If employees are temporarily laid off, does that mean that they cannot transfer under TUPE in a service provision change situation?

This issue was considered by the EAT in Inex Home Improvements Ltd v Hodgkins and others.  The Claimants were employed to carry out painting and decorating work, which was subcontracted to Inex.  The work was released to Inex in various tranches.  Following the completion of one of the tranches of work, and before the next tranche of work was released, the Claimants were temporarily laid off in accordance with the Construction Industry Joint Council Working Rule Agreement because there was no work for them to do. Subsequently, Inex did not get the further work that they had expected to receive, and the work was instead issued to another contractor.

At a preliminary hearing, the Tribunal found that there would have been a service provision change, but since the Claimants had been laid-off, there was no organised grouping of employees.  It was reasoned that the employees could not be part of such a grouping because they were not working at the time of transfer. Inex (rather than the Claimants, many of whom had taken up work with the new contractor) appealed.

The EAT rejected this view, and took a purposive approach to TUPE in a service provision change situation, despite those regulations deriving from UK law not EU law.  The purpose of TUPE is apparent from the inclusion of the words 'protection of employment' in its title. The EAT noted that if the Tribunal’s decision had been correct, it would mean that the transfer of employees could easily be prevented by creating a temporary lay-off situation immediately before a service provision change.  The EAT stated: "In our opinion a temporary cessation of work in the case of a service provision change immediately prior to the transfer does not necessarily prevent a TUPE transfer taking place. The purpose, nature and length of the cessation are of course relevant in determining whether or not the organised grouping continued in existence."  In other words, the lay-off is only one of a number of relevant factors to be considered. 

As the EAT noted it can be argued that the fact of the lay-off in fact supports the proposition that the Claimants’ purpose was the carrying out of the relevant activities. If it was not, then they could have continued with their other activities. 

A temporary cessation in activities around the time of a change of contractor (which is not uncommon in certain industries, such as construction) does not mean that TUPE will not apply. Employers must continue look at all the circumstances to see if there is an organised grouping.