TUPE service provision changes – which employees transfer?

Eddie Stobart v Moreman, an important case in TUPE service provision changes. Photo: David Bagnall/REX
Eddie Stobart v Moreman, an important case in TUPE service provision changes. Photo: David Bagnall/REX

Determining whether or not TUPE applies to an outsourcing or insourcing situation can be a headache for employers. Linda Glover explains which employees transfer in a service provision change.

The conditions for a service provision change require, among other things, an organised grouping of employees whose principal purpose is carrying out the relevant activities on behalf of the client. Where the conditions are met, only those employees assigned to the organised grouping will transfer, but what does that mean?

Which employees are assigned?

Depending on the operational set up, ascertaining which employees are assigned to the organised grouping is a straightforward matter in some cases.

Where employees undertake work for more than one client, or service more than one contract, this can be problematic, and percentages alone are not determinative.

Guidance from the Department for Business Innovation and Skills says that, for there to be an organised grouping, employees should be “essentially dedicated” to carrying out the activities that are to transfer. This provides some clarity, but each situation requires careful examination.

In the case of Eddie Stobart Ltd v Moreman and Others the Employment Appeal Tribunal (EAT) held that it is insufficient for employees to carry out the majority of their work for a particular client; they must be organised by reference to the client’s requirements and be identifiable as members of that client’s team.

That was similarly the case in Seawell Ltd v Ceva Freight (UK) Ltd and another, where an employee was found not to be assigned to the work that was taken back inhouse by the client. Even though the employee spent all his time working for that client, he worked as part of a team whose principal purpose was to service a variety of clients.

Can employees be assigned artificially?

The potential for being left with employees on the loss of a contract can tempt employers to artificially assign or reassign staff in anticipation of a transfer in order to ensure the transfer and avoid redundancy costs.

However, the recent case of London Borough of Hillingdon v Gormanley could make that more difficult. The company held maintenance and repair contracts with numerous clients, but from 2008 it worked solely for the London Borough of Hillingdon, holding a number of contracts.

When the last of the contracts with Hillingdon came to an end, Hillingdon refused to accept the company’s employees on a transfer, but the tribunal determined that TUPE did apply to them and to three employees who were also involved in running the company.

The EAT set that decision aside, determining that the tribunal had wrongly focused on the fact that the company had only one client immediately prior to the transfer, without taking into account the fact that this was simply the prevailing circumstances at the time.

To properly determine the question of assignment, the tribunal should have considered the company’s organisational structure – in particular, how it organised its work when it had more clients, and also the employees’ roles within the structure and their contractual duties.

The financial implications of successful TUPE-related claims can be high and these cases emphasise the need for careful assessment of all relevant circumstances in determining whether or not the conditions for a service provision transfer are met.

Public-sector transfers are assisted by a policy statement from the Cabinet Office providing that, where TUPE does not apply to a transfer, the principles of TUPE should nevertheless be followed.

Linda Glover

About Linda Glover

Linda Glover is a Senior Associate in Employment & Pensions at Hill Dickinson LLP.
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