Two recent cases have provided further guidance regarding Service Provision Changes under TUPE. The cases concern employees who are absent due to long term sick leave or temporary lay-off at the time of the transfer.

 A Service Provision Change might occur under TUPE where a client outsources activities to a contractor, re-assigns activities to a subsequent provider, or brings activities “in-house”.  There must, immediately before the change, be an organised grouping of employees that has as its principal purpose the carrying out of the relevant activities on behalf of the client. If that is established, the question is then which employees are assigned to that organised grouping of employees, and will therefore transfer to the new provider under TUPE.

The cases highlight the importance of carefully assessing at an early stage whether there is both anorganised grouping of employees and, if there is, which employees are assigned to that organised grouping. This can be a common problem for those regularly negotiating outsourcing/insourcing agreements. Such matters require an analysis of the particular facts and circumstances and, more often than not, difficult issues in relation to particular employees will mean the answer is not straightforward. The cases unfortunately do not set out any “hard and fast” rules, but do provide some guidance. They also highlight the practical importance of actively managing long term absence situations and the temporary lay-off of staff.

Temporary Lay-off

In the case of Inex Home Improvements Limited v Hodgkins and others (UKEAT/0329/14/JOJ), the EAT had to consider whether a temporary lay-off of employees before a change in contractor meant that there was no organised grouping of employees and therefore no Service Provision Change under TUPE. 

The EAT disagreed with the Employment Tribunal and found that the temporary lay-off of employees prior to the change in contractor did not necessarily prevent a Service Provision Change. The EAT could not find any authority for the principle that the grouping of employees had to be actually engaged in the relevant activities immediately before the change. They considered it clear on the particular facts that the cessation of work was temporary and there was an expectation that work would continue. They had regard to the statutory intention of TUPE as the protection of employment (as opposed to some protection short of preserving employment), and drew comparisons with the temporary cessation of employment for the purposes of holidays or sickness, which should not deprive employees of their employment if there is a Service Provision Change during that temporary cessation. 

The EAT did not however discount the fact that there may be cases where a temporary lay-off caused by an absence of work might be sufficient to dissolve the organised grouping of employees. Relevant considerations would be the purpose, nature and length of the cessation of work. 

The case was remitted to the Employment Tribunal to determine the factual issues.

Employees on Sick Leave

The second case concerned the question of whether an employee on long term sick leave was assigned to the organised grouping of employees for the purposes of TUPE (BT Managed Services Limited v Edwards and another, UKEAT/0241/14/MC).  

The case concerned a Field Operations Engineer who worked as part of a team dedicated to a particular contract (DNO). The DNO contract transferred to Ericsson in 2013. There was no question of whether there was an organised grouping of employees, this was accepted by both parties. The question was whether Mr Edwards was assigned to the organised grouping. He had taken long periods of sick leave from May 2006 and had not been back at work since January 2008. He was regarded as having no prospect of returning to work, but was retained as an employee to allow him to access benefits under a Permanent Health Insurance Scheme (a conscious decision was made to that effect in 2010). 

The EAT agreed with the Employment Tribunal that Mr Edwards was not assigned for the purposes of TUPE, and had not been since 2010 when a decision was made to keep him employed purely for the purposes of continued PHI payments. This created a mere administrative or historical connection to the organised grouping which was insufficient for the purposes of TUPE. The EAT considered that there should be some level of participation by employees in the activities of the organised grouping, or where an employee is temporarily absent, an expectation that they will at some point in the future carry out those activities. 

However, sickness absence, even lengthy absence, would not necessarily preclude an employee from being assigned to the organised grouping. The Judge considered the situation of persons temporarily absent on long term sick or maternity leave, or short term lay-off, who would remain to be assigned, distinguishing the situation from those who were permanently unable to return to work, who would not. They concluded the matter will always be a question of fact for the Employment Tribunal taking into account all the relevant circumstances.