This paper concerns part of TUPE regulation 4(1) and regulation 3(3)(a). There’s a summary of the main points at the end of it, on page 7.
Regulation 4(1) states:
…a relevant transfer shall not operate so as to terminate the contract of employment of any person employed by the transferor and assigned to the organised grouping of resources or employees that is subject to the relevant transfer, which would otherwise be terminated by the transfer, but any such contract shall have effect after the transfer as if originally made between the person so employed and the transferee. [emphasis added]
Regulation 2 provides that:
“assigned” means assigned other than on a temporary basis
references to “organised grouping of employees” shall include a single employee
Regulation 4(1) is concerned with “an organised grouping of resources” and “an organised grouping of … employees”. The latter is a reference to a Service Provision Change (“SPC”) and the former to a conventional [i.e. non-SPC] TUPE transfer.
Regulation 4(1) is, of course, the key provision in TUPE and the highlighted phrase within the regulation is potentially relevant whenever TUPE is being considered. However, in reported cases at least, the phrase usually crops up in connection with SPC cases and virtually all of the recent cases are about SPCs. This is probably because most people these days (be they employment lawyers, employment judges or employers) are comfortable dealing with conventional TUPE transfers and tend to get into difficulties, if at all, in relation to SPCs or potential SPCs. This paper therefore concentrates on SPCs, but what it has to say about the meaning of “assigned to” and “organised grouping” applies as much to conventional TUPE transfers as to SPCs.
TUPE regulation 3(3)(a), which is the relevant part of the SPC provisions, is as follows:
(3) The conditions referred to in paragraph (1)(b) [the conditions that need to be satisfied for there to be an SPC] are that—
(a) immediately before the service provision change—
(i) there is an organised grouping of employees situated in Great Britain which has as its principal purpose the carrying out of the activities concerned on behalf of the client;
(ii) the client intends that the activities will, following the service provision change, be carried out by the transferee other than in connection with a single specific event or task of short-term duration;
Summary of the law on SPCs
Recently , the Employment Appeal Tribunal (“EAT”) provided a useful summary of the law relating to SPCs which is worth setting out almost in full in this paper, first, for its own sake, secondly, because it helps to put regulations 3(3)(a) and 4(1) in context and thirdly, because it summarises the effect of both of those regulations. Most relevant to the subject matter of this paper are sub-paragraphs (5) and (6).
(1) The prospective SPC in this case arises under reg. 3(1)(b)(ii), that is where ‘activities’ cease to be carried on by a contractor… on a client's… behalf and are carried on instead by a subsequent contractor...
(2) The expression ‘activities’ is not defined in the Regulations. Thus the first task for the Employment Tribunal is to identify the relevant activities carried out by the original contractor…
(3) The next (critical) question for present purposes is whether the activities carried on by the subsequent contractor after the relevant date… are fundamentally or essentially the same as those carried on by the original contractor. Minor differences may properly be disregarded. This is essentially a question of fact and degree for the Employment Tribunal…
(4) Cases may arise… where the division of services after the relevant date, known as fragmentation, amongst a number of different contractors means that the case falls outside the SPC regime...
(5) Even where the activities remain essentially the same before and after the putative transfer date as performed by the original and subsequent contractors an SPC will only take place if the following conditions are satisfied:
(i) there is an organised grouping of employees in Great Britain which has as its principal purpose the carrying out of the activities concerned on behalf of the client;
(ii) the client intends that the transferee, post-SPC, will not carry out the activities in connection with a single event of short-term duration;
(iii) the activities are not wholly or mainly the supply of goods (rather than services) for the client's use...
(6) Finally, by reg. 4(1) the Employment Tribunal must decide whether each Claimant was assigned to the organised grouping of employees.
It’s necessary to issue two small ‘health warnings’ before considering the law in this area.
First, most of the relevant cases in the last 12 months are Scottish EAT cases (meaning an English or Welsh employment tribunal (ET) isn’t bound to follow them) and/or are decisions of a particular judge whose judgments have sometimes been adversely commented upon. Nevertheless, it’s reasonable to assume that tribunals, whether north or south of the border, will in practice apply the law as set out in those cases.
Secondly, there is a temptation, when thinking about a potential TUPE situation, to say to oneself, “This is just like the situation in such-and-such case. In that case, TUPE didn’t apply and so clearly TUPE doesn’t apply in the situation I’m dealing with.” This is a temptation to be resisted. Although it is often useful to look at the facts of decided cases to get a feel for how things are dealt with in practice, it has to be borne in mind that in theory many cases could be decided either way. Any given case has been decided on the facts by a particular ET in a particular way. The EAT, when it looks at the case, decides just whether the ET got the law right, not the facts. It is perfectly possible for two identical cases to be decided differently by two different ETs both applying the law correctly.
Please note the following general point about interpreting the Regulations:
…there is no rule that the natural meaning of the language of the Regulations must be stretched in order to achieve transfer in as many situations as possible. …. the policy considerations point, if anything, the other way. If the putative “grouping” does not reflect any existing organisational unit there are liable to be real practical difficulties in identifying which employees belong to it. It is important that on a transfer employees should, so far as possible, know where they stand.
