The question of which employees are assigned to a service or part of a service that is changing hands can be a difficult one, particularly where businesses undertake work for more than one client or service more than one contract. A service provision change under TUPE requires there to be an organised grouping of employees whose principal purpose is carrying out the relevant activities on behalf of the client: where TUPE applies, only those employees assigned to the organised grouping will transfer to the new provider.
The Employment Appeal Tribunal in the recent case of London Borough of Hillingdon –v- Gormanley (UKEAT/0169/14/KN) examined the assignment of three managerial employees on a service provision change and determined that the way in which the company and the work is structured, and the employees’ roles and contractual duties within the structure, should also to be taken into account.
Here the employees were involved in both running the company and servicing its clients. Up until 2008 the company had contracts for maintenance and repair with a number of clients but from that time worked solely for the London Borough of Hillingdon. When the last of its contracts with Hillingdon came to an end the company asserted that its staff, including the claimants, would transfer to Hillingdon under TUPE, but Hillingdon asserted the opposite and refused to accept them.
At a preliminary hearing the Employment Tribunal determined that TUPE did apply and Hillingdon settled all the claims brought by the company’s employees, except for the claimants’. The Tribunal subsequently determined that they were assigned to the organised grouping of employees and transferred under TUPE to Hillingdon.
On appeal the EAT held that the Tribunal had fallen into error in reaching this decision by focusing on the fact that the company only had one client (Hillingdon) immediately prior to the transfer, without taking into account the fact that this was simply a matter of circumstances at the time. To properly determine the question of assignment the Tribunal should have considered the company’s organisational structure, in particular how its work was organised when it had more clients, and also the employees’ roles within the structure and their contractual duties.
This case highlights how difficult the determination of assignment can be, particularly in multi-contracting situations, and emphasises the need for thorough assessment given that the financial implications of successful TUPE-related claims can be high. The requirement for wider enquiry is also likely to have the consequence of capturing the artificial assignment of staff immediately prior to a transfer which can be tempting to avoid redundancy costs.