In Eddie Stobart Ltd v Moreman and others, the Employment Appeal Tribunal (EAT) has upheld a tribunal decision that there was no service provision change under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) when a contract was transferred from one contractor to another, as there was no “organised grouping of employees” whose principal purpose was carrying out the activities under the contract.
35 Claimants worked for ES at a depot, providing warehousing and distribution services to two clients. Day-shift employees largely worked on the contract for one client, Vion, whereas night-shift employees carried out the work for the other client. The ES depot closed in 2009, and the Vion contract was awarded to another company, FJG. ES decided that all day-shift employees, and any other employees who had spent more than 50% of their time over the past 90 days working on the Vion contract, were “assigned” to that contract, and so transferred to FJG under TUPE. FJG disagreed that TUPE applied to the transfer of the contract, and ultimately the Claimants were all dismissed. They brought claims against both ES and FJG for unfair dismissal.
The EAT has upheld the decision of the tribunal that the Claimants’ claims against FJG should be struck out, as the test for a service provision change under TUPE had not been satisfied, and so any claim against FJG as employer had no reasonable prospect of success. The test had not been satisfied because the Claimants did not constitute an “organised grouping of employees”, whose principal purpose was carrying out the activities on behalf of the client. The former President of the EAT explained that an "organised grouping" was not simply a group which, without any deliberate planning or intent, mostly worked on tasks that benefitted a particular client. Instead, the employees must be organised in some sense by reference to the requirements of the client in question. In this case, the Claimants spent the majority of their time working on the Vion contract because of the way ES organised its shift patterns, not because they were organised into a team whose principal purpose was to carry out work for Vion. They did not, therefore, satisfy the test for a service provision change under TUPE, and so their employment could not have transferred to FJG. The claims against FJG were therefore struck out.
Impact for employers
- This case is useful not only in helping understand what is meant by an “organised grouping of employees”, but also as a reminder of the order in which various questions must be answered to determine whether or not there is a service provision change under TUPE. The first question that must be asked is whether or not there is an “organised grouping of employees”, which has as its principal purpose the carrying out of the relevant activities under the contract. The fact that a number of employees only do work for the particular client, on its own, will not necessarily be enough.
- If an organised grouping has been identified, only then must it be considered which employees were assigned to that relevant grouping, and are thus in scope to transfer. It is at this stage that consideration will be given to the proportion of time the employee spent on the relevant contract.