Similarly, because the SPC part of the Regulations doesn’t come from European law but is a British invention, there is no scope for adopting a ‘purposive’ interpretation of them to ensure that they conform with European law, except to the extent that they impinge upon the parts of the Regulations that relate to conventional, non-SPC, transfers.3A
…there may be issues where a purposive interpretation is appropriate with respect to service transfer provisions and where the courts should approach matters as they would similar issues relating to transfers of undertakings. For example, it may be necessary not to be too pedantic with respect to the question whether the activities carried on before and after the transfer are sufficiently similar to amount to the same service; or to take a broad approach to the question whether an employee is employed in the service transferred…3A
Organised grouping of employees situated in Great Britain
“organised grouping of employees” means:
The same in regulation 4(1) as in regulation 3(3)(a)(i)
A number of employees which is less than the whole of the transferor’s entire workforce4 [this is questionable – why can’t it be the whole of a company’s workforce?]
Deliberately organised for the purpose of carrying out the activities required by the particular client contract4; “it connotes a deliberate putting together of a group of employees for the purpose of the relevant client work – it is not a matter of happenstance” [this, too, is debatable to an extent – the Regulations clearly require some form of conscious organisation and also, as explained below, require the organised grouping of employees to have a particular principal purpose, but the Regulations say nothing to the effect that the organising must have been done for any particular purpose]
Working together as a team4 [it isn’t clear whether this is supposed to be a separate, free-standing requirement, nor if it is, where it comes from – the Regulations don’t mention teams or anything like that].
“organised grouping” does not mean the same as “group”3. It isn’t enough that there is a group of employees who, as a matter of fact, mostly work on tasks required by a particular client contract – the employees must be organised in some sense by reference to the requirements of the client in question3:
The statutory language does not naturally apply to a situation where, as here, a combination of circumstances – essentially, shift patterns and working practices on the ground – mean that a group (which, NB, is not synonymous with a “grouping”, let alone an organised grouping) of employees may in practice, but without any deliberate planning or intent, be found to be working mostly on tasks which benefit a particular client. The paradigm of an “organised grouping” is indeed the case where employers are organised as “the [Client A] team”, though no doubt the definition could in principle be satisfied in cases where the identification is less explicit. 3
Similarly, although one individual can be an “organised grouping of employees”, the fact that one person as a matter of fact does nothing but work on a particular client contract is not determinative of the question of whether there is a relevant “organised grouping of employees”.5
Unlike in relation to a conventional TUPE transfer, where TUPE can apply even if the part of the undertaking that transfers does not exist as a separate economic entity until the moment of transfer , “it is the essence of a service provision change that the “organised grouping” should have existed prior to the loss of the contract”3.
“situated in Great Britain”: the group must be based in Great Britain, although one or more person within the group can work outside GB without this necessarily meaning the group as a whole is not based in GB.4 (Anomalously, the provisions dealing with conventional [non-SPC] transfers refer to the United Kingdom rather than Great Britain).
Having as its principal purpose the carrying out of the activities concerned
“principal purpose”: the words should bear their ordinary meaning. The organised grouping of employees need not have as its sole purpose the carrying out of the relevant client activities, but that must be its principal purpose4.
“the activities concerned”: what was it that the client required of the transferor or employer; what exactly was the service that was contracted for?4
The activities will, following the SPC, be carried out by the transferee
"... changes in volume of work are relevant when considering whether or not “the activities” carried out by the client on his own behalf from the point of change are “the activities” which were, immediately before the change, being carried out by the “organised grouping of employees”…” . In other words, if, after the change, the alleged transferee does a lot less work of the type that the organised grouping of employees did before the change, then potentially they won’t transfer, because what the transferee is doing may not be “the [same] activities”.
Remember, however, as above: the question is “whether the activities carried on by the alleged transferee are fundamentally or essentially the same as those carried out by the alleged transferor”. It was not “the intention of the introduction of the new concept of service provision change that that concept should not apply because of some minor difference or differences between the nature of the tasks carried on after what is said to have been a service provision change as compared with before it or in the way in which they are performed as compared with the nature or mode of performance of those tasks in the hands of the alleged transferor”.
Although this paper is not about the definition of an SPC in regulation 3(1)(b), it should be noted that, thanks to an October 2012 decision of the Court of Appeal3A, it is now clear beyond a shadow of a doubt that for there to be an SPC, the client on whose behalf the activities are being carried out must be the same before and after the change.
