TUPE Podcast Series: Service Provision Changes - Organised grouping and principal purpose

This is the third podcast in our TUPE Podcast Series. The first podcast When Does TUPE Apply? - Relevant Transfers, we discussed the two types of transfer under TUPE, a Business Transfer and a Service Provision change. In our second podcast Service Provision Changes – Same Client and Fundamentally the Same Activities, we reviewed two of the key requirements for a Service Provision Change, namely the requirement for the client to remain the same pre and post transfer and for activities to remain fundamentally the same. 

In this third podcast, Amanda Glover will be focusing  on another key element of a service provision change. This is the requirement that immediately before the service provision change, there must be an organised grouping of employees situated in Great Britain, which has as its principal purpose, the carrying out of the activities concerned on behalf of the client.

If you have any questions in relation to TUPE, please contact our employment lawyers for advice.

Transcript

Hi, my name’s Amanda Glover,  I’m an Associate Solicitor in the employment team at Clarkslegal.  

This is the third podcast in Clarkslegals’ ‘TUPE podcast series. 

In our previous two podcasts, we discussed the two types of transfer under TUPE, a Business Transfer and a Service Provision change.  We then reviewed two of the key requirements for a Service Provision Change, namely the requirement for the client to remain the same pre and post transfer and for activities to remain fundamentally the same.  

This third podcast will focus on another key element of a service provision change.  This is the requirement that immediately before the service provision change, there must be an organised grouping of employees situated in Great Britain, which has as its principal purpose, the carrying out of the activities concerned on behalf of the client.

Overview

This requirement can be broken into four points:

1.     There must be an Organised Grouping
2. This grouping must be situated in Great Britain
3. It must have the activities as its principle purpose; and
4. It must be in place immediately before the transfer

We’ll look at each of these elements in turn.

Organised Grouping

Firstly, the requirement for there to be an organised grouping.  This is intended to confine TUPE to situations where the transferor (i.e. the outgoing provider) has in place a team of employees that are essentially dedicated and deliberately organised to provide the activities to the client.   If activities are provided by employees ad hoc without a dedicated team, then TUPE will not apply.

It’s not sufficient that the employees in question happen to spend all of their time working for the benefit of a particular client.  There must have been a deliberate decision taken by the employer to organise the employees to work for that client. Essentially, employees must be organised by reference to the requirements of the client and be identifiable as members of that client's team.

Eddie Stobart

By way of example, in the case of Eddie Stobart Ltd v Moreman and others, there were 35 claimants all employed by Eddie Stobart.  At the relevant time, the employees who worked during the day worked on a contract for a company called Vion and employees who worked on night-shifts worked on a contract for another client.

The Vion contract was awarded to another provider.  Eddie Stobart claimed that the 35 claimants, who were all day workers who had spent more than 50% of their time on the Vion contract, must transfer to the new provider under TUPE.

The new provider did not accept this and the individuals were left without an employer and, as usually happens in these situations, the employees pursued claims against both Eddie Stobart and the new provider.

The Tribunal (and later the Employment Appeal Tribunal – which we’ll refer to as the EAT going forwards) found that TUPE did not apply on the basis that there was no organised grouping.  The employees spent the majority of their time on the Vion contract only by chance as they worked during the day.  Thus, the only deliberate organising that had taken place was to put them on day shifts and not to align them to the Vion contract specifically.  

It’s important to note that case law has established that a single employee can be an organised grouping.  However, this does not mean that an individual who works 100% of their time on the contract will always be an organised grouping.  You must look at the facts and decide who has been deliberately organised in line with the client’s requirements and if there is a team that has been deliberately organised, you need to consider them as a whole.  

Seawell

I’d like to go through the case of Seawell Ltd v Ceva Freight (UK) Ltd & another to illustrate this point.  This also leads us onto the second point I wanted to run through with you, the requirement that the organised grouping has the activities as its principle purpose.  

