BT Managed Services Ltd v (1) Edwards (2) Ericsson Ltd UKEAT/0241/14/MC

Why care?

Under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) a relevant transfer includes a service provision change where activities are carried out by an organised grouping of employees.

Where TUPE applies, the employment contracts of those employees assigned to the organised grouping of resources or employees that is the subject of the relevant transfer pass from the transferor to the transferee (Regulation 4(1)).

In this case, the EAT had to consider whether an employee on long-term sickness absence, with no possibility of returning to work, was assigned the organised grouping of employees.

The case

The Claimant was employed as a member of BTMS’ DNO team, providing operational maintenance for Orange/EE mobile phone networks. The DNO team had its own separate and dedicated structure within BTMS, including its own managers, operatives, other staff, budget and own operational unit code (OUC). The parties agreed that the DNO team was an organised grouping of employees with its principal purpose being the carrying out of the DNO contract on behalf of Orange, and fell within Regulation 3 of TUPE.

In May 2006, the Claimant started long-term sick leave as he was unable to carry out the strenuous work his job required. Attempts to find him a different role failed and he was regarded as permanently incapacitated. He last worked in January 2008 but he remained an employee but receiving payments under BTMS’ permanent health insurance (PHI) scheme. When his entitlement to payments under this scheme expired, BTMS made payments to him. During this period he remained on the books of the DNO team, the payments made were treated an expense of the DNO team, and his contract with BTMS was through the managers of that team. If he had been able to return to work, it would have been as part of the DNO team: his job title never changed and he was never assigned to any other part of the business.

In December 2012, the DNO contract transferred from the Respondent to Ericsson and aTUPE service provision change took place in June 2013. The DNO team all transferred to Ericsson except for the Claimant, who Ericsson refused to accept.

The Employment Tribunal held that he did not transfer as, being permanently incapacitated and with no prospect of returning to work with the DNO team, he did not contribute to the economic activity of the group and so he was not assigned to the DNO team within the meaning of TUPE Regulation 4(1).

BTMS appealed to the EAT, arguing that it was wrong to merely take into account as one criteria in determining whether he was assigned to the DNO team the question of where he would have been required to work had he been able to do so. BTMS argued this was decisive, and since the Claimant would have been required to work in the DNO team if he was well enough, he must be assigned to that team, and any question of participation in the economic grouping was irrelevant.

The EAT (HHJ Serota QC) disagreed, holding that the question of whether an employee absent from work at the time of a service provision change was assigned to the relevant grouping was a matter of fact to be determined according to the circumstances of each case.

Absence from work does not necessarily mean that an employee is no longer assigned to the grouping, but an employee such as the Claimant who had no (and would never again have any) connection with the economic activity of the group could not be regarded as assigned to the group.

There is a clear link between the identification of the relevant organised grouping, and the question of who is assigned to it. As the organised grouping subject to the service provision change is defined by Regulation 3(2) by reference to the economic activities its purpose is to pursue, an employee who plays no part in those activities and will never do so is not assigned to that grouping. Mere administrative connection to that grouping is insufficient to constitute an employee as being assigned to the grouping in the absence of some participation in the grouping’s economic activity.

What to take away?

The case confirms that a permanent absence (as opposed to a temporary one) will prevent an employee from being part of an organised grouping of workers for TUPE purposes because some level of participation in carrying out the relevant activities on behalf of the client is required.

Businesses which are subject to a service provision change should therefore be aware that employees who are permanently unable to work, but who remain on their books for whatever reason, will not transfer as part of the service provision change. This is an additional cost for employers who will still be paying for these employees, either directly (as in this case) or via increased premiums on their permanent health insurance policy.