The Employment Appeal Tribunal (EAT) has held that a client’s instruction to a contractor to remove an employee from its services did not mean that the individual was not assigned to those services for the purposes of the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE). In Jakowlew v Nestor Primecare Services Limited (t/a Saga Care) and another UKEAT/0432/14, the employer had refused to comply with the client’s instruction, meaning that the individual concerned effectively continued to perform services for the client. Accordingly she was assigned to the organised grouping of employees providing services for the client at the point those services were taken over by the new provider.

Background

TUPE applies where there is a relevant transfer. A relevant transfer can be a traditional business transfer (ie a business sale) and/or a service provision change.

For a service provision change to occur under TUPE, a client must do one of the following:

  • Cease carrying out activities on its own behalf and assign them to a contractor;
  • Reassign activities from one contractor to another; or
  • Bring activities previously carried out by a contractor in-house.

In such circumstances, if there is an organised grouping of employees situated in Great Britain whose principal purpose is the carrying out of those activities on behalf of the client, TUPE operates to transfer the employment of the employees assigned to that organised grouping automatically to the new service provider.  

It is therefore important to consider whether a particular employee is assigned to the organised grouping of employees providing the relevant services. 

Facts

Ms Jakowlew was employed by Nestor Primecare Services Limited (trading as Saga Care) (Saga) as a care manager at its Enfield branch office. She worked principally on a contract with the London Borough of Enfield (Enfield). Saga’s contract with Enfield ended on 30 June 2013 and the services were taken over by a new contractor, Westminster Homecare Limited (Westminster), with effect from 1 July 2013.  

Prior to the transfer, there had been difficulties in the relationship between Ms Jakowlew and her manager. Following an incident that occurred in February 2013, Ms Jakowlew and two of her colleagues were suspended from work pending disciplinary proceedings. Saga delayed in taking action in respect of that incident.

The contract between Enfield and Saga contained a contractual provision giving Enfield the right to instruct Saga to remove any person from its services. That right was not to be exercised unreasonably or vexatiously by Enfield.  On 14 June 2013, Enfield wrote to Saga with an instruction to remove the three suspended employees from its services pursuant to its rights under the contract. Saga protested and objected to that instruction. There was some correspondence between Saga and Enfield, which culminated in Saga’s solicitor informing Enfield on 26 June 2013 that Saga was prepared to dispute the matter legally, on the basis that Enfield’s instruction was both unreasonable and vexatious.

At the same time, Saga took steps to deal with the outstanding disciplinary issues.  Ms Jakowlew attended a disciplinary hearing on 27 June 2013 and was issued with a written warning, which was subsequently confirmed in writing on 5 July 2013.  She was informed at the disciplinary hearing that her employment would transfer to Westminster on 1 July 2013.  

There was subsequently some debate between Saga and Westminster regarding whether Ms Jakowlew had transferred with the other employees under TUPE.  By the end of July 2013, Saga had accepted that Ms Jakowlew was not assigned to the organised grouping of its employees that had been providing services on behalf of Enfield immediately before the transfer. Saga’s Enfield office had closed by that stage and Ms Jakowlew was subsequently dismissed on grounds of redundancy in September 2013.

Ms Jakowlew brought claims of unfair dismissal against both Saga and Westminster. Her principal argument was that her employment had transferred to Westminster under TUPE. Both Saga and Westminster argued that no such transfer had taken place.

Employment tribunal decision

The employment judge identified that it was necessary to establish which part of the business Ms Jakowlew was assigned to immediately before the transfer. The judge confirmed that TUPE had to apply, whatever misunderstanding there may have been between the parties.  

The employment judge concluded that Ms Jakowlew “had been removed by Enfield Council from [the] service provision” by its letter of 19 June 2013. As a result, the judge concluded that Ms Jakowlew was “not employed in the organised grouping which carried out the Enfield Council contract and in those circumstances she did not transfer.” Ms Jakowlew “therefore remained at all material times an employee of” Saga. Ms Jakowlew appealed to the EAT.

EAT decision

The EAT concluded that the tribunal's decision was an error of law. The employment judge’s task was to concentrate on the action taken by the employer and to ask whether the employer required the employee to continue working in the organised grouping or would have done so but for their excusal from attendance immediately before the transfer. The judge had erred in law in ignoring what Saga did when it received Enfield’s instruction.

The EAT’s view was that it was plain that up to the transfer date, Saga did nothing to remove Ms Jakowlew from her assignment to the organised group of employees providing services on behalf of Enfield. While the contract enabled Enfield to give an instruction to Saga, it did not authorise Enfield to assign an employee itself. It was for Saga to decide what action to take. Saga protested to the instruction but it did nothing to remove Ms Jakowlew from the provision of those services. 

It had been argued that the effect of Ms Jakowlew’s suspension from work would be to remove her from the organised grouping of employees. The EAT observed that, in its view, suspension should be treated no differently from holiday, study leave or sickness absence.  The key feature was that at the end of any period of suspension, the employee - barring dismissal or demotion - would return to the group in which she had worked previously. Suspension therefore could not amount to a reassignment.

Accordingly, the EAT was satisfied that only one outcome was possible if the correct legal test was applied. Ms Jakowlew remained assigned to the grouping of employees that transferred to Westminster on 1 July 2013.  The appeal was therefore allowed.

Comment

This case had very similar facts to an earlier case decided by the EAT (Robert Sage Limited (t/a Prestige Nursing Care Limited) v O’Connell and others UKEAT/0336/13 (Robert Sage)). However there was one crucial difference; specifically the employer in Robert Sage had acted on the client’s instructions and reassigned the employee concerned.  

The EAT’s decision in Jakowlew clarifies that the employer must act on the client’s instruction in order for it to have the effect of removing the employee from the relevant organised grouping of employees. On its own, an instruction from the client to do so will not be enough.

The EAT in Robert Sage had left open the argument that a suspended employee is not assigned to the organised grouping of employees. While the EAT’s comments on this point are not binding, it was clear that the EAT regarded a suspended employee as falling within the same category as those on holiday or sick leave and the decision therefore casts doubt on the likely success of such an argument in future cases.  

Saga’s non-compliance with Enfield’s instruction would almost certainly entitle Enfield to bring a breach of contract claim against Saga. However the value of such a claim would depend on the loss sustained by Enfield and, in particular, whether Enfield was liable to indemnify Westminster under the terms of the outsourcing agreement for the costs of Ms Jakowlew’s employment (including termination costs). In the absence of such a provision, it is unlikely that Enfield would be able to demonstrate that it had suffered a loss as a result of Saga’s breach. This decision serves as a useful reminder of the importance of carefully drafting any outsourcing agreement to include provisions dealing with what will happen both at the commencement of the services and on termination, as well as appropriate indemnities.