TRANSFER OF UNDERTAKINGS. 1. Personal Injury and Insurance.2-6. Alemo-Herron v Parkwood Leisure Ltd SC 7-9

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1 TRANSFER OF UNDERTAKINGS 1. Personal Injury and Insurance Recent activity on the TUPE front: Alemo-Herron v Parkwood Leisure Ltd SC 7-9 Spaceright Europe Ltd v Baillavoine CA Key2Law (Surrey) LLP v De Antiquis CA Abellio London Ltd v Musse & others EAT Johnson Controls Ltd v Campbell & others EAT Argyll Coastal Services Ltd v Stirling & others EATS Eddie Stobart Ltd v Moreman & others EAT Gabriel v Peninsula Business Services Ltd & another EAT Meter U Ltd v Ackroyd & others; v Hardy & others EAT Seawell Ltd v Ceva Freight (UK) Ltd & another EATS Taurus Group Ltd v Crofts & another EAT The Manchester College v Hazell & another EAT SNR Denton UK LLP v Kirwan & another EAT Liddell s Coaches v Cook & others EATS McCarrick v Hunter CA

2 PERSONAL INJURY AND INSURANCE Injury before transfer 1. In the employment context a personal injury claim can be expressed as: negligence, breach of statutory duty or breach of contract. In whichever form it is pleaded, it is capable of transfer Martin v Lancashire County Council [2001] ICR 197 (CA), paragraph 38 (sometimes referred to in shorthand as Bernadone after Bernadone v Pall Mall Services Group Ltd with which it was a conjoined appeal). Though Martin was decided under the 1981 Regulations the wording of the relevant regulation (Regulation 4(2)(a) 1 under the 2006 regulations, Regulation 5(2)(a) under the 1981 regulations) has not materially changed. Insurance 2. s.1(1) Employers Liability (Compulsory Insurance) Act 1969 all employers who are not exempted are to insure against liability in respect of personal injury sustained by employees arising out of and in the course of their employment. 3. The Act is one to which employees are not parties but is for their benefit. 4. Does the transferee get the benefit of the transferor s insurance? 1 Without prejudice to paragraph (1), but subject to paragraph (6), and regulations 8 and 15(9), on the completion of a relevant transfer (a) all the transferor s rights, powers, duties and liabilities under or in connection with any such contract shall be transferred by virtue of this regulation to the transferee. Regulation 4(6) does not have any bearing on matters; neither does Regulation 8 or Regulation 15(9). 2

3 5. The transferee s insurer will not be liable for the damages of an employee who is transferred and suffered injury prior to transfer. It is highly unlikely that a transferee s insurance would cover a liability arising before an employee became an employee of a transferee. 6. The transferee s insurance policy will cover employees in their employment during the currency of that policy who suffer injury during the currency of that policy. This is what is known as being on risk. 7. The transferee will be able to resort to the insurance policy of the transferor Martin v Lancashire supra, paragraphs 44, 45, 48 and 49 though it was an issue only in Bernadone. 8. A transferor had before the transfer a contingent right to recover from the insurers under the policy in respect of liability to any employee and one which arises or is in connection with the employee s contract of employment. 9. The transferor s contingent right to recover from its insurers under the insurance contract for damages successfully claimed by an employee also transfers under Regulation 4(2)(a) (see footnote above) to the transferee. 10. However, the employee and the transferee get the benefit (in effect) of the insurance policy on the same terms as the transferor: that the insurer has no valid basis for avoiding the policy. Therefore indemnities from the transferor should still be obtained. 3

4 11. The regulations are to be construed so as to ensure that on a transfer an employee is not deprived of rights against his employer which the employee would otherwise have had had he continued in employment with the transferor which arise out of or are connected with his contract of employment Martin paragraph The 1969 Act does not give an employee a right of action against the employer but it was in part enacted for the employee s benefit; if the employer became insolvent, the employee would have the benefit of the Third Parties (Rights Against Insurers) Act 1930 should the employer become insolvent Martin paragraph There is no injustice to the transferor s insurer as they will only be meeting a liability for which they have already taken the premium. 14. What about companies who are exempted from the Employers Liability (Compulsory Insurance) Act 1969? 15. A transferee will inherit uninsured claims. 16. Regulation 17 TUPE imposes on a transferor and transferee joint and several liability in respect of personal injury: (1) Paragraph (2) applies where (a) by virtue of section 3(1)(a) or (b) of the Employers Liability (Compulsory Insurance) Act 1969 ( the 1969 Act ), the transferor is not required by that Act to effect any insurance; or 4

5 (b) by virtue of section 3(1)(c) of the 1969 Act, the transferor is exempted from the requirement of that Act to effect insurance. (2) Where this paragraph applies, on completion of a relevant transfer the transferor and the transferee shall be jointly and severally liable in respect of any liability referred to in section 1(1) of the 1969 Act, in so far as such liability relates to the employee s employment with the transferor. 17. This works for an employee and transferee as long as the transferor is in existence and has assets to satisfy any judgment in favour of the employee or any indemnity in favour of the transferee. 18. Therefore due diligence is a must for a transferee. 19. Therefore warranties and indemnities remain a must for a transferee. 20. This is one situation where you have the belt and the braces. NB In Richardson v Pitt-Stanley [1995] ICR 303 the Court of Appeal decided that failure of a company to arrange insurance under the 1969 Act did not expose the directors to civil liability even though the directors were exposed to criminal liability for the same failure. 5

