TUPE service provision change: tribunal’s reasoning flawed on assigning manager to organised grouping of employees

In DLA Piper’s latest case report, the Employment Appeal Tribunal (EAT) found that an employment tribunal’s judgment was flawed when it held that an employee of a transferor was assigned to the organised group of employees that were reassigned to the transferee on a service provision change.

Costain Ltd v Armitage and another EAT/0048/14

Facts

The claimant was employed as a project engineer for ERH Communications Ltd from 2007. In 2012, the claimant was promoted to project manager and his revised duties included responsibility for the management of projects undertaken by ERH, including additional instructions arising out of framework or maintenance contracts.

ERH was the contractor for the provision of services for the Welsh Assembly Government on the “All Wales regional maintenance contract for road network communications and tunnel systems” (AWRMC). In 2008, ERH also won a separate ancillary contract with the Welsh Assembly that was a framework agreement under which ERH would be required to bid to secure works under any ancillary contracts available.

Service provision change under TUPE

The AWRMC came up for tender in June 2012 and was awarded to Costain Ltd. A service provision change in respect of the AWRMC took place on 1 February 2013, but the ancillary contract did not form part of the transfer.

ERH asserted that the claimant spent 80% of his time on the AWRMC and his employment would transfer to Costain under TUPE. The claimant felt that ERH’s assessment of the percentage of time he spent on the AWRMC failed to take into account his responsibilities following his promotion. In addition, Costain contested whether or not TUPE applied to the claimant on the basis that he spent most of his time on one-off ancillary projects as opposed to the AWRMC. ERH submitted timesheets for the final three months leading up to the TUPE transfer, which showed that the claimant had spent 67% of his time on the AWRMC, which included time absent due to sickness and holiday. Costain asserted that the claimant had not been assigned to the AWRMC and therefore he would not TUPE transfer to Costain.

Employment tribunal claim

The claimant presented a number of claims against both ERH and Costain. Following a preliminary hearing, the tribunal held that the claimant was assigned to the organised group of employees that TUPE-transferred from ERH to Costain and his employment automatically transferred to Costain. Costain appealed to the EAT.

EAT decision

The EAT upheld Costain’s appeal and remitted the case to a differently constituted tribunal for fresh consideration. The EAT found that the tribunal failed to demonstrate within its judgment that it had applied the necessary two-stage test of:

• defining the organised grouping of employees; and
• determining whether or not the claimant had been assigned to that organised grouping.

In the EAT’s opinion, the tribunal’s conclusion was too broad and did not take into account the distinction between the AWRMC and other works carried out under the ancillary framework agreement. This was an important distinction given that works carried out under the ancillary framework agreement did not transfer to Costain.

It was a central element of Costain’s case that the claimant had been a project manager who became engaged on particular projects on a troubleshooting basis. Costain argued that, just because the claimant might have been more heavily involved in the AWRMC in the lead up to the TUPE transfer, this did not definitively demonstrate that he had been assigned to the organised grouping of employees. The EAT held that the reasons given in the tribunal’s judgment were inadequate to enable the parties to properly understand what conclusions were reached on central issues. Therefore, they could not know on which points they had won or lost.

Implications for employers

This case is a useful reminder that the percentage of time spent by an employee on the activities that will transfer under TUPE is not in itself determinative. Wider consideration needs to be given to other factors, which in this case should have included Costain’s argument that the claimant acted as a troubleshooter.

On a separate note, the EAT exercised its discretion to make a costs award against ERH in favour of Costain on the basis that ERH actively sought to resist the appeal. The EAT noted that while costs do not simply follow the event in the EAT, parties need to be alive to the fact that fees will generally be recoverable under the EAT rules, and that in this case it was appropriate to require ERH to pay costs in the sum of £1600 to Costain.