Determining which employees are assigned to an undertaking or organised grouping of employees for the purposes of TUPE.
Whenever there is a TUPE transfer, one question high on the agenda is “Which employees will transfer?” At first blush, the legal test seems straightforward enough: employees of the transferor who are assigned to the undertaking or organised grouping of employees that is subject to the relevant transfer will transfer to the transferee. But how do you actually determine which employees are “assigned” for these purposes?
The TUPE Regulations do not provide much assistance. They simply state that “assigned” means assigned other than on a temporary basis. However, recent case law in the context of service provision changes has helped to provide some guidance on this important question.
The cases establish a two-stage test. The first task is to define the organised grouping of employees. In a previous edition of TUPEnews, we reported on case law clarifying the meaning of “organised grouping”. Essentially, there must be an element of conscious organisation by the employer of its employees to carry out the activities in question – i.e., there must be a deliberate putting together of a group of employees to do the work, rather than such a group evolving as a matter of happenstance.
The second task is to determine whether a particular employee is assigned to that organised grouping. It can be tempting to apply a simple “time spent” test and conclude that all employees spending 50% or more of their time working on the services being transferred are sufficiently assigned and will transfer with the services. However, whilst the amount of time that an employee spends working on the services in question is a relevant factor, it is by no means conclusive. Instead, a close analysis of all the circumstances is required.
One recent case (London Borough of Hillingdon v Gormanley) demonstrates that in deciding whether employees are assigned to an organised grouping of employees it is necessary to consider the way the organisation is structured and the role of the employees (including their contractual obligations) within the organisation.
The case involved a property maintenance company. Among its employees were three members of the Gormanley family who held managerial roles within the company. The company initially carried out property maintenance work for a small number of councils and housing trusts, but after a time its sole client was the London Borough of Hillingdon. As a result, the family members worked more or less exclusively on services for the council.
In 2012, the council decided to terminate its arrangements with the company and undertake the maintenance work itself. The Employment Tribunal concluded that there was an organised grouping of employees whose principal purpose was carrying out property maintenance work for the council, that there was a service provision change and that the family members’ employment transferred to the council under TUPE.
On appeal, the EAT decided that the family members were not assigned to the organised grouping of employees. It was not sufficient that they worked almost exclusively on services for the council: this was mere happenstance given how the business had developed from having multiple clients to having only one, and a fuller analysis was required.
In particular, it was important to consider the way in which the company was structured and the role of each family member within the organisation. Evidence of an employee’s role (likely to be found in their contract of employment or job description) will show what duties the employee could be called upon to perform as well as those which they are actually performing at a particular moment in time. Consideration should have been given to how the family members’ work would have been organised when the company had more than one client. This would indicate whether the family members were principally engaged to work for the council or whether they had wider duties.
This recent case highlights the fact that it will not always be easy to determine which employees are assigned to an organised grouping of employees. This might be good news for organisations planning to bring back in-house functions that are currently outsourced and also good news for service providers concerned about inheriting staff when they win new contracts. Unless the existing service provider can show both that it deliberately organised its employees into a team to provide the services and that each employee was deliberately assigned to that team, it may be difficult for that provider to argue that the employees will transfer under TUPE when the contract ends.
The case also highlights that the answer to the question “Which employees will transfer?” will usually be highly fact-specific and require a careful analysis of the particular circumstances in each case – jumping to a conclusion in this key area carries real commercial risks.