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TUPE update: Service Provision Changes and time spent by employeesTUPE update: Service Provision Changes and time spent by employees

» Posted on: 30 September 2014

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When employers are considering whether or not the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) applies to an Service Provision Change (an SPC), a common approach taken by employers is to focus on challenging whether or not an employee is part of an organised group of employees, which has as its principal purpose the carrying out of activities, by simply looking at the percentage of time an employee spends on an activity immediately before an SPC transfer and to use that analysis to establish if a transfer should take place.

In a recent case, the Employment Appeal Tribunal (EAT) considered the question: Does the percentage of time an employee spends on an activity immediately before an SPC transfer establish transfer? In the case, Costain Ltd v Armitage and ERH, the EAT decided that the percentage of time does not establish a transfer.

The Claimant was a Project Manager at ERH managing telecommunications projects under two contracts for the same Client (the Welsh Assembly). Only one contract provided guaranteed work: that transferred to Costain. Whilst Costain accepted that there was an organised grouping of employees to which the majority of employees were assigned it distinguished the Claimant as an unassigned trouble-shooter. The employment tribunal found that the Claimant's employment had transferred on the basis that "immediately before the transfer" 67% of his time was spent on the transferring activity.

The EAT considered the tribunal's reasons to be inadequate. The need for conscious organisation applies just as much to the assignment question as to the identification of an organised grouping of employees in the first place. A "bright lines" approach needed to be adopted at all stages: a snapshot of "time spent" failed to provide any certainty as to whether there was deliberate planning of the Claimant's work in line with the activity. Conversely, the fact that an employee is only spending a minority of his time on the activity immediately before transfer does not preclude assignment.

This case does illustrate how a tribunal can relatively easily fall into error when dealing with the issue of which employees are eligible to transfer on a service provision change. The employment tribunal here erred by jumping to the conclusion that there was an organised grouping of employees, without defining what the grouping consisted of but this is also a mistake often made by employers. The approach that ought to be taken is a two-stage exercise of defining the organised grouping, applying the relevant case law, and then determining whether the employee is assigned to it. While it is tempting to use the percentage of time spent as an objective, tangible criterion, the question of assignment will usually depend on a number of factors.

The Taylors Employment Team regularly advises clients on the intricacies of TUPE and has a proven track record of successfully challenging the application of TUPE in SPCs. If you require any guidance or advice then please do not hesitate to contact us.

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