Labour & European Law Review Weekly Issue 274 21 June 2012
Under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE), there has to be “an organised grouping of employees” for a service provision change to have occurred. In Seawell Ltd v Ceva Freight (UK) Ltd and Moffat, the Employment Appeal Tribunal (EAT) said that a “grouping” could not be said to be “organised” if employees just happened to end up working mostly on tasks that benefitted a particular client.
Mr Moffat worked as a logistics co-ordinator for Ceva which provided freight forwarding and management logistics to companies, one of which was Seawell, a platform drilling business. Ceva operated an “inbound” and “outbound” operation for the company.
He spent 100 per cent of his time on the outbound part of the Seawell contract, although Seawell was not Ceva’s only client. Other staff also worked on it but worked for other contracts at the same time.
Seawell made clear when it became a client in or about April 2008 that the relationship would not be long term, and ended the contract in January 2010 when it took the work back “in house”.
Ceva told Mr Moffat that his employment had transferred over to Seawell, which it denied. He brought unfair dismissal claims against both companies.
The regulations state that there is a service provision change when:
“activities cease to be carried out by a contractor or a subsequent contractor on a client’s behalf ... and are carried out instead by the client on his own behalf”,
and immediately before the service provision change there is:
“an organised grouping of employees ... which has as its principal purpose the carrying out of the activities concerned on behalf of the client; and “the activities concerned do not consist wholly or mainly of the supply of goods for the client’s use”.
The Tribunal held that Seawell was carrying out the same activities after January 2010 that Ceva had carried out before that date. As an “organised grouping” could be made up of just one employee and as Mr Moffat’s principal purpose was carrying out “the activities concerned”, TUPE applied.
Mr Moffat’s contract had therefore transferred over to Seawell and his claim of unfair dismissal was upheld. Ceva appealed.
The EAT, however, disagreed. Referring to the case of Eddie Stobart Ltd v Moreman and ors, the EAT said that the phrase “organised grouping” required employees to be “organised in some sense by reference to the requirements of the client in question.”
In other words, a situation where employees were deliberately brought together for the purpose of the client’s work. It did not therefore apply in circumstances where employees just happened to end up working mostly on tasks that benefitted a particular client.
The Tribunal did not find that the “outbound” operation had the principal purpose of carrying out the Seawell work, nor that Ceva had specifically formed a grouping of employees (consisting of Mr Moffat) to carry out the Ceva work. The fact that he spent 100 per cent of his time on that contract did not mean he transferred.
The EAT pointed out that when Seawell took the contract back in-house, it took over all aspects of the work that had previously been done by Ceva. In other words, the work that had been done by the other employees working on the contract as well as those duties that Mr Moffat had undertaken.
He was not therefore carrying out “the activities concerned” as they were being done by several people, although he was the only one who worked solely on the Seawell contract.
It was illogical said the EAT for the Tribunal to conclude that because Mr Moffat spent 100 per cent of his time on Seawell work, he carried out 100 per cent of the work.That being so, there was no service provision change and no relevant transfer.
The EAT took a narrow approach in this case as to what constitutes a service provision change, making it necessary to establish that the grouping of employees had the principal purpose of carrying out the work.