How temporary work agencies can reduce the risk of TUPE claims when clients change employment agencies

The Employment Appeal Tribunal has ruled that agency staff transferred to a temporary work agency which had taken over supplying agency staff to a client. It considered that the change of agencies amounted to a service provision change under TUPE resulting in the agency workers transferring on their existing terms, with continuity of employment unaffected by the change of employer. This transfer and ultimately key liabilities may well have been avoided if the agency staff had not been employed under contracts of employment by the initial agency, and instead engaged under agency worker contracts.

Mrs Oliveira was employed under an employment contract by G-Staff, and supplied to Butcher’s Pet Care to work as an Alutray Operative. Mach Recruitment entered into a Service Level Agreement with Butcher’s and engaged Mrs Oliveira and she continued to work for Butcher’s. When the Service Level Agreement was terminated, Mrs Oliveira claimed unfair dismissal and needed to show that she had been continuously employed as an employee.

The employment tribunal considered that there was an “organised grouping of employees” whose main job was to carry out work for Butcher’s and TUPE operated to transfer Mrs Oliveira’s employment to Mach Recruitment on the same terms and conditions. She had therefore transferred as an employee and was able to claim against Mach Recruitment for unfair dismissal, a redundancy payment and notice pay. Had she only been a worker, and not an employee, of G-Staff, then the law remains unsettled on whether TUPE would apply to workers and so this significantly reduces the risk Mrs Oliveira would have spent time and money arguing the point. Also, and in any event, as a worker and not an employee, she would have had no statutory right to claim unfair dismissal, a statutory redundancy payment and notice pay (although workers might have a contractual notice period, even if they do not have a statutory one).

Mach Recruitment appealed to the Employment Appeal Tribunal, arguing that in order to find that there was “an organised grouping of employees” the agency workers had to be “deliberately organised” to meet Butchers’ business needs. That had not happened here. Instead the employees had ended up working for Butcher’s due to shift patterns and practical arrangements, not because of any formal planning.

The Employment Appeal Tribunal dismissed the appeal. It noted that Mrs Oliveira always worked alongside the same people (other than when somebody was replaced) and it considered this was enough to show that there was a specific group organised to meet Butcher’s needs. This was more than a coincidence and there must have been a conscious decision of some sort to organise them in that way.

Lessons for temporary work agencies

Temporary work agencies need to be aware of the risk of TUPE applying, both when they enter into a contract with a client (when they could inherit agency workers already working for the client) and on termination (when their agency workers could transfer to another agency). Where the agency workers are employed by umbrella companies and supplied to the agencies, and are to move to the new agency’s preferred umbrella company supplier, the risk of TUPE applying should also be considered, as the law in this area is unclear. This is particularly so if the transferring agency has given any TUPE indemnities benefitting the transferring umbrella company.

To better protect themselves, agencies should consider engaging staff as workers, rather than employees. While not failsafe, as it’s possible that workers’ contracts could also be found to transfer under TUPE, there would certainly be greater scope for argument over whether TUPE applies. Importantly, even if a worker’s contract does transfer, workers have fewer employment protections and so an agency would be able to dismiss workers without facing successful claims for unfair dismissal, redundancy payments and statutory notice pay.

More generally, the case indicates that a conscious decision to organise employees by reference to a client’s requirement may not necessarily be required for there to be an “organised grouping”, although it is not enough that employees just happen to carry out the majority of their work for a particular client or are randomly allocated work for that client. Agencies and other service providers should retain clear evidence about how staff are organised in relation to particular clients or contracts in order to rebut arguments that TUPE applies when one agency or service provider replaces another.