Gavin Macgregor, an employment lawyer at Loch Employment Law takes inspiration from the Bard as he considers a TUPE dilemma…
Q: We’re about to take on a new contract, that we won at tender. However, the company that lost the tender has transferred an employee over to the contract we’re taking on. Does this mean we have to accept them under TUPE?
When considering service provision changes, readers will be familiar with the clichéd Shakespearean pun: “TUPE or not TUPE” from Hamlet. However, in the above dilemma, perhaps the following words from the bard himself are more appropriate to capture the ambiguity that often accompanies TUPE transfers: “Until I know this sure uncertainty, I’ll entertain the offered fallacy.”
When navigating through the complex minefield of TUPE Regulations, HR practitioners often enter confusing territory.
Successfully winning a tender for the provision of services from a competitor is naturally a cause for optimism within any business. Nevertheless, organisations must be cautious in order to facilitate the transition of services to the client as smoothly as possible and also be mindful of the potential TUPE implications for staff.
The TUPE process
Part of the TUPE process involves the exchange of information between the transferor (i.e the business losing the contract) and the transferee (the business taking on the contract).
The informing and consultation phase requires a degree of cooperation between both the transferee and transferor. When this involves two competitors, the relationship can be frosty to say the least.
In the above example, the business acknowledges that a TUPE service provision change applies and is are aware of the obligation to take on employees from the transferor.
The transferor who previously supplied the services may now be choosing to cynically move a particularly troublesome employee into the transferring department in order to offload that individual onto your company.
The employee may be a poor performer or unreliable and disruptive. On the other hand, the transferee may no longer have sufficient work to justify keeping that person in their previous department and has chosen to manufacture a TUPE transfer of the employee, rather than conduct a redundancy consultation.
Questions to ask
Whatever the motive underlying this behaviour, several questions require to be answered in order to determine whether or not your business must accept the employee under a TUPE transfer.
Which Employees transfer?
Staff employed by the transferor “immediately before the transfer” of the contract would be automatically transferred to the transferee on their existing terms and conditions. This has been restrictively interpreted to mean “at the very moment before the transfer”.
When considering the application of TUPE to service provision changes, it is important to clearly define the “organised grouping of employees” before assessing whether an employee has consciously been assigned to that group.
The case of Botzen v Rolterdamsdhe and Duncan Webb Offset (Maidstone) Limited v. Cooper held that those employees who have been “assigned” to the undertaking should be transferred. Sometimes it is obvious who is assigned to a particular undertaking but that is not always the case because employees may work for several different clients and across various departments.
A number of factors will determine who has been assigned to the operation transferring. These include:
- the amount of time spent in each of the operations by the employee;
- the amount of value given to each operation by the employee;
- the terms of the employment contract (e.g duties and place of work); and
- how the employee’s salary is allocated between different departments parts of the overall operation.
Some cases have suggested applying a ‘percentage test’ to determine what proportion of an employee’s duties are spent on the undertaking. However, that test is only a useful guide and is not determinative and the transferor must consider the overall picture.
The Department for Business Innovation and Skills guidance suggests that, for there to be an organised grouping, employees should be “essentially dedicated” to carrying out the activities that are transferring.
In Eddie Stobart Ltd v Moreman and Others the Employment Appeal Tribunal (EAT) held that it is insufficient for employees simply to carry out the ‘majority’ of their work for a particular client. Instead, they must be organised by reference to the client’s requirements and be identifiable as members of that client’s team.
The ruling of the EATs in Costain Ltd v Armitage and ERH (Costain) and London Borough of Hillingdon v Gormanley (Hillingdon) have highlighted that, for an employee to be eligible to transfer under TUPE where there has been a service provision change, the employee must have consciously been put into a group to service the contract which is to be transferred. It is not sufficient that the employee simply happens to spend the majority of their time delivering that contract.
When does the transfer take place?
The European Court of Justice has found in Celtec v Astley that the date of transfer is the particular point in time when responsibility for carrying on the business of the undertaking passes. Therefore, the business must take on the employees who are assigned to the undertaking on the date of the transfer of the contract from the competitor.
Do we need to accept this employee as part of the transfer?
When a business loses a contract, it may be tempted to artificially assign or reassign staff prior to a transfer in order to avoid redundancy costs. However, if a transferee is concerned that the transferor is offloading employees to them via a transfer it may be able to rely on the case of London Borough of Hillingdon v Gormanley.
In this instance, the company had various maintenance and repair contracts with clients. From 2008 it worked solely for the London Borough of Hillingdon until that arrangement terminated. When the final contract ended, Hillingdon refused to take in the company’s employees under TUPE. A tribunal initially concluded that three employees who were also involved in running the company had the right to transfer.
Yet, the EAT later determined that the Tribunal had wrongly placed emphasis on the fact that the company only had one client immediately prior to the transfer. Instead, a Tribunal must consider how the service was organised when it had multiple clients and also how the employees were assigned within that structure to perform their contractual duties.
Ultimately, if the employee has been properly assigned to the department that will transfer and they genuinely perform most of their duties in that department, the employee will fall into that organised group.
Unfortunately for the transferee, they will therefore be obliged to accept the individual as part of the TUPE transfer even though that individual was only assigned during the three months prior to the transfer.
Of course, this dilemma can be avoided when the sale agreement documents are detailed enough to specify which employees will transfer to give a measure of certainty to the parties.
A transferee should request as much information as possible from the current service provider and try to ascertain which employees (if any) will potentially transfer. That may include the employees’ contracts, job descriptions, shift patterns, and departmental structures. You may also ask to interview the relevant employees to explore information about how their duties were assigned and how they spend their time on a weekly basis.
If you suspect a competitor is attempting to artificially assign employees to transfer, then request information to help determine whether there has been a conscious decision to organise the employees to service that particular client.
If there is any doubt the transferee should always ask for more information. Rather appropriately, Shakespeare’s words from All’s Well That Ends Well spring to mind: “I will be a fool in question, hoping to be the wiser by your answer…”