In two recent cases, the Employment Appeal Tribunal (EAT) has considered the issues of assignment for managers and whether they were assigned to the organised grouping of employees that transferred to a new contractor on a service provision change.

As Christmas approaches, imagine if you will, a peaceful, snowy scene at the 'North Pole'. There is to be a transfer of 'Christmas toy construction' activities from one toy construction contractor to another. Imagine that the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) will apply. So far, so good.

But an argument soon breaks out. Will the Project Manager responsible for toy construction, board games and jigsaw puzzles transfer to the new contractor under TUPE?

The key to this riddle is whether the Project Manager is 'assigned' to the 'Christmas toy construction' activity. Shouts of, "Oh yes, he is!" and, "Oh no, he's not!" echo around.

Of course, this may be great fun at the pantomime but, in the real world, whether someone transfers under TUPE can be riddled with uncertainty and can be one of the most vexed employment issues faced by contractors.

In two recent cases, the Employment Appeal Tribunal (EAT) has considered the issues of assignment for managers and whether they were assigned to the organised grouping of employees that transferred to a new contractor on a service provision change.

Here, our employment experts analyse these two recent decisions which set out how to apply the 'assignment' test in cases where services transfer. They also provide a summary of issues to consider when evaluating whether an employee is assigned. This will help to avoid the risks associated with disputes over whether an employee (or their claims) transfers to a new contractor.

The law: Summary of TUPE and assignment

Where there is a service provision change (such as when a new contractor takes over the provision of activities which are fundamentally the same as those activities carried out by the previous contractor), TUPE will apply.

For transfers of services under TUPE, there must be "an organised grouping of employees" whose "principal purpose" is carrying out the relevant activities on behalf of the client.

An employee who is employed immediately before the transfer by the old contractor and who is 'assigned', other than on a temporary basis, to the organised grouping will transfer to the new contractor.

Practical difficulties and legal issues may flow from the unexpected assignment of an employee.

There are two main scenarios which can give rise to risks. Either the employee is dismissed by the original contractor and brings claims against the new contractor or the employee simply transfers to the new contractor under TUPE. There are numerous mechanisms to achieve protection for the new contractor, including indemnities for claims arising from the subsequent dismissal of any employees who unexpectedly transfer to the new contractor.

With some employees, is it quite obvious whether or not they are 'assigned', with others the question is far less clear.

The grey area is around employees who spend part of their time (potentially a very significant part of their time) working in the relevant part but are not exclusively allocated to it, for example, Project Managers.

While there is no definition of 'assignment' under TUPE, often the parties use percentage of time spent by the employee on the particular services or undertaking as a key indicator. However, 'assignment' is not purely a question of looking at the percentage of time an employee is engaged in working on the activities in question.

Employment Appeal Tribunal (EAT) Decisions

Costain Ltd v Armitage

Facts

In this case, ERH Communications Ltd had a contract for provision of communication services for the Welsh Assembly relating to highway maintenance, the All Wales Regional Maintenance Contract, known as the AWRMC contract.

This provided a guaranteed income stream and there was also a framework agreement for additional works. ERH also had an ancillary contract which, unlike the maintenance contract, guaranteed no work. Following a retender, ERH lost the AWRMC contract to Costain with effect from 1 February 2013. However, the ancillary contract did not transfer.

Costain accepted there was a service provision change (SPC) under TUPE; the issue was whether there was an organised grouping of employees for the AWRMC and whether Mr Armitage, a Project Manager, was assigned to the organised grouping. Mr Armitage's role involved the management of projects of varying complexity and value, including the AWRMC project and any works arising out of the framework agreement and ancillary contract.

The Tribunal decided that there was an organised grouping by reference to the requirements of the AWRMC contract and Mr Armitage was assigned to that organised grouping as he spent approximately 67% of his time on AWMRC (although that also included holiday and sickness absence).

Decision

Costain successfully appealed, principally on the ground that the Judge had focussed too much on percentages of time and had not firstly defined the organised grouping of employees.

The EAT sent the case back to be heard by a new Tribunal.

WGC Services Ltd v Oladele

Facts

Mr Oladele and a colleague were area managers for a cleaning company servicing a number of hotels for Whitbread plc. A number of contracts governed the cleaning services, which were provided across 19 sites.

Between June and October 2010 Whitbread terminated those contracts, awarding the services to new contractors. As the services for each hotel were transferred, one by one, Mr Oladele and his colleague, initially responsible for a large number of hotels, found themselves responsible for fewer and fewer.

