No Service Provision Change Where Employees “Happened” to Work on Contract

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Posted on 07 Mar 2012

Employees who happened to work on a particular contract because of the shift they worked were not an "organised grouping of employees" and so did not transfer when the contract changed hands. 

In Eddie Stobart Ltd v Moreman and others, ES was providing warehousing and distribution services to two clients. The way the shift patterns operated meant that the day-shift employees worked principally on the Vion contract and the night-shift employees worked principally on the other contract. When the Vion contract was awarded to a new contractor, ES took the view that the day-shift employees were "assigned to the Vion contract" and transferred to the new contractor. 

The claimants claimed unfair dismissal when the new contractor refused to take them on. The new contractor argued that the claimants had not shown that they were assigned to any particular client of ES and therefore could not rely on TUPE. 

However, the employment tribunal reached its decision on a different basis. For TUPE to apply on a change of contractor there must be "an organised grouping of employees" whose "principal purpose" is carrying out the relevant activities on behalf of the client. The claimants were not an "organised grouping of employees" – they spent the majority of their time on the Vion contract simply because of the way ES organised its shift patterns, not because they were an organised team whose principal purpose was to carry out work for Vion. 

The EAT dismissed ES’s appeal.  An "organised grouping of employees" is not simply a group which, without any deliberate planning or intent, mostly works on tasks for a particular client. The employees must be organised in some sense by reference to the requirements of the client in question. 

This case demonstrates the importance of identifying an organised grouping of employees if TUPE is to apply on a change of contractor. The fact that employees happen to work on a particular contract is not enough. They must instead be organised in some way by reference to the client’s requirements - otherwise their employment will not transfer when the contract changes hands. Outgoing contractors need to be aware of this as they could be saddled with redundancy costs and possible unfair dismissal claims. Contractors wishing to ensure TUPE applies will need to organise their workforce by reference to the client’s requirements so that they are essentially dedicated to carrying out activities for that client.

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