Inex Home Improvements Ltd v Hodgkins and others

A condition to the extended service provision change definition under reg.3(3) of the Transfer of Undertakings (Protection of Employment) Regulation 2006 (TUPE) is that there is immediately before the service provision change “an organised grouping of employees situated in Great Britain which has its principal purpose the carrying out of the activities concerned on behalf of the client”. Or to phrase this condition more simply, there needs to be an “organised grouping”.

If the “organised grouping” condition is not fulfilled there will not be a “relevant transfer” under the extended definition.  The question before the EAT  in Inex Home Improvements Ltd v Hodgkins and others was whether employees who were temporarily laid off at the time of the service provision change could be part of the “organised grouping”.

Facts

Inex employed the claimants as a group to undertake various building works. Those works were subcontracted to Inex by Thomas Vale, in sequential tranches.  Over November and December 2012, Inex completed the work for the most recently issued tranche of work.  A further tranche had not been issued by this time; it was expected to be released in January 2013. Temporarily there was, therefore, no work for the claimants to undertake.

The claimants’ terms of employment provided that employees could be laid off “where work is temporarily stopped or not provided”.  However, the temporary lay-off provisions could only be used where there was “a reasonable expectation of being able to provide work within a reasonable time”.

In the circumstances and pursuant to their employment contracts, the claimants were laid off temporarily at various dates during November and December.

A new tranche of work (which was substantially similar to the preceding tranche) was issued in January 2013 to another contractor, Localrun.

Outcome

It was not disputed that the appointment of a different contractor, Localrun, to perform work under the newly released works order, being work similar to that undertaken by Inex, was a “service provision change” under reg.3(1)(b)(ii) TUPE. The issue before the EAT was whether the claimants’ temporary absence from work, because of their temporary lay-off, meant there was no “organised grouping” immediately before the service provision change and, therefore, no relevant transfer.

On considering the issue, the EAT concluded: (i) a temporary absence from work, or cessation from work, did not in itself deny the employees who were involved in the relevant activities their status as an “organised grouping”; (ii) the purpose or reason for, as well as the nature and length of the cessation, are relevant to determining whether or not there was an “organised grouping” at the relevant time; (iii) whether or not the employees were part of an organised grouping was a question of fact for the ET; (iv) an organised grouping can continue despite a temporary cessation in activities; it is not necessary for activities to be carried on at the time of the service provision change.

Points to note

Importantly, and running counter to current received wisdom, the EAT said that, when interpreting the service provision change provisions under TUPE, though the service provision change provisions were not found in the Acquired Rights Directive and purely a domestic provision, the principles  relevant to the construction of the Directive (including its purpose) applied.

The purpose of the Directive being to ensure, as far as possible, that the contract of employment or employment relationship continues unchanged with the transferee, in order to prevent the employees concerned from being placed in a less favourable position solely as a result of the transfer. Further, when construing the service provision change provisions the purpose of TUPE, namely “protection of employment”, must, also, be taken into account and the meaning of the provision construed accordingly to meet that legislative purpose.

This purposive interpretation by the EAT, arguably, runs counter to the literal interpretation adopted by the Court of Appeal in McCarrick.