No Service Provision Change Where Employee Only Worked on One Contract

An employee who spent all of his time working on a contract for a particular client was not an organised grouping of employees and so TUPE did not apply when the contract was brought back in-house.

In Seawell Ltd v Ceva Freight (UK) Ltd, M worked as a logistics co-ordinator for Ceva, a logistics business.  Ceva organised its workforce into two sections – one dealing with “outbound” goods and one dealing with “inbound” goods.  M was part of the “outbound” team.  He spent 100% of his time working on the Seawell contract, whereas the rest of the eight member team spent up to 30% of their time working on that contract.  When Seawell brought the contract back in-house, Ceva argued that M’s employment transferred to Seawell under TUPE.  M’s employment was terminated and he claimed unfair dismissal. 

The EAT held that the tribunal had been wrong to decide that TUPE applied.  One of the essential requirements for a service provision change (SPC) - that before the SPC there was an organised grouping of employees whose principal purpose was to carry out the activities for the client – was missing.  There had been no finding that Ceva had put together a grouping consisting of M specifically to carry out Seawell work – it was just “happenstance” that he spent all of his time working on the Seawall contract.

Although the “outbound” team was an organised grouping of employees, it had not been organised by reference to the Seawell contract and its principal purpose was not to carry out work for Seawell.  

The fact that TUPE states that a single employee can be an organised grouping does not mean that an employee who spends 100% of their time working for a particular client will be an organised grouping.  Whether there is an organised grouping of employees will depend on whether the group has been put together for the purpose of the client’s work.  It must not be simply a happy coincidence.  This is the second case concerning a logistics business where TUPE has been found not to apply because the grouping of employees was not put together by reference to the requirements of the client.  In Eddie Stobart Ltd v Moreman and others TUPE was found not to apply where employees worked mainly on one contract simply because of the way the employer organised its shift patterns. 

Contractors who want to ensure that TUPE applies when a contract comes to an end will need to make sure that they organise their workforce by reference to the client's requirements.