Q: I have just acquired a new customer. The employees of the old contractor came over to us under TUPE. The old contractor didn’t tell us about someone who was on long term sick and hasn’t been back for six years did he transfer over to us?
A: Jodie Hill, employment consultant at Lionshead Law replies…
This is a really interesting question and firstly it would be useful to consider when TUPE applies and then answer your query.
The Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) affects many businesses and in the current economic climate, it is important to understand TUPE and the effect it could have on your business.
A potential TUPE arises where there is a relevant transfer. A relevant transfer is either a business transfer or a service provision change. To help explain this further, TUPE can arise if the following scenarios apply:
- You are considering selling all or part of your business as a going concern. (A business transfer)
- You are purchasing a business. (A business transfer)
- You are outsourcing your cleaning contract, catering supplier or IT or other in- house service for the first time. (A service provision change)
- You are bringing previously outsourced services back in house. (A service provision change)
- You are considering changing service provider for any outsourced services. (A service provision change)
If any of these do apply then you should be aware of TUPE and its implications.
In brief, TUPE protects employment rights of all affected employees, as the employees of the outgoing employer automatically become employees of the incoming employer at the point of transfer. They carry with them their continuous service from the outgoing employer, and should continue to enjoy the same terms and conditions of employment with the incoming employer. The employees are also protected against dismissal in connection with the TUPE transfer.
In the question I am being asked, the TUPE situation is a service provision change, as you have taken over the contract from another contractor. However, there will only be a TUPE transfer under a service provision change if various conditions are met.
The conditions for a service provision change TUPE require, among other things, an organised grouping of employees whose principal purpose is carrying out the relevant activities on behalf of the client. Where the conditions are met, only those employees assigned to the organised grouping will transfer, but what does that mean?
Depending on the operational set up, ascertaining which employees are assigned to the organised grouping can be a straightforward matter in some cases.
Although what happens, as in your situation, when an employee has been absent from work on long term sick, could they be considered to be “assigned” to the organised grouping of employees for TUPE purposes, at the relevant time?
Interestingly, this matter was raised in the case of BT Managed Services Ltd v Edwards and another. In this case, the Employment Appeal Tribunal (EAT) found that an employee who had been off work for six years and had no prospect of returning to work was not “assigned” to an organised grouping for TUPE purposes.
The employee’s only connection with the grouping was administrative as he remained “on the books” so that he could continue to receive permanent health insurance. The EAT distinguished this case from scenarios where employees are on maternity leave or long-term sick at the time of the TUPE transfer. In those cases, the absence could be temporary, depending on the facts of the case.
In answer to the question, the key is whether the employee is permanently absent from work (as in the case mentioned above), or if the employee may, at some point in the future, return to work and carry out their activities for the business. You need to carry out further due diligence in this matter to ascertain the reality of the situation and whether the employee has any real prospect of returning to work or not.
If the absence is permanent and the employee will have no part in the performance of the activities going forward then it is unlikely they are assigned to the organised grouping of employees and therefore will not transfer under TUPE.
Prevention not cure
The presented scenario further highlights the importance of due diligence pre TUPE transfer.
As part of a TUPE process the outgoing employer must provide the potential incoming employer with specific information about the transferring employees. This is called employee liability information and this has to be provided not less than 28 days before the relevant transfer. It is crucial that incoming employers actively chase this information if it is not provided and also ask more searching questions about employees on long-term sick leave at the disclosure stage.
This will help ensure you are fully informed of the business you are seeking to take on as well as having a clear understanding about those who are absent on long-term sick leave and whether there is any expectation of a return to work. This should be carried out well in advance of any transfer to protect the business from any unexpected surprises.
Once due diligence is complete, before the transfer takes place, the incoming employer should seek indemnities from the outgoing employer to protect them in situations which may arise such as this.