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The Employment Appeal Tribunal (EAT) has held that workers who were temporarily laid off prior to a service provision change were still part of an organised grouping of employees for the purposes of TUPE and therefore could transfer to the new contractor.
TUPE is intended to preserve employment where there is a sale of a business or a 'service provision change' (SPC), such as an outsourcing.
An SPC occurs where there is a change int he party performing services for an end user and the activities that make up the service remain fundamentally the same before and after the transfer. For the employees of the outgoing contractor to transfer to the new provider, they must be considered an 'organised grouping of employees' prior to the change and their principle purpose must be to perform the relevant activities that constitute the service. Determining whether or not there has been an SCP will turn on the facts of each case.
In Inex Home Improvements Ltd v Hodgkins and others UKEAT/0329/14, Inex Home Improvements Ltd (Inex) was contracted by Thomas Vale Construction plc (Thomas Vale) to provide painting and decorating services. The work was released in stages and completed by Inex's employees.
In November and December 2012, stage 8 was completed and it was anticipated that the next stage would be released to Inex in January 2013. As a consequence of the short cessation of work, Inex laid off the employees working on the job temporarily until the next stage was released. However, instead of issuing stage 9 to Inex, Thomas Vale issued work to another contractor, Localrun (Decorating) Ltd (Localrun). The nature of the work required under stage 9 was substantially the same as the work undertaken by Inex's employees under stage 8.
The Inex employees brought claims in the employment tribunal against Inex and Localrun, asserting that their employment should have transferred to Localrun pursuant to TUPE. The Employment Tribunal (ET) has held that the workers had not transferred because, immediately before the SPC, they were not an 'organised grouping of employees' due to the fact that they were not performing the activities due to the temporary lay-off. Inex appealed.
The EAT decided that a temporary cessation of work did not prevent the employees being an 'organised grouping' and therefore in principle a temporary lay-off would not preclude the transfer of their employment to the new contractor. The EAT found that there was nothing in the wording of TUPE that required the employees to be actually performing the activities at the time of the SPC.
The case has been remitted back to the ET to determine whether the Inex employees were an organised grouping of employees immediately before the SPC. This will be a question of fact including the length, reason and nature of the lay-off and the expectation that work would resume.
The case shows that a temporary cessation of work prior to a service provision change will not prevent a TUPE transfer. This decision follows a line of previous cases regarding business transfers and is therefore an unsurprising outcome; however, it does provide useful clarity that this approach applies to SPCs.
Employers undertaking due diligence prior to a service provision change will therefore need to consider raising enquiries to ascertain whether any employees have been or will be laid off or have ceased work for any other reason prior to the transfer.