6 RECENT ACTIVITY ON THE TUPE FRONT Alemo-Herron v Parkwood Leisure Ltd [2011] ICR 920: Supreme Court TUPE 1981 regs 5(1)(2) (now regs 4(1)(2) Tupe 2006) The continuing impact of collective agreements and the negotiation of new collective agreements after there has been a transfer to an employer who is not a party to the negotiations for the collective agreements. 4(1): Except where objection is made under paragraph (7), a relevant transfer shall not operate so as to terminate the contract of employment of any person employed by the transferor and assigned to the organised grouping of resources or employees that is subject to the relevant transfer, which would otherwise be terminated by the transfer, but any such contract shall have effect after the transfer as if originally made between the person so employed and the transferee. 4(2): Without prejudice to paragraph (1), but subject to paragraph (6), and regulations 8 and 15(9), on the completion of a relevant transfer (a) all the transferor s rights, powers, duties and liabilities under or in connection with any such contract shall be transferred by virtue of this regulation to the transferee; and (b) any act or omission before the transfer is completed, of or in relation to the transferor in respect of that contract or a person assigned to that organised grouping of resources or employees, shall be deemed to have been an act or omission of or in relation to the transferee. 1. The Claimants were former employees of Lewisham LBC. They were first transferred to CCL Ltd and then transferred to Parkwood. 6

7 2. The Claimants contracts included the benefit of collective agreements negotiated from time to time by their Union with a representative body of local authorities. These agreements included rates of pay. CCL Ltd honoured those rates of pay. 3. Pay increases were negotiated for Parkwood initially refused to honour the rates, Parkwood as a private employer had not been a party to the negotiations. The Claimants brought a claim and without admission of liability Parkwood agreed to pay the increases for 2004 and 2005 but would not honour the increase for The Claimants brought a further claim. 4. The ET dismissed the Claimants claims; the EAT allowed the Claimants appeals and remitted the claims; the CA allowed Parkwood s appeal and the ET s order was restored. 5. Is the effect of regulations 5(1)(2) TUPE 1981 such that the Claimants were entitled to the pay increases negotiated after they were transferred to Parkwood? 6. The CA had applied Werhof v Freeway Traffic Systems Gmbh [2006] ECR I-2397: transferees are not committed to any collective agreement made after the expiry of the agreement in place at the date of the transfer; therefore Whent v T Cartledge Ltd [1997] IRLR 153 which applied common law principles of contract to the situation was not to be followed. 7

8 7. The Claimants claim the contract should be given effect according to their terms, which includes the collective agreements; Parkwood say only the collective agreements as transferred are protected. 8. On Werhof : the Claimants contended that even if Werhof is more restrictive than regulation 5, EC law permits domestic law to be more generous; Parkwood contended that regulation 5 was to do no more than implement the EC Directive and therefore must be construed according to the terms of the Directive and rulings of the ECJ. 9. In substance there is no difference between regulation 5(1)(2) and article 3(1) of the Directive. The Supreme Court concluded that Parliament intended to do no more than implement article 3(1). 10. If the ordinary and natural meaning of regulation 5(1)(2) is more generous than article 3(1) effect can be given to that meaning unless Werhof indicates that a court may not do so. 11. Werhof is distinguishable on its facts (Germany has a statutory framework in dealing with collective agreements; England and Wales has the law of contract) and on the legal issue: article 3(1) did not preclude the ruling of the German Federal Labour Court. Does article 3(1) prevent domestic law from being more extensive? Werhof does not provide an answer and therefore there has been a reference to the ECJ. 8

9 Spaceright Europe Ltd v Baillavoine [2012] ICR 520, Court of Appeal Administrator transfer whether particular transfer or transferee needs to be in contemplation availability of ETO where business is being sold TUPE 2006 regulation 7(1): Where either before or after a relevant transfer, any employee of the transferor or transferee is dismissed, that employee shall be treated for the purposes of Part X of the 1996 Act [Employment Rights Act] (unfair dismissal) as unfairly dismissed if the sole or principal reason for his dismissal is- (a) the transfer itself; or (b) a reason connected with the transfer that is not an economic, technical or organisational reason entailing changes in the workforce. 1. Some employees were dismissed by administrators prior to a TUPE transfer. 2. Was the reason for dismissal connected with the transfer so as to make the dismissal automatically unfair? 3. ET found for B and the EAT agreed. 4. U Holdings Ltd went into administration on B was dismissed with 43 others on the same day. U subsequently went into liquidation. On the administrators sold the business and assets of U to S. Any liability for unfair dismissal passed to S under TUPE. 9