The Claimant, in this case, worked for Ceva as part of an ‘outbound’ group comprised of 8 employees.  Ceva also had an ‘inbound’ team.  The Claimant spent 100% of his time on the relevant activities whereas the other 7 employees in the outbound team only spent between 10-30% of their time on the activities.  When the activities were transferred to a new provider, Ceva argued the claimant should transfer under TUPE.  

The Tribunal agreed, reminding itself that a single employee can be an organised grouping, however the EAT overturned this and decided that TUPE did not apply.   The EAT noted that the only groupings that had been deliberately put together by Ceva were the ‘outbound’ and ‘inbound’ teams.  The claimant was not an organised grouping himself but part of the outbound team.  Then, looking at the next part of the test, it could not be said that the activities were the outbound team’s principal purpose (given that most of the team worked elsewhere for the majority of their time) and therefore TUPE did not apply.

Principal Purpose

That brings us nicely onto the requirement that the activities are the principle purpose of the organised grouping.

We have seen from the Seawell case that it is the principle purpose of the group that must be examined at this stage.  In later podcasts, we’ll cover who transfers and look at assessing whether an individual is ‘assigned’ to the organised grouping but this comes in later and it’s always important to identify the organised grouping and its principle purpose before you turn to the question of assignment. 

The purpose does not have to be the groups sole purpose but it should be its main purpose.  A further point on the principal purpose test comes from the case of Tees Esk and Wear Valleys NHS Foundation Trust v Harland.  In this case, the EAT held that, when determining the principal purpose of a grouping, it is relevant to consider both the employer's intention behind organising the grouping and the activities carried out immediately before the change of service provider. It recognised that the principal purpose of a grouping may change over time and so it needs to be looked at, at the point of transfer.

In this case the relevant activities were the provision of care to a patient with severer learning disabilities.  The care was initially provided by 27 individuals.  The patient’s condition gradually improved and the team caring for him reduced to 11 people who also cared for other patients located in the same building, and in fact spent the majority of their time doing this work for other patients.

The EAT held that the principal purpose of an organised grouping of employees is fact-sensitive.  It found no issue with the tribunal’s findings that, over time, the requirement for employees to care for the patient had diminished.  Caring for the patient did continue to be a subsidiary purpose of the grouping but at the point of transfer it was not the principal purpose of the group – the principal purpose was providing care to the other patients. 

Now we’ll just briefly touch on the two other requirements I mentioned earlier, namely that the organised group is situated in Great Britain and that it is in place immediately before the transfer.

Situated in Great Britain immediately before the transfer

Given the wording TUPE will clearly apply to transfers within Great Britain or from Great Britain, however, it will not apply to transfers into Great Britain from elsewhere.  However, it’s always worth noting that there may be local laws that apply in those situations, particularly for EU countries, which will adopt TUPE in some form or another.

Regardless of the requirement for the organised grouping to be situated in Great Britain, a transfer can occur where some of the employees in that grouping ordinarily work outside Great Britain.  

By way of example, if you have an organised grouping of 10 employees and one of the employees works from home, which is outside of Great Britain, then TUPE can still apply.  However, if the whole team worked outside of Great Britain then TUPE would not apply.

Under TUPE the organised grouping must be situated in Great Britain immediately before the transfer but the statutory wording does not indicate whether or not the group must actually be carrying out the activities at that time.  

Case law has indicated that temporary cessations of work, whether this be due to a downturn in work required or a contract dispute, will not necessarily prevent TUPE from applying as the wording strictly does not require that the employees be working immediately before the alleged service provision change in order to be an organised grouping. Now, there may be cases where a temporary down-turn in work will be sufficient to dissolve an organised grouping but this is dependent on the facts and will not always be the case.

Despite the wording used here it’s worth noting that the same protection applies to Northern Ireland. 

Closing

That brings us to the end of this podcast.  I hope you’ve found it helpful.  The next podcast in the series will be focussing on the two exceptions under TUPE where a service provision change will not be found even if the other tests are satisfied i.e. a single specific event or task of short term duration and the supply of goods for the client’s own use.

Many thanks for listening!