One common myth is that for an employee to “TUPE transfer” he/she must spend more than 50% of their working time on the transferring business or outsourced activity. 

In Costain Limited v Armitage and ERH, the EAT has provided a useful reminder that time spent working on an outsourcing activity determines neither whether TUPE applies nor whether an employee does, or does not, transfer.

Mr Armitage worked as a Project Manager at ERH. He worked on two projects for the same client, the Welsh Assembly. One of the contracts transferred to Costain. Costain disputed Mr Armitage was assigned to the organised grouping of employees that transferred to it. The employment tribunal found that Mr Armitage transferred because immediately prior to the transfer he spent 67% of his time on the transferring contract.

On appeal, the EAT remitted the claim back to a different employment tribunal to reconsider as the reasoning behind the original decision was inadequate. In doing so, it gave the following guidance:

  • In the context of a service provision change, employers can muddle the question as to whether there is an organised grouping of employees with the question as to whether an employee is assigned to that grouping.
  • The existence of an organised grouping of employees is part of the legal test which determines if there is a service provision change, as opposed to who transfers. Previous cases such as Seawell says that for this question to be answered in the affirmative, there must be a deliberate putting together of a group of employees for the purpose of the relevant client’s work. As Eddie Stobart Ltd found, the fact that employees just so happen to spend all of their time working on one contract is not, of itself, determinative that the employees are organised by reference to that client’s activities. It is not how an employee spends their time, but why they work on a particular activity which is key to judging if there is an organised grouping of employees (and therefore a service provision change) in the first place.
  • If it is established that there is a service provision change, the only employees who transfer are those permanently assigned to the organised grouping immediately prior to the transfer. As per Duncan Webb, being involved in the work undertaken by the grouping immediately prior to the transfer will not necessarily mean an employee is deemed to be assigned to it. Whilst the time spent by an employee on an activity is relevant to assessing assignment, the fact an employee may be spending a high or low percentage of time on the transferring activity at the date of the transfer could simply be reflective of temporary demand. To assess whether an employee is permanently assigned to a transferring activity therefore requires looking not just at how an employee spends their time, but their job title and job description, how the employee’s salary is funded and where the employee’s employer derives the most value from that person’s working time.

The key lesson for employers is therefore that when assessing whether TUPE applies and who transfers, it is more important to look at how and why an employee splits their time than simply calculating the percentage of time they spend on the transferring activity.