10 5. S contended that when 7(1) refers to the transfer there has to be an actual transfer in contemplation. 6. Just as the ET and the EAT rejected this, so did the CA: the natural and ordinary meaning of the language does not require a particular transfer or transferee to be in existence or contemplation at the time of the dismissal. It is a matter for the objective assessment of the evidence before the ET. 7. It is a common experience of life that an event (A) may sensibly be considered to be connected with a later event (B), even though it was not known, contemplated or foreseen at the time of event (A) that event (B) would happen (para 45, Mummery LJ). 8. There was no ETO reason available to S as for an ETO reason to be available requires an intention to change the workforce and to continue to conduct the business, as distinct from the purpose of selling it. Therefore ETO is not available to administrators to make the business a more attractive proposition to a purchaser. 9. The approach to connected with in Harrison Bowden Ltd v Bowden [1994] ICR 186 and Morris v John Grose Group Ltd [1998] ICR 655 is to be preferred to Ibex Trading Co Ltd v Walton [1994] ICR 907 which is not to be followed. 10

11 Key2Law (Surrey) LLP v De Antiquis (Secretary of State for Business, Innovation and Skills intervening) [2012] ICR 881, Court of Appeal The administration of a company under an order of the Court are not analogous insolvency proceedings attracting the disapplication of regulations 4 and 7 TUPE TUPE 2006 regulation 8(7): Regulations 4 [effect of relevant transfer on contracts of employment] and 7 [dismissal of employee because of a relevant transfer] do not apply to any relevant transfer where the transferor is the subject of bankruptcy proceedings or any analogous insolvency proceedings which have been instituted with a view to the liquidation of the assets of the transferor and are under the supervision of an insolvency practitioner. 1. D was employed as an assistant solicitor at the Epsom office of DK DK dismissed D on grounds of redundancy joint administrators of DK were appointed by the court DK enters into management contract with K for its Epsom office D brings claims for pay in lieu of notice, holiday pay, unfair dismissal and sex discrimination. 2. D claims that as K were the transferee of the Epsom part of DK s undertaking then they are liable under regulations 4 and ET: (a) there was a transfer to K; (b) there was an SPC; (c) regulations 4 and 7 were not disapplied by regulation 8(7). The ET applied a fact based enquiry to determine aspect (c), applying Oakland v Wellswood (Yorkshire) Ltd [2009] IRLR

12 4. The EAT agreed with the Secretary of State that the fact based approach was wrong and the absolute approach applied. Applying that approach the EAT concluded that administration proceedings did not constitute insolvency proceedings which have been instituted with a view to the liquidation of the assets of the transferor (Schedule B I Insolvency Act 1986) and therefore were not analogous insolvency proceedings instituted with a view to liquidation of [DKs] assets within regulation 8(7). 5. The phrase analogous insolvency proceedings is taken from article 5(1) of Council Directive 2001/23/EC. 6. Regulations 8(7) and 8(6) 2 exist so that TUPE does not discourage potential purchasers of the business from acquiring the business (Secretary of State for Trade and Industry v Slater [2008] ICR 54, CA). 7. The administrator has to perform his functions as quickly and efficiently as is reasonably practicable in the interests of the company s creditors and applying one of three approaches to that subject to their own hierarchy: (a) rescuing the company as a going concern; (b) achieving a better result for the company s creditors as a whole than would be likely if the company were wound up; (c) realising property in order to make a distribution to one or more secured or preferential creditors (paragraphs 3(1) (4) and 4, Schedule B I). 2 8(6): In this regulation relevant insolvency proceedings means insolvency proceedings which have been opened in relation to the transferor not with a view to the liquidation of the assets of the transferor and which are under the supervision of an insolvency practitioner. 12

13 8. However in a high proportion of administrations it will be apparent both before and after administration that (a) is not achievable and (b) is foreseen as being the achievable objective. 9. The objective to be chosen is a matter for the administrators judgment based on the hierarchy and is not prescribed by the court, but it is a matter in relation to which the court will have evidence before an order is made as an order can only be made if it is reasonably likely to achieve the purpose of administration (this fuels the pre-pack approach to administration). 10. Regulation 8(7) is intended to give effect to article 5(1). Article 5(1) codifies various decisions of the ECJ from Abels v Administrative Board of the Bedrijfsvereneging voor de Metaalindustrie en de Electrotechische Industrie [1985] ECR 469 to Europieces SA v Sanders [1998] ECR I bankruptcy proceedings clearly includes insolvent liquidation of corporate transferors. 12. Abel s case determined that in the case of insolvent liquidations the protection of employees that was the purpose of the Directive must be sacrificed to the superior commercial interests of the transferor s creditors; transfers that were part of an insolvency regime other than liquidation did not attract the Directive s protection. 13

14 13. Abel focused on the object of the procedure being used. The same approach was applied in D Urso v Ercole Marelli Elettromeccanica Generale Sp A [1991] ECR I The absolute approach focuses on the purpose of administration appointments generally, an exercise focused on the purpose of administration in Schedule B I (as favoured by the Secretary of State and D). The fact based approach focuses on the particular administration appointment that has been made (favoured by K). 15. The determination of whether or not administration proceedings are, in any particular case, to be characterised as analogous insolvency proceedings should not depend on the evidence leading to the making of the appointment of the administrators. There is the risk of uncertainty: here, it had been suggested that objective (b) was possible, but objective (a) could not be ruled out; meanwhile neither (b) nor (a) proved possible and (c), which had not been mentioned as a possibility, was the eventuality. 16. The identification of a particular purpose and the evidence in support is with a view to satisfying the court that an administration order should be made as it is reasonably likely to achieve the purpose of the administration. But the order is made for the purpose of administration in paragraph 3, which keeps all the administrators options open. 14

