No, held the Employment Appeal Tribunal "EAT" in BT Managed Services v Edwards (1) and Ericsson (2). If the employee plays no part in the business being transferred and will never do so because of ill-health, he is not part ofthe 'organised grouping' that transfers to the new service provider.
Irwin Mitchell represented Mr Edwards who was in receipt of permanent health insurance "PHI" and had been absent from work due to severe ill health for over 5 years. Ericsson maintained that Mr Edwards had not been transferred following a service provision change and he brought proceedings against it because BT alleged that he hod transferred and threatened to stop his PHI payments following the transfer.
Mr Edwards was a member of a team dedicated to domestic networks which had its own structure, managers and admin staff. He was originally employed by Orange, but was transferred to BT following Orange's decision to outsource this work.
Mr Edwards became ill in 2006 and lost worked in 2008. Although there was no prospect of him returning to work, he remained on employee and received PHI payments. His PHI cover lasted for years but his contract provided that he was entitled to be paid a salary until retirement.
As a result of a re-tender, BT lost the contract and in June 2013 the work transferred to Ericsson. It was accepted that there was a service provision change covered by TUPE. Ericsson argued however that Mr Edwards did not transfer because he did not contribute to the economic activity of the transferring team and was not therefore part of the 'organised grouping' providing the services immediately before the transfer. BT argued that he had transferred and that the liability to pay Mr Edwards had also transferred. At this point, Mr Edwards was 59 years old.
A service provision change will be caught by the TUPE provisions if immediately before the transfer, there is an organised grouping of employees which has its principal purpose the carrying out of the activities being transferred and it is anticipated that these activities will continue post transfer.
Employees who transfer are entitled to continue to benefit from their contractual terms and conditions (aport from those which relate to benefits under on occupational pension scheme).
Employment tribunal decision
The ET said that Mr Edwards had not transferred because he did not contribute to the economic activity which had transferred to Ericsson. It said that he had not been part of the assigned group since 2010 when BT decided that he would not be fit for any work but would remain "on the books" to enable him to benefit from his contractual entitlement to PHI. As a result, he was not assigned to any part of the business.
BT appealed and argued that if Mr Edwards had been fit, he would have been required to work for the transferred team and was still part of the organised grouping.
The EAT agreed that Mr Edwards had not transferred to Ericsson and that the organised grouping of employees is defined by reference to the economic activity being pursued. Accordingly, "an employee who plays no part in these activities and will never do so is not assigned to that grouping". The fact that BT continued to treat Mr Edwards as an employee for administrative purposes was insufficient.
Will this decision affect other employees who are absent at the date of the transfer?
This decision does not mean that all employees who are absent from work at the date of a TU PE transfer will be excluded from the group of transferring employees. It has already been established that if the absence is temporary (as would be the case where the employee is on family related leave or in most cases of sickness absence) then the employee will transfer if, but for their absence, he/she would be required to work in the organised grouping. This principle does not apply, however, to situations where the employee does not and will never work.
So what does this decision mean for employers and those involved in TUPE transfers?
In the run up to a potential transfer, identify any employees who are absent from the business and find out why. If any are permanently unable to work they are unlikely to transfer, so the transferor employer will be left with them following the transfer. For those likely to inherit staff under TUPE, additional questions could be asked about employees who are off on long term sick, to establish whether the absence is permanent, in which case the transferee may avoid inheriting them.