Assigned to the organised grouping
The issue of assignment needs to be considered separately from that of “organised grouping” because, “...the issues of whether there existed an organised grouping satisfying the requirements of regulation 3(3)(a)(i) and of whether, if so, all or any of the claimants were assigned to that grouping are analytically distinct”4. However, “…the two points nevertheless self-evidently overlap to a very considerable extent, since for the purposes of considering who is assigned to a putative “organised grouping” it is necessary to identify what that grouping consisted of.”4
In relation to the regulation 4 issue of assignment:
“the question [was he/she “assigned”?] has to be asked in respect of each individual employee. It is not to be assumed that every employee carrying out work for the relevant client is assigned to the organised grouping.”10
even in a "single client" case, it shouldn’t be assumed that every employee is necessarily “assigned”10. “If, for instance, an employee’s role is strategic and is principally directed to the survival and maintenance of the transferor as an entity, it may then not be established that that employee was so assigned. It will all be a matter of the facts and circumstances of the individual case”10
“It is not … the law that every employee who can be linked in some way to the relevant client activity is to be regarded as assigned under reg 4… the fact that a causal chain can be shown does not determine the issue.”10
“The question is: was the particular employee, prior to the transfer, assigned to the organised grouping of employees which was organised to have as its principal purpose the carrying out of the activities for which the client contracted, on the client's behalf?”10 [As mentioned above, care has to be taken with this. The phrase “organised to have as its principal purpose” could mean that the reason for organising the grouping of employees has to be to make its principal purpose the carrying out of the activities. The Regulations, however, merely require that the grouping be organised and that it have a particular principal purpose; it shouldn’t be necessary to ask why the organised grouping of employees is organised the way it is. Also, so far as concerns the phrase “on the client’s behalf”, the Regulations require no more and no less than that the principal purpose of the organised grouping is the carrying out of the activities on behalf of the client; it is not, for example, the case that the group has to have been organised on the client’s behalf.]
Examples of individuals who would not be assigned in a "single client" case include: “a person employed … as a handyman at the transferor's Head Office keeping the building in a suitable condition for client work to be administered from it or as a cook there to maintain the nutritional status of the directors thereby enabling them to work efficiently”10.
Finally, a small point, relating to the fact that “assigned” in the Regulations does not include “assigned … on a temporary basis”, that may not crop up much in practice but is worth bearing in mind: if an employee is on his notice period when the SPC takes place, this does not make him only temporarily assigned to the part of the transferor he worked for.
The case that decides that small point is also authority for the proposition that when an employee is not in work at the date of the alleged transfer / SPC, e.g. is on "garden leave" or long-term sick leave, it is a question of fact whether the employee was “assigned” at that date.
Examples of decided cases
The employee, O, had worked for a particular business unit which was sold as part of a transaction that TUPE applied to. His job title referred in terms to that business unit. His name had been on the preliminary list of those to be transferred and when the written materials about the transfer were circulated, they were sent to him in the same way they were sent to all those who were transferred. He had no other fixed employment with the employer at the date of transfer. By the time of transfer, however, there was no more work for him in that business unit and he was not doing any work in that business unit. Decision: TUPE didn’t apply to O as he was not assigned to the transferring organised grouping.
M was an employee of a logistics company, C. C had a number of clients, including a north sea oil company, S. The relevant part of C’s workforce was divided into two: an inbound goods group and an eight-strong outbound goods group, which M was part of. Within the outbound goods group, M was the only one who spent most of his time on the contract with S. M in fact spent 100 percent of his working time on that contract and was “in charge of the [relevant] activity and made it happen”, albeit that other employees worked on the contract too. S then took all of the activities covered by its contract with C, including everything M did, "in house". Decision: TUPE didn’t apply to M as there was no relevant organised grouping to which he was assigned; the only organised groupings were the inbound and outbound goods groups and there was no ‘S contract outbound team’ or equivalent.5
The claimant, M, was an employee and director of a company, L, that provided services to homeless people. Over a period of years, L provided its services to a particular local authority, E, pursuant to a series of contracts. At a time when E was L’s only client, E took the provision of the services being provided by L "in house". M’s work for L included an element of direct service provision but also included a significant strategic element and a distinction could be drawn between what she did that constituted providing services, through L, for E and what she did to keep L going. The major things she did to keep L going were, though, helping put together L’s tenders for E’s work and helping to ensure that L’s staff satisfied the relevant regulatory requirements to enable them lawfully to provide the services to E. M also had managerial responsibility for individuals who provided the services that were taken "in house". Decision: TUPE didn’t apply as the relevant organised grouping consisted of the individuals who provided direct services to users and M was not assigned to that group.10
Summary & Conclusions
In a potential SPC situation, there are broadly four questions to ask about the situation as it is immediately before the change. What order it is appropriate to ask them in may well be different in different situations, but even where the answer to some or all of them seems obvious, it’s a useful discipline to ask them all in every case where the conclusion seems to be that TUPE applies.
The organised groupings question: does the transferor have any organised groupings of employees based in Great Britain [not: what groups of employees are there]?
The principal purpose question: is the main purpose of any such organised groupings the carrying out of particular activities [other than the supply of goods] for a client of the transferor and if so what are those activities [not: does a particular employee or group of employees happen to devote most of his/her/its time to particular activities]?
The activities question: are the activities identified in answer to the second question going to be carried out for the client by the new service provider [other than in connection with a single specific event or task of short-term duration]; are the activities the new service provider is going to carry out fundamentally or essentially the same activities?
The assignment question: is the employee in question assigned [other than temporarily] to any of the organised groupings of employees identified in answer to the first question that has as its main purpose the carrying out of the activities identified in answer to the second and third questions?