15 17. It is odd to conclude that article 5(1) should depend on the expectations that led to the making of an order, when the events following its making may require a different course to be followed. 18. Article 5(1) is concerned with the purpose of analogous insolvency proceedings which have been instituted, that means a consideration of the administration order when actually made rather than the hopes for it prior to its making. The requirement that proceedings have been instituted is replicated in regulation 8(7) alongside analogous insolvency proceedings. 19. If proceedings have to have been instituted then the regulation must relate to the moment following the order having been made by the court not any time before the order of the court was made. If it were to relate to the specific administration rather than the scheme of the Act then there may be uncertainty as the administration may take different courses during its existence. 20. The purpose of an order is that identified in paragraph 3 with its attendant options not the administrator s pre-conceived ideas. 21. Given the available options it is not possible to conclude that such an appointment is with a view to liquidation of the transferor s assets. Liquidation may be the result in many cases and that result may be apparent from the outset, but it will not be so in all cases and the administrator is bound by statute to consider the options once appointed. 15

16 21. The Supreme Court has given K permission to appeal. 16

17 Abellio London Ltd v (1) Musse & others (2) Centrewest London Buses Ltd [2012] UKEAT CEA, Langstaff P and lay members substantial change in working conditions to the material detriment of a would be transferring employee detriment to be considered that of employee not additionally the employer approach to considering substantial change in working conditions in Tapere v South London and Maudsley NHS Trust followed TUPE 2006, regulations 4(9)(11) 4(9): Subject to regulation 9, where a relevant transfer involves or would involve a substantial change in working conditions to the material detriment of a person whose contract of employment is or would be transferred under paragraph (1), such an employee may treat the contract of employment as having been terminated, and the employee shall be treated for any purpose as having been dismissed by the employer. 4(11): Paragraphs (1), (7), (8) and (9) are without prejudice to any right of an employee arising apart from these Regulations to terminate his contract of employment without notice in acceptance of a repudiatory breach of contract by his employer bus drivers on the 414 out of Westbourne Park depot, London, employed by C the 414 is transferred to A. This was an SPC (no issue between the parties). But A were based in Battersea, a distance of 6 miles from Westbourne Park. All 5 drivers resigned, 4 on the day of transfer, M on the day 17

18 before. M objected to the transfer, the others objected to the change in their conditions. 3. Their objections were based on the additional travel time to and from work ranging from 70 minutes to 2½ hours. 4. Was this a repudiation of the contract? See regulation 4(11); was this a substantial change in working conditions to the employees material detriment? See regulation 4(9). 5. The contracts with C allowed C to alter the drivers location but committed C to endeavouring to allocate drivers to their preferred work location. In their handbook, Alperton, Greenford, Hayes, Uxbridge and Westbourne Park were all locations but Battersea was not on the list. 6. Regulation 4(9) deals with a substantial change in working conditions so does not require a finding on breach of contract. Working conditions may cover contractual conditions but it can also cover physical conditions and may certainly cover place of work. It is not that the contract is without relevance but it is a matter to be taken into account and is not decisive. Here the reference in the contract to location showed that C recognised its importance. 6. Tapere v South London and Maudsley NHS Trust [2009] IRLR 972: whether or not there is a change in working conditions is a simple question of 18

19 fact. Whether it is a change of substance is also a question of fact. Nature and degree of change will have to be considered. 7. The ET was plainly entitled to reach the conclusion that the change in location was a substantial change in working conditions. The ET was also entitled to conclude that the change was detrimental. The ET was also entitled to conclude that it was a material change (rather than immaterial, trivial, insubstantial). The ET were correct to follow the Tapere approach (they were bound by Tapere anyway) that the detriment to be considered was that of the employee and not additionally the employer. It is the employee s perspective that is to be considered though objectively as to the effect of what has taken place upon someone in the employees position. 8. The possibility of a change to the contract does not affect matters as the ET are to compare the working conditions prior to transfer and those as a result of the transfer. 9. On 4(11): the ET were entitled to conclude there was a breach of contract, Battersea was not in the company list. The ET were entitled to conclude that C in notifying the drivers of the change prior to transfer had not made a valid variation of the contract, C did not have a location in Battersea it was A who did. TUPE preserves the continuity of the employee s contract not the identity of the employer and regulation 4(2) does not apply either (C s acts or omissions shall be deemed to have been an act or omission of or in relation to the transferee). 19

20 10. There might be an issue on A being prevented by the promptness of the resignations preventing A from negotiating any variation thereby not being in repudiatory breach. 11. C s appeal in relation to M was allowed and the matter remitted. 20

21 Johnson Controls Ltd v (1) Campbell (2) UK Atomic Energy Authority [2012] UKEAT JOJ, Langstaff P and lay members Centralised service fragmented when taken in-house approach to making of findings in SPC claims Regulation 3(1)(b)(iii) taking service in-house: These Regulations apply to- (b) a service provision change, that is a situation in which- (ii) activities cease to be carried out by a contractor or a subsequent contractor on a client s behalf (whether or not those activities had previously been carried out by the client on his own behalf) and are carried out instead by the client on his own behalf; and in which the conditions set out in paragraph (3) are satisfied. 1. Regulation 2 provides that an organised grouping of employees can be a single employee. 2. Was there a TUPE transfer of C from J to UKAEA? 3. Activities is not defined in the regulations. Therefore the first task for the ET is to: (a) identify the relevant activities carried out by the original contractor. (b) The next task is to determine whether the activities carried out following the alleged transfer are essentially the same as those carried out before (minor differences apart). 21

