In the recent case of Seawell v Ceva Freight (UK) Ltd & Anor, the Employment Appeal Tribunal considered whether one employee working 100% on the provision of services to one client of his employer could classify as an “organised grouping”, thus triggering TUPE laws. Nicola Doran and Chris Stack report.
Topic: TUPE (Transfer of Undertakings (Protection of Employment) Regulations 2006)
Who: UK Employment Appeals Tribunal
When: 19 April 2012
Law stated as at: 30 June 2012
TUPE may apply where there is “service provision change” (namely, insourcing, outsourcing or re-tendering) or a business transfer. The application of TUPE when re-tendering a contract can be the thorn in the side of employers in the marketing and advertising industry, where agencies can be caught by TUPE when they win or lose client accounts.
In order for TUPE to apply on a service provision change there must be:
- an organised grouping of employees. Previous case law has established that an organised grouping can be a single employee. It is unlikely TUPE will apply where an agency uses different employees each day or week to provide the service;
- which had as its principal purpose the carrying out of the activities concerned. This means that employees must be “essentially dedicated” to the relevant activity. This may not be the case where employees provide their services to a number of clients; and
- a continuation of the relevant activities for the new client.
The effect of TUPE is that all employees assigned to the activities concerned (meaning as a rule of thumb that they spend more than 50% of their time on the activities) will transfer to any new service provider on their existing terms and conditions.
Such employees will be afforded special protection from dismissal, including having a claim for automatic unfair dismissal if they are dismissed in connection with the transfer. This will be the case save for certain circumstances, for example where the new service provider does not require the total number of employees who have transferred and there is a genuine redundancy situation.
A recent case, Seawell Ltd v Ceva Freight (UK) Ltd and another (UKEAT 0034/11) considered what an “organised grouping of employees” is for the purpose of TUPE.
Ceva Freight (UK) Ltd (“Ceva”) provides freight forwarding and management logistics services. Its workforce was split into those dealing with outbound and inbound goods. Employee Mr Moffat worked on outbound goods and spent 100% of his time working on the Seawell client account. Other employees in the group spent some of their time (varying up to 30%) on the Seawell account.
When Seawell decided to bring the work carried out by Ceva in-house, Ceva asserted that Mr Moffat should transfer to Seawell under TUPE. Seawell disagreed and, as Mr Moffat’s employment had been terminated by Ceva in the meantime, he brought claims under TUPE against both companies.
The Employment Appeal Tribunal held that TUPE did not apply in this case and that Mr Moffat had therefore been unfairly dismissed by Ceva. This was on the basis that there was no “organised grouping of employees” for the purposes of TUPE. The court noted that:
- whilst a single employee can be an organised grouping, this did not mean that an employee who spends all of their time working on a single client was an organised grouping;
- organised meant “putting together” a group of employees for the purpose of doing a particular client’s work. In this case, the employees were organised by reference to inbound and outbound goods and not by reference to Seawall. Mr Moffat just happened to do all the Seawell work; and
- it was necessary for the organised grouping to carry out the activities which were transferring. In this case, Seawell took back in-house all the work carried out by Ceva for them, not just those services carried out by Mr Moffat.
Why this matters:
In practice, marketing and advertising industry employees will often be organised into dedicated client teams. This case is a useful reminder that one employee can be an “organised grouping”. However, it also illustrates that an employee who happens to work exclusively on one client’s contract may not always fall within that definition. Whether or not an organised grouping exists will hang more on whether a group of employees has been “put together” to service a particular client.