The law says that immediately before a “service provision change” there has to be an organised grouping of employees whose principal purpose is to carry out activities on behalf of the client. In Inex Home Improvements Ltd v Hodgkins and ors, the Employment Appeal Tribunal (EAT) held that a temporary cessation of work immediately prior to the transfer did not necessarily prevent a TUPE transfer taking place.
The claimants worked as part of a group under a contract which was subcontracted to Inex by Thomas Vale. Their employment contract provided that they might be subject to temporary lay offs “where work is temporarily stopped or is not provided by the employer”.
The claimants were subsequently laid off on various dates in November and December 2012 when the work they were doing ceased temporarily. They were told by Inex in writing that the next tranche of work should be issued by Thomas Vale in January 2013. In the event, however, the work was issued to another contractor, Localrun.
The claimants argued that their contracts had transferred to Localrun by virtue of a service provision change (SPC) under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE).
Section 3(1)(b)(ii) of TUPE states that there is an SPC when one contractor stops providing activities for a client and a different contractor carries them on for the same client.
Section 3(3)(a)(i) states that immediately before the SPC there has to be “an organised grouping of employees … which has as its principal purpose the carrying out of the activities concerned on behalf of the client”.
The employment tribunal judge held that the change of contractor amounted to an SPC, but that the employment of the claimants had not transferred over to Localrun. It reasoned that as they had been temporarily laid off and were not therefore working immediately before the date of the SPC, they were no longer “an organised grouping” whose principal purpose was to carry out the activities concerned on behalf of the client as the activity had ceased.
The EAT held that the essential question was whether a temporary cessation of work was capable in itself of dissolving the organised grouping. In answering that question, it pointed out that the law does not require the organised grouping to be actually engaged in the activity “immediately before the service provision change”.
Nor was there anything to suggest that a temporary cessation of activities at that time precluded the continued existence of the organised grouping. Although the wording of Regulation 3(1)(b)(ii) requires that “activities cease to be carried out by a contractor” and are thereafter “carried out instead by another person”, there is nothing to suggest that there cannot be a lapse of time between cessation and resumption of the work.
As the purpose of the regulations was to protect employment, the EAT said it would not make sense if a temporary cessation of work disqualified employees who were affected from being considered to be an organised grouping. Instead, common sense suggested that any temporary cessation of employment should not of itself deprive employees of their employment if there is an SPC during that time.
It was for the tribunal to decide each case on its own facts but it should take into account the purpose, nature and length of the cessation as relevant considerations in determining whether or not the organised grouping continued or not. It allowed the appeal and remitted the case to the tribunal for a re-hearing.
This is a helpful case which demonstrates a purposive approach to service provision changes under the TUPE regulations.