22 (c) The next task is that where activities remain essentially the same to determine whether there is an organised grouping of employees in GB whose principal purpose is the carrying out of those activities on behalf of the client; (d) Followed by determining whether the client intends that the transferee post- SPC will not carry out the activities in connection with a single event of shortterm duration; (e) Followed by determining whether the activities are not wholly or mainly for the supply of goods rather than services, (f) And then determining whether each Claimant was assigned to the organised grouping. 4. C, who was employed by J, principally performed work as a taxi administrator at UKAEA s Harwell site. UKAEA decided in 2010 to bring the service in-house, basically by allowing employed secretaries to book taxis directly rather than through C. 5. The EJ identifies the activity as a central co-ordinated taxi administration service. Identifying the activity is a question of fact and degree, therefore the EAT can only interfere with an EJ s finding if it found the EJ was not entitled to come to the conclusion at which he d arrived. 6. Was UKAEA performing essentially the same activity as J? 22

23 7. The ET is to adopt a holistic assessment. The ET will be alert to the possibilities of manipulation but its determination will not simply be by enumerating tasks and identifying whether the majority of those tasks quantitavely is the same as the majority prior to the alleged transfer. 8. The ET was entitled to place emphasis on the centralised co-ordinated nature of the service (the lay members were very keen on the difference here). 9. Was the ET entitled to conclude that C had been providing a central coordinated service and that that service had been provided by J, and that it no longer existed? 10. Without giving the green light to all such fragmentation cases, the EAT determined the ET was entitled to this conclusion. 23

24 Argyll Coastal Services Ltd v Stirling & others [2012] UKEATS BI, the Honourable Lady Smith. Employees who have different employers are not capable together of being an organised grouping of employees for the purpose of regulations 3 and 4(1) consideration of meanings of organised grouping of employees, situated in Great Britain, Principal purpose, Activities need to clearly determine whether the employee was a part of the organised grouping of employees in question SPC, regulation 3(1)(b)(ii) claim: These Regulations apply to- (b) a service provision change, that is a situation in which- (ii) activities cease to be carried out by a contractor on a client s behalf (whether or not those activities had previously been carried out by the client on his own behalf) and are carried out instead by another person ( a subsequent contractor ) on the client s behalf; and in which the conditions set out in paragraph (3) are satisfied crew members of the St Brandan and Ms Struthers and Mr Sosin. 2. EJ on a PHR found the employment contracts had transferred to A. 3. JAG owned a fleet of vessels and had an office in Scotland. The MoD contracted with JAG to deliver cargo in the Falklands. The contract existed from By 2001 JAG only owned the St Brandan and it worked the Falklands contract. 24

25 4. Prior to 1997 JAG employed the crew. From the crew had contracts with GSML based in Guernsey. It was an HMRC accepted scheme for avoiding employer s N.I. Jag transferred the crew s wages to GSML each month. In turn GSML sub-contracted most of their employer s obligations to a wholly owned subsidiary of JAG. 5. JAG employed 2 office staff, Ms Struthers the Managing Director and Mr Sosin the cashier/accountant. They were always employed by JAG. From 2001 the only function of JAG was to take the necessary steps to operate the MoD contract. 6. In 2009 the MoD entered into a charter party with VWMS that included cargo transportation that had been carried out by the St Brandan. VWMS entered into a charter party with A for a vessel called the Tamar and crew. The Tamar was suitable for the St Brandan work Tamar took over from St Brandan. 7. The Claimants must show: An organised grouping of employees situated in GB which had as its principal purpose, the carrying out of the activities concerned ; those required under the contract between the transferor and the client on behalf of the client. 25

26 8. There was no authority on any of the above phrases. 9. Organised grouping of employees : a number of employees but less than the transferor s whole workforce, deliberately organised for the purpose of carrying out the activities by the client and who work as a team. 10. situated in GB : the group has to be based in GB, although that does not preclude some members of the group from working outside GB. 11. Principal purpose : it need not be the sole purpose, otherwise the phrase is to be given its ordinary meaning. 12. Activities : what does the client require of the transferor? 13. The Claimants then have to show that they were assigned to that organised grouping. The argument that organised grouping of employees has a different meaning in regulation 4(1) from 3(3)(a)(i) 3 was rejected. 14. The EJ concluded: (a) A had carried out the service for MoD when JAG lost the contract; (b) the sole purpose of the office activities was to support the activities of the St Brandan; (c) the office activities had no stand alone purpose; (d) the operation of the St Brandan was carried out by an organised grouping of employees consisting of Ms Struthers and Mr Sosin. 3 3(3)(a)(i): The conditions referred to in paragraph (1)(b) are that (a) immediately before the service provision change- (i) there is an organised grouping of employees situated in Great Britain which has as its principal purpose the carrying out of the activities concerned on behalf of the client; 26

