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Employees must be part of a "deliberate" grouping to transfer under TUPE, tribunal says

Out-Law News | 21 May 2012 | 3:21 pm | 2 min. read

Individuals who spend all their time working for a single client will not necessarily form part of an "organised grouping of employees" whose employment will transfer under the Transfer of Undertakings (Protection of Employment) (TUPE) Regulations when their work is taken back in-house, the Employment Appeal Tribunal (EAT) has said.

In order to make up an "organised grouping" for the purposes of TUPE the group of employees – which may be made up of a single employee only - has to be deliberately organised and not merely "organised by happenstance", Lady Smith said in her decision. The ruling overturned that of the original employment tribunal, which had found that the contract of employment of a worker with a logistics company, who spent all his time on work for oilfield services company Seawell, transferred to that company when it took the work in house.

TUPE protects the rights of employees whose companies are taken over by new owners. It was expanded in 2006 to govern situations where work is outsourced, brought back in-house or the service provider is changed.

Employment law expert Jill Turner of Pinsent Masons, the law firm behind Out-Law.com, said that the decision further clarified the often complex issue of how to identify when there was an organised grouping of employees for the purposes of the regulations.

"Lady Smith is clear that the organised grouping must be a 'deliberate' grouping of those individuals - or one individual – for the purpose of carrying out those activities," said Turner, who represented Seawell at the original Employment Tribunal in the case. "There will now be greater certainty for business with regard to when this will apply as this 'deliberate' organisation is quite a high bar for employers to achieve. This will mean that we will have greater certainty in when individuals TUPE to a new employer following a contract for the provision of service."

The worker, Craig Moffat, was co-ordinator of the logistics and freight forwarding arrangements provided by his employer, Ceva Freight, for Seawell. Moffat spent 100% of his time on the Seawell contract, while other employees spent smaller percentages of their time on the contract and the rest of their time on other clients of Ceva's. On this basis, an employment tribunal said that Moffat's employment transferred to Seawell when they took the work back in house either because he was himself an "organised grouping" for the purposes of TUPE or was automatically assigned to such a grouping by virtue of his spending 100% of his time on the Seawell contract.

However, Lady Smith said that the tribunal had applied the "wrong test" when considering whether Moffat formed part of an "organised grouping". Although TUPE specifically provides for the situation where a single employee counts as a grouping, the fact that one employee spent all his time working for a single client did not necessarily denote such a grouping, particularly as Seawell took back the whole of the work that Ceva had carried out on its behalf - not just the work carried out by Moffat.

"The 'activities concerned' [for the purposes of TUPE] are whatever activities are, after the change, carried out by the client on his own behalf instead of by the contractor," she said. "Accordingly, the 'activities concerned' in this case comprised the entirety of the work carried out by Mr Moffat [and other Ceva employees]. Mr Moffat was not carrying out 'the activities concerned' albeit that he was carrying out part of them... the Tribunal in effect concluded that because Mr Moffat spent 100% of his time on Seawell work, he carried out 100% of that work and that that is illogical."

Ceva did create deliberate groupings of its employees, splitting them into those performing "outbound" and "inbound" tasks. Moffat's role fell within the "outbound" group, but the "principle purpose" of that group was not to provide services solely to Seawell, Lady Smith said. As Moffat lost his job when Seawell took the work back in house, the case was sent back to the original employment tribunal to determine appropriate compensation for his unfair dismissal by Ceva.

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