In a recent decision the Employment Appeal Tribunal identified an additional hurdle for claimants which appears to have restricted the application of TUPE where there is a change of contractor providing services.
Since 2006 the Transfer of Undertakings (Protection of Employment) Regulations (TUPE) have applied where there is a "service provision change" (as well as the 'traditional' business transfer).
If TUPE applies, the contracts of employment of assigned employees and the employment liabilities under such contracts transfer from the outgoing employer (the transferor) to the in-coming employer (the transferee). Where TUPE applies there are also restrictions on changing the terms and conditions of employees and protection against dismissal in connection with the transfer.
It is therefore particularly important for companies which are tendering for service contracts to know whether or not TUPE will apply. Where TUPE applies, an in-coming employer may inherit significant liabilities and this will obviously impact on the price they charge for providing the services.
It is broadly understood that a service provision change occurs where a client outsources its services, changes a contractor providing it with services or when services are brought back in-house from a contractor.
However, the position is more complex because, for there to be a service provision change under TUPE, certain conditions must apply. One of these is that there must be:
"an organised grouping of employees situated in Great Britain which has as its principal purpose the carrying out of activities concerned on behalf of the client ."
The claimants were employed by Eddie Stobart Ltd (ES) at a depot in Nottinghamshire which operated a shift system. ES was providing logistics services to two clients from the depot. Due to client delivery needs, employees working during the day primarily provided services to one client, Vion, and employees working during the night for the other client.
ES claimed that the Vion contract was awarded to FJG Logistics Ltd (FJG) (this was disputed by FJG but for the purposes of deciding the preliminary issue set out below, it was accepted that the Vion work was being done by FJG). ES regarded the dayshift employees as assigned to the contract and that their employment had therefore transferred to FJG. FJG refused to accept that there had been a TUPE transfer and ES dismissed the relevant employees.
The claimants brought employment tribunal claims including unfair dismissal and failure to inform and consult against ES and/or FJG. FJG applied to have the claims stuck out arguing that the employees had not been "assigned" to any particular client of ES, in particular Vion.
The tribunal struck out the claims against FJG, but on the basis that the claimants were not an organised grouping of employees; they spent the majority of their time working on the Vion contract because of the way shift patterns were organised, not because they were a dedicated team whose principal purpose was to carry out work for Vion.
ES appealed arguing that to satisfy the "organised grouping" test, it was sufficient to show that the claimants worked mostly for Vion; it was not necessary for the employees to be organised as members of a "Vion team".
The Employment Appeal Tribunal (EAT) dismissed the appeal. It pointed out that the issues of whether there was an organised grouping of employees and if so, whether any of the claimants were assigned to that grouping were two distinct questions.
To satisfy the "organised grouping" test it was necessary to show more than the fact that a group of employees carried out the activities for the client in question as the main part of their day-to-day work. It was necessary to show that the employees were actually organised, in some sense, by reference to the requirements of the client. The judge said:
".The paradigm of an "organised grouping" is indeed the case where employees are organised as "the [Client A] team", though no doubt the definition could in principle be satisfied in cases where the identification is less explicit."
The EAT's decision has provided useful guidance for employment tribunals in assessing whether or not there is a service provision change under TUPE. Firstly, a tribunal must consider if the employees are organised into an organised grouping for an identifiable client. Only then should the tribunal go on to look at the amount of time employees spend working for a particular client in order to decide whether or not they are assigned to the organised grouping.
This is helpful for employers in certain sectors such as logistics as the guidance sets the bar significantly higher then might have been previously thought: organisations that do not have clearly dedicated teams working for clients may breathe a sigh of relief! At least for now.