27 15. The EJ made no finding on whether the crew were or were not an organised grouping of employees. 16. The EJ concluded regulation 3(1)(b) was engaged and regulation 3(3)(a)(i) and 3(4)(c) 4 gave the ET jurisdiction to hear the claims. In terms of activities A and VWMS accepted any similarity test was met. 17. The EAT overturned the EJ s decision. The EJ had failed to determine whether the particular employee was part of the organised grouping of employees (regulation 4(1)). A finding under regulation 4(1) is not a mere formality, it requires resolution after a proper examination of the whole of the facts and circumstances. Being involved in the carrying out of the relevant activities immediately prior to the transfer will not necessarily mean that that employee was assigned to the organised group. 18. The EAT made some obiter observations on regulation 3 issues amongst which included: that as the crew had a different employer (GSML) to the office staff (JAG) how could they be part of any organised office based grouping, the application of regulation 3(4)(c) could not be relied on to allow them to piggy back onto any grouping of Ms Struthers and Mr Sosin that may be found to exist, 4 3(4)(c): Subject to paragraph (1), these Regulations apply to- (c) a transfer of an undertaking, business or part of an undertaking or business (which may also be a service provision change) where persons employed in the undertaking, business or part transferred ordinarily work outside the United Kingdom. 27

28 19. It was critical to tackle whether the crew were an organised grouping and if so whether they were situated in GB; TUPE won t apply unless there are affirmative answers. 20. On determining the activities for the purpose of the regulations the starting point is, what was the service that the client contracted for? Hire of a vessel and crew to move cargo with the Master receiving instructions from the client? 21. The EAT doubted that the EJ could find that there was a link between the office staff and the operation of the St Brandan. Ms Struthers and Mr Sosin carried out work sub-contracted by GSML to JAGM, which may demonstrate they carried out work for GSML. The arrangement was not a sham and JAG did not employ the crew. 22. The EJ also failed to enquire widely enough about Ms Struthers and Mr Sosin s duties: e.g. what responsibilities, if any, did they have regarding the premises they were located in? 23. The EAT rejected the Claimants contention that a single organised grouping of employees could be made up of employees who have different employers. 28

29 Eddie Stobart Ltd v (1) Moreman (2) FJG Logistics Ltd (3) Cooper (4) Hart and Hopkinson [2012] UKEAT ZT, Underhill P Subsequent contractor factual requirement that employee is part of an organised grouping by reference to the client not by happenstance whether there is an organised grouping of employees and whether the Claimant is part of it are distinct questions there is no rule that the natural meaning of the regulations be stretched in order to achieve a transfer in as many situations as possible 2006 regulations, regulation 3(1)(b)(ii): These Regulations apply to- (b) a service provision change, that is a situation in which- (ii) activities cease to be carried out by a contractor on a client s behalf (whether or not those activities had previously been carried out by the client on his own behalf) and are carried out instead by another person ( a subsequent contractor ) on the clients behalf; and in which the conditions set out in paragraph (3) are satisfied. 1. ES closed their warehouse at MW on ES claimed that M, C, H, and H s contracts had transferred to FJG. FJG disagreed. 2. The EJ decided that ES had dismissed the Claimants. 3. MW was a warehouse for meat. In 2008 ES provided meat to 5 suppliers who in turn provided retailers. The warehouse operated a shift system. By early 2009 ES were supplying only F and V. F supplied ASDA, V had a number of customers. Different retailers had different agreed times for placing orders for 29

30 next day delivery. For ASDA it worked out that the night shift did most of the picking. The day shift therefore mostly picked for V. 4. V switched to FJG for supplies. When ES informed employees they were transferring to FJG they informed those who worked wholly or mainly on the day shift and those who over the previous 90 days could be shown to have performed more than 50% of their tasks for V; 58 persons in total. 5. FJG applied for the claims against them to be struck out as the witness statements from the Claimants and from the one witness for ES did not show that the Claimants were assigned to any particular client. For the purposes of the strike out, FJG accepted the facts set out in the witness statements for the Claimants and ES. 6. The EJ noted there had been no transfers of employees when the 3 earlier clients had changed their suppliers, which suggested that ES did not think there was any organised grouping of employees in relation to them. 7. The organisation of the work at MW was in no way by reference to the client. It was a shift system. It was V s ordering requirements and those of others that determined when picking took place and therefore by whom. The employees did not suggest they were assigned to an identifiable V team. 30

31 8. For the EAT the issues were: (a) was there an organised grouping within regulation 3(3)(a)(i) 5 ; (b) were any or all of the Claimants assigned to that grouping. Those are analytically (and statutorily) distinct questions. The evidence only addressed issue (b). Nevertheless the two issues overlap to a considerable extent. 9. Was it sufficient for ES to show there was a group of employees who as a matter of fact mostly worked on tasks for V or was it necessary that the employees be organised as members of a V team? 10. The regulations state not simply that as a matter of fact the employees should principally carry out the activities in question but that the carrying out of those activities should be the principal purpose of the organised grouping. That requires the employees be organised by reference to the requirements of the client in question. 11. This is not objectionable on policy grounds, TUPE protects employees who are thereby able to go with the work. 12. But there is no rule that the natural meaning of the regulations be stretched in order to achieve transfer in as many situations as possible. 5 3(3)(a)(i): The conditions referred to in paragraph (1)(b) are that- (a) immediately before the service provision change- (i) there is an organised grouping of employees situated in Great Britain which has as its principal purpose the carrying out of the activities concerned on behalf of the client; 31

