Interesting Judgement on TUPE Transfers

It is now commonly understood that if a service providers’ contract with its client is terminated employees of the service provider engaged mainly or wholly to fulfil the contract are likely to transfer to the employment of the client under The Transfer of Undertakings (Protection of Employment) Regulations 1981 as amended (TUPE). Emma Wyatt, Employment Solicitor reviews the recent case of Seawell Ltd v Ceva Freight (UK) Ltd, in which the EAT considered whether the service provision change test was met where an employee spent all of his time working on a contract for a client.

TUPE applies to a “relevant transfer”.  This includes a transfer of a business where there is a transfer of an economic entity that retains its identity and a service provision change, where a client engages a contractor to do work on its behalf, reassigns such a contract or brings the work “in-house”.  One of the conditions is there must be “an organised grouping of employees situated in Great Britain which has as its principal purpose the carrying out the activities concerned on behalf of the client”.  The organised grouping of employees could be a single employee.

When TUPE applies, employment contracts of those employees assigned to the organised grouping of resources or employees that are the subject of the relevant transfer pass from the transferor to the transferee.

In the above case, Mr Moffat was employed by Ceva Freight (UK) Ltd as a logistics coordinator.  The workforce was organised into two distinct sections for inbound and outbound goods.  Mr Moffat was one of eight employees who worked in the outbound group.  He spent all of his time working on an account for Seawell Ltd.  The other seven employees spent either some or none of their time on this account.

Seawell decided to bring the work carried out by Ceva in-house.  Ceva stated that TUPE applied to Mr Moffat so his employment transferred to Seawell but Seawell disputed this.  Mr Moffat’s employment was terminated and he brought a claim of unfair dismissal against Ceva and Seawell.  The employment tribunal held that Mr Moffat had TUPE transferred from Ceva to Seawell and therefore Seawell were liable for his unfair dismissal.

Seawell appealed against the tribunal’s decision arguing that the tribunal had adopted the wrong test in concluding that Mr Moffat was an organised grouping because all the work he did was for Seawell.

The EAT upheld the appeal, finding that Mr Moffat was unfairly dismissed by Ceva.  The case was remitted to the employment tribunal to determine compensation.  The EAT agreed with Seawell that the tribunal had applied the wrong test in determining whether there was an organised grouping of employees.  The fact that TUPE provides that a single employee can be an organised grouping did not mean that an employee who spent of all their time working for a single client was an organised grouping.  The only deliberately organised grouping of employees at Ceva were the outbound and inbound groups of employees.  There was no evidence to support the notion that Ceva specifically formed a grouping consisting of Mr Moffat to carry out the Seawell work or that the outbound group was arranged in order to fulfil the Seawell contract.

For the purposes of TUPE the organised grouping of employees carry out the “activities concerned”.  This refers to the activities that are being carried out by the client on its own behalf instead of by the contractor.  Seawell took the entire amount of work that had previously been carried out by Ceva, not merely the aspects carried out by Mr Moffat.  The tribunal had reached an illogical conclusion that because Mr Moffat spent 100% of his time on the Seawell work, he therefore carried out 100% of that work.  This was incorrect.

The outbound group could not be said to have been carrying out activities on behalf of Seawell as its principal purpose.   Therefore the outbound grouping were not an organised group of employees for the purposes of TUPE.

This decision illustrates that although TUPE provides that a single employee can be an organised grouping of employees, this does not mean that an employee who works exclusively on one client’s contract will automatically satisfy the definition of an organised grouping of employees.

If you might be involved in the sale or acquisition of a business or have lost (or won) a contract for services, whether private or public, and might be affected by the TUPE regime you can contact Emma or any of the Employment Team on 02380 717717.

ENDS

This is for information purposes only and is no substitute for, and should not be interpreted as, legal advice.  All content was correct at the time of publishing and we cannot be held responsible for any changes that may invalidate this article.