In almost every TUPE transfer, whether a business sale or a service provision change (SPC), you come eventually to the chap receiving permanent health insurance benefits. The transferor has no need for him any longer and the transferee has no wish to bump up its own PHI premiums for someone who is seemingly never going to turn up to work for it anyway. So who gets him? Does he TUPE across or stay behind?

Some very useful guidance on this question in the service provision change context can now be found in the Employment Appeal Tribunal’s decision in BT Managed Services Limited –v- Edwards. Mr Edwards was assigned to a particular contract (DNO) operated by BT for Orange. In 2006 he suffered heart problems, arising from which he was soon deemed permanently unfit for work and put on BT’s PHI scheme. In June 2013 the DNO contract was the subject of a service provision change to Ericsson and all Mr Edwards’ DNO colleagues went with it. However, Ericsson refused to take Mr Edwards on the basis that by the time of the transfer he was no longer assigned to the organised grouping of BT labour which performed the DNO contract for Orange.

This looked harsh – Mr Edward had never been assigned to any other bit of BT’s business, neither his contract nor his title had been changed, such contact as he had with BT while off sick had all been via the DNO managers, his costs remained on the DNO P&L and his continuing presence on the DNO headcount prevented that team from hiring a replacement. It was acknowledged also that in the hypothetical event that Mr Edwards did become fit for work again, his return would at least initially be to the DNO team. Overall, how could he not be assigned to the DNO contract?

The Judge considered the existing case law on assignment without deriving much guidance from it beyond that a temporary period of absence, even relatively long-term, would not be sufficient to break a person’s assignment to a particular organised group of labour. But this was different, “quite unlike any other that I have seen related to a service provision change“, he said. Here Mr Edwards’ incapability was accepted as permanent, and though BT could no doubt have “cobbled together” (now a judicially-approved legal term, apparently) some role for him, it did not have to do so and there was no sign that it would.

Therefore by June 2013, Mr Edwards’ continuing connection with the DNO team was for purely historical reasons and of an administrative nature only. He had last done any work on the contract in 2008. Most importantly, in the EAT’s view, how could Mr Edwards be assigned to an organised group of labour with the principal purpose of carrying out activities for a client (the TUPE definition for SPC purposes) once it was accepted that he neither was contributing nor would ever again contribute to the performance of those activities? In those circumstances it was immaterial that there was no positive argument as to where, if not DNO, Mr Edwards was assigned. It was not DNO, and that was enough to resolve the matter.

In a business sale, the question of assignment does not usually arise – you are either employed in the undertaking or not. However, in SPC cases this decision is potentially very important. It may very well determine liability for employees who are on PHI or who are otherwise not expected to return. The clear inference from this case is that such people will stay behind with the transferor.

That creates the scope for some interesting arguments about the nature of the employee’s absence and in particular, its expected degree of permanence. It is in no sense impossible, for example, that someone in receipt of PHI benefits may later recover enough to resume some form of continuing employment. In those circumstances, could the inability to contribute to the activities at the heart of the service provision change genuinely be described as permanent? If not, this case suggests that the transferee would inherit the person even though he was on PHI, and even though the date for a return might be years away. So as transferor, your best bet must be to maintain a faint but persistent thread in dealings with your PHI employees that you expect them back in due course, assuming that the medical prognosis is not so grim as to make that a clear nonsense.