32 13. If the touchstone is whether a particular employee was assigned to a recognised team principally serving a particular client then the answer to the issues will normally be self-evident. If you don t base matters on the existence of an organisational unit there will likely be real difficulty in identifying which employees belong to the group (here most of the employees did not know who they were picking for, they simply used bar codes to pick). 14. It is the essence of an SPC that an organised grouping should have existed prior to the change in contractor. 32

33 Gabriel v (1) Peninsula Business Services Ltd (2) Taxwise Services Ltd [2012] UKEAT MAA, HHJ Clark TUPE not raised common law position: employee cannot be transferred without their consent 1. G was originally employed by P. P acquired shares in Q who changed its name to QDOS Taxwise Ltd. G was placed on the QDOS payroll in QDOS changed its name to T from and the trade and assets of the Taxwise business transferred to T from that date. The EJ found that G did not receive the conveying this information and was unaware of the change and her transfer. G s payslips and P60 showed T as her employer but as the amounts were correct G did not check her employer s identity. 2. G brought claims against P on and for sex and race discrimination for the period November T were joined on A PHR was convened to determine, amongst other matters, whether G s employment transferred to T. 3. The EJ found: (a) G was employed by P until ; (b) her complaints against P were time-barred and dismissed; (c) her complaints against T in the first ET1 were in time; (d) her complaints against T in the 2 nd ET1 were out of time but time would be extended. 33

34 4. Was the EJ wrong to conclude that G s employment effectively transferred from P to T on ? 5. At common law an employee cannot be transferred without their consent (Nokes v Doncaster Amalgamated Collieries Ltd [1940] AC 1014). TUPE has altered that, but there was no suggestion that a TUPE transfer occurred between P and T. 6. The EJ having found G was not informed of the change, it was only raised in an from P s HR manager to the ET on (their ET3 had accepted G was their employee), there was no express assent by her and no implied consent (she was placed on T s payroll in April 2008 but remained P s employee and did not check the employer s identity when the payslips showed something different). P of course were named as the original respondents by G to the ET1s. 7. Therefore the claims against P could in fact proceed and there being no cross-appeal from T, the claims against T could proceed too. 34

35 Meter U Ltd v Ackroyd & others; Meter U Ltd v Hardy [2012] CEA, Honourable Mrs Justice Slade DBE and lay members workforce ETO corporate employee not part of workforce use of franchise system for carrying out of meter reading 2006 regulations, regulation 7(2), workforce : This paragraph applies where the sole or principal reason for the dismissal is a reason connected with the transfer that is an economic, technical or organisational [ETO] reason entailing changes in the workforce of either the transferor or the transferee before or after the relevant date. 1. The ETs held that Ackroyd and Hardy had been dismissed for a reason connected with the transfer and M had not established an ETO reason for the dismissals. There was no appeal from the first finding. 2. Since 1999 M had provided meter reading services by means of franchises with independent limited companies, typically owned by individual meter readers. 3. H and others whilst working for G4S provided services to Scottish Power. An SPC occurred on and 10 employees transferred to M. 35

36 4. A and others worked for N Power Yorkshire Ltd on a contract for Scottish Power. Siemens were then awarded the contract and they sub-contracted to M. An SPC took place on and 109 employees transferred to M. 5. M undertook consultations with the employees and their unions. M explained the franchise system and offered the opportunity to the employees to form franchise companies. Only 3 employees chose to do so and on the others were made redundant. 6. If an ETO reason was to apply it must involve changes to the workforce which must be something more that just the terms and conditions involved. Neither TUPE or the Directive define workforce. 7. The Hardy Tribunal thought the workforce encompassed franchisees. The Ackroyd Tribunal thought it necessary to take a purposive approach as the Ackroyd claimants had only been given the option by M of either becoming a franchisee or being made redundant; the change was not one that was an ETO reason entailing changes to the workforce. 8. The Ackroyd Tribunal had found that the franchise model enabled M to operate from a very low cost base so it could tender for contracts offering competitive prices. The loss to M of changing from franchisees to employees would be 15 million. 36

37 9. Does the workforce of M include not only employees but also individuals employed by franchise companies, or possibly, the franchise companies themselves? 10. worker in domestic employment legislation refers to the individual. An ordinary common sense use of the word workforce does not include limited companies. 11. It must be an objective of the employer s plan that the change to the workforce is part of the economic, technical or organisational reason; changes in identity of individuals making up the workforce do not constitute changes in the workforce itself so long as the overall numbers and functions of the employees looked at as a whole remain unchanged (Berriman v Delabole Slate Ltd [1985] ICR 546 (CA)). 12. The EAT took the view that changes in numbers of employees or their duties were not the only changes that may constitute changes in the workforce, but did not determine whether a change in status from employee to independent contractor was such a change. 13. It was an error by the ETs to hold that franchisees were included in M s workforce. The franchise model was not a sham but only the Ackroyd Tribunal had made a determination. As workforce does not include limited companies, there was a reduction and therefore a change in the workforce in relation to the Ackroyd Tribunal and the Hardy Tribunal. The dismissals in Ackroyd were 37

