The Transfer of Undertakings (Protection of Employment) Regulations 2006 apply where there is a “relevant transfer” to automatically transfer the contracts of employment of employees assigned to the economic entity which is transferring from the outgoing employer (the transferor) to the incoming employer (the transferee), and to provide those employees with protection against changes to their terms of employment and/or their dismissal for the sole or principle reason of the transfer.
There are two types of relevant transfers. A “business transfer”, or “standard transfer”, involves the transfer of a business, undertaking or part of a business or undertaking where there is a transfer of an economic entity that retains its identity. Alternatively, a “service provision change” occurs where a client engages a contractor to do work on its behalf, reassigns an outsourced contract or bringing the work “in-house”.
Immediately before a service provision change there must be “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” (Regulation 3(3)(a)(i) TUPE). It is the constituency of the organised grouping which continues to raise the majority of issues and has helped shape the law in this area.
The EAT confirmed in Tees Esk and Wear Valleys NHS Foundation Trust v Harland UKEAT/0173/16 that, when determining the principal purpose of a grouping, it is relevant to consider both the employer’s intention behind organising the grouping in a particular way and the activities actually carried out immediately before the change of service provider.
For a decade prior to 5 January 2015, the NHS Trust had been responsible for providing care to a patient with severe learning difficulties – this initially involved a team of 27 people which had reduced to 11 people by 2012 as the patient’s condition improved. When the patient moved into a building shared with other disabled service users that year, the members of the patient’s team found themselves caring for other service users. Thereafter, the patient’s care continued to improve. In 2014, the contract for the patient’s care was put out to tender and won by Danshell Health Company. Prior to the change in service provision on 5 January 2016, the transferor (Tees Esk and Wear Valleys NHS Foundation Trust) informed the transferee (Danshell Health Company) that there were 11 employees assigned to the contract for the patient’s case whose employment would transfer under TUPE; the putative organised grouping subsequently shrank to 7 on the basis that these members of staff had provided care to the patient during more than 75% of their shift over the previous year.
The affected employees, whose preference was to remain in NHS employment, brought Employment Tribunal claims. At a Preliminary Hearing the Tribunal concluded that there was a change in service provision and there was an organised grouping with 11 employees assigned to it, however, the principle purpose of the grouping was no longer the provision of care to the patient at 5 January 2015.
On appeal, the NHS Trust argued that previous case law had made clear; it is the mind of the employer in organising the group of employees which defines purpose. Accordingly, looking at the actual activities being carried out by the employees concerned introduces a further unwarranted ‘objective’ test to the four stages of assessment laid down in the Rynda case:
i. Identify the service which the (alleged) transferor was providing to the client;
ii. List the activities which the staff of the transferor performed in order to provide that service;
iii. Identify the employee(s) of the transferor who ordinarily carried out those activities;
iv. Consider whether the transferor organised said employee(s) into a grouping for the principle purpose of carrying out the activities.
Indeed, the Eddie Stobart judgment cautions against focusing the amount of time employees spend on particular activities as these alone will not be determinative of the existence of an organised grouping. However, in that case the issue was one of ‘assignment’ – the extent to which the employees were organised by reference to the requirements of the client in question, an analytically distinct step – whereas in this case the issue was the ‘principle purpose’ of the organised grouping.
In considering whether an employment tribunal is entitled to look at the actual activities being carried out when assessing the ‘principal purpose’, the EAT noted that the fact that an employee was working on the transferring activities immediately before the transfer is not, on its own, sufficient to show that they are assigned to the grouping, yet, there is no requirement that the grouping in question must actually be carrying out the relevant activities immediately before the service provision change (which provides for employees to still be part of an organised grouping where there has been a temporary cessation of work).
The EAT found that the Tribunal had carried out the Rynda test and had further made a clear finding that the NHS Trust had deliberately organised the grouping of 11 employees for the purpose of looking after the patient. However, influenced by the patient’s reduced requirement for care, the Tribunal had gone on to decide that the purpose of the organised grouping had diluted over time such that it was not primarily concerned with the patient’s care immediately before the change in server provision. The key issue was whether the Tribunal was correct to focus on the activities alone in determining the principle purpose, or whether that question still required consideration of the NHS Trust’s intention behind organising the group as it did.
In the EAT’s view, whilst it is insufficient to identify the actual activities being carried out by an organised grouping without determining its principle purpose, the carrying out of those activities ultimately has to be the principle purpose, and the principal purpose of a grouping may change over time. Here, the initial purpose of putting the group of employees together was to care for the patient, and the NHS Trust had retained the grouping as an identifiable team. However, that provision of care had become a subsidiary purpose and was no longer the principle purpose of the organised grouping immediately before the transfer.
Returning to Regulation 3(3)(a)(i) TUPE, this does not ask what the transferor’s intention was behind the organised grouping (although intention will be relevant to determining the existence of an organised grouping and may suggest the principle purpose), it asks what was the principle purpose of the organised grouping, which is more than a subjective question and one which involves consideration of the actual activities being carried out by the employees assigned to the grouping immediately before the change in service provision.
TUPE can be a complicated and confusing set of regulations, and navigating the issues on a relevant transfer requires taking a methodical approach based on awareness both of the facts and law. At Jacksons Law Firm we have decades of experience advising on TUPE matters and fully understand the complexities of what the Regulations say in principle, and how they operate in practice. For more information on TUPE or for any other employment related issues, please contact a member of our Employment Team.