Of the final six hotels, three were transferred on different dates between November and December 2010 to a single new contractor, WGC Services Ltd. Mr Oladele and his colleague claimed they were assigned to a group of employees which provided the cleaning services that transferred to WGC Services Ltd.

The Tribunal agreed that the two managers were assigned and upheld their claim. It was accepted that there was an organised grouping of workers dedicated to carrying out activities at the relevant three hotels, and that there was a transfer of the cleaning services from the original contractor to WGC.

On the basis that the area managers worked mainly at those hotels where activities were transferred to WGC, the Tribunal concluded that they were assigned to the relevant organised grouping of employees, meaning that they were in scope to transfer.

Decision

WGC successfully appealed the decision. The EAT decided that the Tribunal had not provided sufficient explanation of its reasons for its conclusions.

The EAT sent the case back to be heard by a new Tribunal.

Key messages from these cases

To go directly to the summary of issues, click here.

In more detail, the key messages from these cases are that:

Is there an "organised grouping" for a SPC?

  • The first question is what is the "organised grouping of employees"; and then secondly, is the employee assigned to that group? It is a two-stage test.
  • The concept of an organised grouping implies an element of conscious organisation by the employer of his employees in the nature of a team. The principal purpose of this team must be to carry out of the activities in question. The employer's organisation must be deliberate and not just by accident or 'happenstance'. It is not enough that a particular group of employees all happen to be carrying out those activities at the time of the transfer.
  • When determining whether or not there is an organised grouping of employees, you must examine each of the relevant contracts under which services are provided. You must decide by looking both at those contracts and the actual working practices, whether there is an organised grouping. There may be one grouping working across a number of contracts, or separate groups for each contract (or indeed no organised group of employees at all). However, a decision that there is a single organised group working across a number of different contracts would need to be carefully explained.

Is the employee "assigned" to that organised grouping?

  • Assignment is a question of fact. It involves considering multiple factors to determine for what part of a business an employee carries out their duties. Crucially, the time an employee spends working in a particular part of a business is not, on its own, a definitive test. So, while it might be tempting for parties to focus on percentages of time spent working for a specific part of the business, it is in vital to consider all the relevant facts and circumstances.
  • Not every employee carrying out work for the relevant client will be assigned to the organised grouping. Simply having responsibility for a specific group of employees at a particular point in time does not necessarily amount to assignment. Clear evidence linking the manner in which the services are provided and the employee's role is needed.
  • Look principally at the activities undertaken by employees immediately before the transfer when deciding whether they are assigned to a relevant group of employees (even in circumstances where those activities may have recently changed because of a series of contract terminations and/or transfers). However, to be assigned means more than merely working for a time on the relevant contract or contracts. The Tribunal needs to determine the nature of each individual's work, examining the period of time immediately before the transfer, and having careful regard to the identity of the relevant organised group(s) of employees, taking into account that there might be more than one group. An employee's work load may vary from time to time. Relying on a snapshot taken immediately before the transfer may not give a true picture.
  • No simple assumptions should be made about the assignment of managers (or others) to particular groups of employees.

Summary of issues

  1. Separate the issue of whether there is an "organised grouping" from whether a particular individual is "assigned" to that grouping. These are two analytically distinct questions.
  2. First identify the 'organised grouping'.
    • An organised grouping implies an element of conscious organisation by the employer of employees in the nature of a team. The principal purpose of this team must be to carry out of the activities in question.
    • Examine each of the relevant contracts under which services are provided and the actual working practices in deciding the relevant organised grouping(s).
  3. Second, identify those 'assigned' to the organised grouping (who transfer under TUPE).
    • Different weightings may be given to each factor and the relevant factors will inevitably vary from case to case.
    • The list of factors to consider includes: the time an employee spends in a particular part of the business; the value the employee gives to a particular part of the business; terms of employment; and allocation of the cost of the employee to particular parts of the business.
    • No one factor can determine the issue of assignment.
    • The percentage of time worked by the individual on a particular contract does not, by itself, determine whether an employee is "assigned".
    • Even if a particular individual is involved in the organised grouping, it cannot be assumed that they transfer under TUPE. The necessary factual connection to the work in question must be established.
    • Whether an employee is assigned is a question of fact to be decided based on all the circumstances of the case.
  4. Given the risks and liabilities which may flow from getting the question of an employee's assignment wrong, parties should always consider contractual protection where possible.