under The Transfer of Undertakings (Protection of Employment) Regulations (TUPE), as the work in question had been carried out by an organised grouping of employees whose principal purpose was to carry out the work required by the Vion contract and the contracts of those employees transferred to FJG.
Stobart identified employees who spent 50% or more of their time performing Vion work and notified them that they would transfer. FJG did not accept that there had been a service provision change. The employees brought tribunal claims and at a pre-hearing review the employment judge determined whether or not to strike out the tribunal claims.
The employment tribunal held that there had been no service provision change from Stobart to FJG. He said that the fact that the employees spent the majority, or indeed all, of their time on a particular task for a particular customer was not in itself evidence of an organised grouping of employees. The organisation of work was not by reference to the customers, but by reference to the shift system. The fact that many of the staff found themselves working exclusively on work necessitated by the Vion contract was a function of the time of day that Vion’s customers chose to place their orders, not of the organisation of the work so that there were teams dedicated to that contract. The employees could not say that they regarded themselves as being assigned to one contract. There was no reasonable prospect of success in establishing the existence of an organised grouping of employees.
The Employment Appeal Tribunal (EAT) agreed. The requirement of an organised grouping necessarily connotes that the employees be organised by reference to the requirements of the client in question. It does not apply to a situation where a group of employees may, without any deliberate intent or planning, be found to be working mostly on tasks that benefit a particular client. If the grouping does not reflect any existing organisational unit, there are liable to be real practical difficulties in identifying which employees belong to it. The EAT considered it important that, on a transfer, employees should know where they stand.
This is a surprising decision. The Government’s guidance observes that the “organised grouping” condition is meant to confine TUPE to situations where the outgoing service provider has in place a team of employees “essentially dedicated” to carrying out the activities that are to transfer, which would suggest that the mere fact of actually doing the work in question is sufficient.
However, this case clearly states that something more is needed, although it is not entirely clear what. There is some implication that the employees must know that they are working on, for example, “contract A”. This will remove TUPE protection for a lot of employees in the logistics industry, where it is rare to have identified, client-dedicated teams.
The most important practical implication is that employers that have employees working on contracts where the expectation is that, if the contract goes elsewhere, the employees would transfer with it should ensure that there is a clear organised grouping of employees on that contract, for example by designating and referring to them as “contract A workers” or in some way identifying them as a “team”.
Mary Clarke, partner, DLA Piper
Practical guidance from XpertHR on TUPE transfers