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TUPE: A change of emphasis

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Isn’t it always the way with employment law? Just when you think you’ve got to grips with some of the more complex issues, the Employment Appeals Tribunal (EAT) goes and moves the goalposts and the game changes!
 
The Transfer of Undertakings (Protection of Employment) Regulations 2006 (“TUPE”) have a reputation for being complex and often counter-intuitive. Many have struggled over the years to make sense of the relatively brief, but at times ambiguous, provisions of TUPE and narrowly distinguished judgments have made broad principles difficult to establish and follow. 33 years after it was introduced, a good deal of businesses still struggle to make sense of when TUPE applies and the impact it can have upon your operations.
 
No doubt driven by the changing political breeze, in recent times the courts and tribunals have increasingly entertained the prospect that TUPE may not apply to every contract re-tendering situation and arguments against its application, focussed upon the precise wording of the Regulations, have found greater favour.
 
Although in many ways this has been to the benefit of those businesses that enjoy access to specialist advisers who understand and can take advantage of the changing mood of the courts and tribunals, it has also disrupted several of the broad principles that have been relied upon by many to make sense of the Regulations and their application.
 
The concept of what constitutes an ‘organised grouping’ for the purposes of a Service Provision Change (SPC) under Regulation 3 (1) (6) is a notable area of development.
 
Regulation 3 (3)(a) (1) requires that there is an ‘organised grouping of employees’ which has as its principle purpose the carrying out of the relevant activities, immediately before the SPC. A number of recent cases have challenged what exactly is meant by the words ‘organised grouping’, and it may not surprise you to hear that it is not what most might previously have thought!
 
A few of these cases are particularly worth noting and suggest how closely the courts and tribunals are now reviewing the facts presented to them as well as the precise wording of the Regulations; 
 
•    In Eddie Stobart v Moreman and others [2012] the EAT held that the concept of an organised grouping requires "deliberate planning or intent" by the employer. Employees must be organised by the employer by reference to the requirements of the particular client. The employees in this case spent the majority of their time working for a particular client, but that was simply a consequence of the fact that they were organised according to the shift they worked, not according to the requirements of that client.

•    In Seawell Ltd v Ceva Freight (UK) Ltd [2013] the EAT overturned a tribunal decision that there was a service provision change when a client insourced services which it had previously outsourced. The EAT concluded that, whilst a single employee can amount to an ‘organised grouping’, that does not mean that an employee who spends all of their time on work for a particular client is necessarily an organised grouping simply because of time spent. The case turned on the matter of whether there was any genuine organisation or deliberate designation by the employer. On the facts, the employee in question was not deliberately organised for the purposes of the client's contract. Further, the employee worked as part of a team and that teams’ principal purpose was not the client's contract. The EAT noted that an organised grouping signifies a deliberate "putting together" of a group of employees for the purpose of a client's work, it was not a matter of "happenstance" .

•    In Costain Ltd v Armitage and ERH [2014] the EAT held that employment tribunals are first required to define the organised grouping before then determining whether relevant employees are assigned to the grouping identified. It is not appropriate to conflate these two issues. In this case, the EAT found that the tribunal placed too much emphasis on the percentage estimates of time spent by relevant employees on each contract, restating Seawell and that the concept of an organised grouping implies an element of conscious organisation by the employer of its employees. Percentage of time spent on a particular contract, previously the primary consideration in determining assignment, is no more than a relevant factor to be taken into consideration.
 
In essence, for an organised grouping to arise and for TUPE to apply, employees must be deliberately organised according to the client’s requirements (to satisfy regulation 3(3)(a)(i) of TUPE). If the employees are not organised having regard to the client’s requirements, then they may not be in scope to transfer. The amount of time that employees spend working for a particular client is then relevant to whether they are assigned to the organised grouping. 
 
Unsettling though they are, these recent arguments are undoubtedly helpful to businesses seeking to avoid the application of TUPE and offer greater scope for managing a situation. More than ever before, obtaining specialist advice at an early stage can make all the difference.
 
If you would like to test your understanding of TUPE and perhaps learn a little more, join us for our Webinar on Thursday 22 July, book now using our online booking form 

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