22 August 2016
TUPE: what constitutes an ‘organised grouping of employees’
A service provision change under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) takes place when, immediately before the transfer, there is an 'organised grouping of employees' situated in Great Britain which has as its principal purpose the carrying out of the relevant activities on behalf of the client. Case law on this issue illustrates that a somewhat restrictive interpretation is being applied to this term.
In Argyll Coastal Services v Sterling and others, the Employment Appeal Tribunal (EAT) interpreted the phrase 'organised grouping of employees' as connoting 'a number of employees which is less than the whole of the transferor's entire workforce, deliberately organised for the purpose of carrying out the activities required by the particular client contract and who work together as a team'. In Eddie Stobart Limited v Moreman and others, the EAT held that an organised grouping will only exist where the employees in question are organised by reference to the provision of services to the relevant client. In Seawell Limited v Ceva Freight (UK) and another, the EAT ruled that although a single employee can be an organised grouping of employees for the purposes of a service provision change under TUPE, the fact that an employee works solely on a contract for a client is not sufficient in itself to qualify. There must be evidence that the employer specifically formed the grouping to carry out the work.
In a further case on the interpretation and application of the service provision regulations in TUPE (Amaryllis Limited v McLeod and Others), the EAT found that the Employment Tribunal (ET) had made errors in approach in relying on the work carried out over a number of years by the department in question of the transferor's business rather than on the work carried out under its contract with the relevant client immediately prior to the transfer.
Millbrook Furnishings Limited has been in business for many years and first held a contract with the Ministry of Defence (MoD) for the renovation of upholstered wood and metal furniture more than 50 years ago. Between 2003 and 2008, however, Amaryllis Limited secured a contract with the MoD which included the supply of new furniture as well as furniture renovation work. During that period, Amaryllis subcontracted the majority of the renovation work to Millbrook. In 2008, Millbrook was again contracted to carry out furniture renovation work for the MoD, until December 2012 when contracts were awarded to four contractors, which included Millbrook and Amaryllis, under a framework agreement. In early 2014, the furniture renovation contract was retendered. On this occasion, Millbrook was unsuccessful and the work went to Amaryllis.
The ET held that there had been a service provision change under TUPE. The department at Millbrook in which the claimants worked had originally been set up for the purpose of servicing the MoD's contract for furniture renovation and had done so for many years on a continuous basis. In the ET's view, it had not 'morphed' from a department dedicated principally to servicing the MoD's contracts into one that existed to service the needs of all customers. The MoD continued to be the department's largest customer and the relevant employees spent almost 70 per cent of their time working on the MoD contract.
Amaryllis appealed against the ET's decision and won. The EAT reiterated that when determining whether or not there has been a transfer under TUPE by way of a service provision change, it is not sufficient to establish that a number of employees carry out significant work for a particular client. The question that must be addressed is whether, immediately before the transfer, there exists a grouping of employees which was organised for the principal purpose of carrying out the activities concerned on behalf of the particular client. The ET had erred in taking a historical view of the work carried out by the furniture renovation department. Furthermore, between 2003 and 2008, this was carried out for Amaryllis, not the MoD, indicating that the ET had focused on the continuing nature of the work itself rather than the organisation of work under a specific contract for a particular client.
In the light of the EAT's findings, the ET's decision was set aside.
Says employment partner, Jo Davis: "If you are involved in the transfer of a business or lose or secure a contract for service provision, we can provide advice."
To speak with Jo, call 01753 279029 or email email@example.com.