TUPE: EAT reminder about interplay between "organised grouping of employees" test and the question of assignment
Published 8 October 2014
Mr Armitage was initially employed as a Project Engineer for ERH Communications Ltd (ERH), a company that provided communications services for the Welsh Assembly, relating to a programme of planned highway maintenance throughout Wales. These services were provided under the All Wales Regional Maintenance Contract (the AWRMC). There was also a framework agreement between ERH and the Welsh Assembly for additional works, and an ancillary contract under which ERH had no guarantee of work, but could be required to bid for works not covered by the AWRMC.
In October 2012, Mr Armitage was promoted to Project Manager. This role involved the management of projects of varying complexity and value, including the AWRMC project and any works arising out of the framework agreement and ancillary contract. The AWRMC came up for tender, and ERH lost the contract to Costain Ltd (Costain). A service provision change took place on 1 February 2013. The ancillary works contract, which was outside the AWRMC, did not transfer.
During the consultation process, Mr Armitage was told that he would transfer to Costain under TUPE, as ERH estimated that he spent 80% of his time on the AWRMC. Costain queried whether TUPE applied, as it appeared that he spent most of his time on one-off ancillary projects, rather than the AWRMC. Costain took the view that Mr Armitage had not been assigned to the AWRMC and, as such, would not transfer into its employment. Mr Armitage brought various claims against ERH and Costain.
The employment tribunal ruled that Mr Armitage was assigned to an organised grouping of employees immediately before that group was transferred from ERH to Costain, and that his employment automatically transferred to Costain under TUPE. The employment judge concluded that it was clear that there was an organised grouping of employees, organised by reference to the requirements of the Welsh Assembly in respect of the AWRMC. It rejected Costain's assessment that Mr Armitage spent only 40% of his time on the AWRMC, although accepted that the original figure of 80% was too high.
Costain appealed to the EAT. The EAT allowed Costain's appeal and remitted the case to a differently constituted employment tribunal. The tribunal's conclusion that the organised grouping of employees "had as its principal purpose the carrying out of activities... on behalf of the Welsh Assembly government" was too broad, as it failed to take account of the distinction between the AWRMC and the other works carried out under the ancillary framework agreement. This was crucial, given the nature of Mr Armitage's role, as the AWRMC was the subject of the service provision change, whereas the ancillary works contract was not. The tribunal should have first defined the organised grouping of employees, and then determined whether Mr Armitage had been assigned to that grouping.
What this means for employers:
This case illustrates how a tribunal, and therefore an employer, 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. It should have performed the two-stage exercise of defining the organised grouping, and then determining whether the employee is assigned to it. While it is tempting to use percentage of time spent to determine the question of assignment, other factors need to be taken into account.