38 therefore for an ETO reason; the same conclusion will apply if the Hardy Tribunal were to conclude that the franchise arrangement was not a sham. 38

39 Seawell Ltd v (1) Ceva Freight (UK) Ltd (2) Moffat [2012] UKEATS BI, The Honourable Lady Smith and lay members organised grouping of employees principal purpose require finding that any organised group of employees had the carrying out of activities for the client as its principal purpose not sufficient that M spent 100% of his time carrying out work for client TUPE 2006, regulation 3(3)(a)(i): The conditions referred to in paragraph (1)(b) are that- (a) immediately before the service provision change- (i) there is an organised grouping of employees situated in Great Britain which has as its principal purpose the carrying out of the activities concerned on behalf of the client; 1. ET held that M s contract of employment with C transferred to S. 2. C are freight forwarders and in the business of management logistics. M was a logistics co-ordinator. S became a client of C in about April S required of C that when they required supplies for their platform drilling business, C would receive the supplies at its warehouse, store them, ship the goods to the relevant platforms when required, together with appropriate paperwork e.g. safety certificates. 5. S were not C s only client. 39

40 6. C s workforce was divided between inbound and outbound goods; M was in the outbound group. There were 8 in the group. 2 of them dealt with another account. M spent all his time on S; his line manager spent 20% of his time on S, the general manager spent about 10% and 2 warehousemen spent 20-30% of their time on S. 7. S made clear to C their relationship was not to be a lasting one. As at S ceased being C s client and carried on those activities itself. 8. The EAT broke down what M had to show: an organised grouping of employees situated in GB ; which had as its principal purpose ; the carrying out of the activities concerned (the activities required under the contract between the transferor and the client) on behalf of the client. (see Argyll supra for Lady Smith s discussion of the quoted phrases) 9. The organised grouping is one of deliberate organisation and not happenstance, see Eddie Stobart supra. 10. Whether an organised grouping exists and whether or not a claimant was assigned to that grouping remain analytically distinct. 40

41 11. The EAT overturned the ET. 12. The only deliberately organised groupings were the inbound and outbound groups. There was no finding the outbound group had the carrying out of activities for S as its principal purpose. 13. It was not sufficient for regulation 3(3)(a)(i) that M spent all his time on S s work. No finding indicated M was specifically assigned to carry out S s work. 14. Regulation 3(3)(i) requires the organised grouping of employees to have carried out the activities concerned. The activities concerned are whatever activities are, after the alleged transfer, carried out by the client on his own behalf instead of by the contractor. S took in-house all C s activities carried out on its behalf, not just those M carried out. 15. M, the line manager, the general manager and the 2 warehousemen were not an organised grouping of employees within regulation 3(3)(a)(i). There was no finding that M was assigned to the group. M may have carried out all his work for S but that does not mean that he was assigned to the group. There must be specific findings of fact. 41

42 Taurus Group Ltd v (1) Crofts (2) Securitas Services (UK) Ltd [2012] UKEAT CEA, HHJ Richardson and lay members Follows EAT in Hunter v McCarrick client is the same client throughout regulation 3 SPC, regulation 3(1)(b)(ii): These Regulations apply to- (b) a service provision change, that is a situation in which- (ii) activities cease to be carried out by a contractor on a client s behalf (whether or not those activities had previously been carried out by the client on his own behalf) and are carried out instead by another person ( a subsequent contractor ) on the client s behalf; and in which the conditions set out in paragraph (3) are satisfied. 1. ET held C to have been transferred to T. 2. C was employed by S (previously known as Reliance) from He was a security officer at a building in Nottingham. S lost the security contract, and suggested that C had transferred to T, but T begged to differ. 3. The security service was originally for client E, then for CRM. Mansion Group took over the management of the building from CRM and gave S notice. 4. C argued that the client under regulation 3(1)(b) did not have to remain the same, it would undermine TUPE s purpose if that was so. S said there had 42

43 been a novation, alternatively C was right. T said: no novation and as the client had changed there was no SPC. 5. The EAT followed the EAT decision in Hunter v McCarrick where Slade J had held that the client in regulation 3(1)(b)(ii) referred to a specific client, and that 3(1)(b)(i) and (iii) 6 are to the same effect; the client in regulation 3(3)(a)(i) is a client as in 3(1)(b)(i)-(iii); regulation 3(3)(a)(ii) 7 requires consideration of the intention of the client immediately before the SPC; if the client were capable of being plural, whose intention would have to be considered? 6. The EAT generally follows its own decisions on a point, particularly where it s a considered decision after argument and there are no conflicting appellate decisions. 6 3(1)(b)(i) and (iii): These Regulations apply to- (b) a service provision change, that is a situation in which- (i) activities cease to be carried out by a person ( a client ) on his own behalf and are carried out instead by another person on the client s behalf ( a contractor ); (iii) activities cease to be carried out by a contractor or a subsequent contractor on a client s behalf (whether or not those activities had previously been carried out by the client on his own behalf) and are carried out instead by the client on his own behalf, and in which the conditions set out in paragraph (3) are satisfied. 7 3(3)(a)(ii): The conditions referred to in paragraph (1)(b) are that- (a) immediately before the service provision change- (ii) the client intends that the activities will, following the service provision change, be carried out by the transferee other than in connection with a single specific event or task of short term duration; 43