When the famous haulier lost its Vion contract to FJG Logistics, it argued that 35 Stobart employees should under TUPE be transferred to FJG. FJG disagreed, saying the 35 weren’t an “organised grouping.” Nicola Doran and Chris Stack report on the later EAT verdict and implications for agencies and their clients.
Topic: TUPE (Transfer of Undertakings (Protection of Employment) Regulations 2006)
Who: Eddie Stobart Ltd v Moreman & Ors
When: 16 March 2012
Where: UK Employment Appeal Tribunal
Law stated as at: 30 March 2012
TUPE may apply where there is "service provision change" (namely, insourcing, outsourcing or re-tendering) or a business transfer. The application of TUPE to re-tendering exercises has caused headaches for many employers in the marketing and advertising industry, where agencies frequently win and lose client accounts which can be caught by TUPE.
In order for TUPE to apply on a service provision change there must be:
- an organised grouping of employees which had as its principal purpose the carrying out of the activities concerned; and
- a continuation of those activities concerned for the new client.
The effect of TUPE is that all employees assigned to the activities concerned (which in rough terms mean that they spend the majority of their working time working on the services that are to transfer) will transfer to any new service provider and will be afforded special protection from dismissal, including having a claim for automatic unfair dismissal if they are dismissed in connection to 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, Eddie Stobart Limited v Moreman and ors (UKEAT 0223/11) considered what an "organised grouping of employees" is for the purpose of TUPE.
Eddie Stobart provided warehousing and distribution services (the "Services") to two clients from its Nottinghamshire depot.
The two clients had differing requirements in terms of the timing of their deliveries: one wanted principally nightshift work, the other, a client named Vion, required dayshift orders.
On closure of Eddie Stobart's depot, the Vion contact was awarded to a new contractor, FJG Logistics. Eddie Stobart informed those employees who spent more than 50% of their time on Vion Services that there had been a service provision change and that, as they were assigned to those Services, their employment had transferred to FJG. FJG did not accept that TUPE applied and the employees were dismissed by Eddie Stobart as a result.
The employees brought employment tribunal proceedings for unfair dismissal against both Eddie Stobart and FJG. The Tribunal found that the employees were not an "organised grouping" of employees. The Tribunal's reasoning was that, event though the employees spent the majority of their time working on the Vion Services, this was because of the way Eddie Stobart organised its shift patterns, not because they has been deliberately organised into a team whose principal purpose was to carry out work for Vion.
Eddie Stobart appealed against this decision. It argued that to satisfy the "organised grouping" test, it was sufficient to show that the employees worked mostly for Vion; it was not necessary for the employees to be organised as members of a "Vion team".
The Employment Appeal Tribunal ("EAT") did not agree with Eddie Stobart and dismissed its appeal. It found that an "organised" grouping could not simply be a group which worked on tasks benefitting a particular client without any deliberate planning or intent. A clear example of an organised grouping was therefore a client team. The EAT found that in this case, most of the employees did not even know for which clients they picked goods for.
Why this matters:
In practice, marketing and advertising industry employees will often be organised into dedicated client teams. However, this case will be helpful to agencies winning new clients to resist the application of TUPE where is difficulty in identifying which employees are assigned to that particular client (for example where an employee may work for a number of clients).
The case also serves as a useful reminder that, whilst it is a good starting point to look to a percentage of working time for establishing whether TUPE applies, this is not the whole story for a service provision change. Whether an organised grouping of employees exists requires a more client focussed review of working arrangements and an analysis of whether employees can be said to belong to an organisational unit.