TUPE – the question of which employees transfer is not just a matter of percentages

06 Oct 2014

In contracting out exercises to which the TUPE Regulations apply, there is often debate between the parties about what percentage of their working time a particular employee spends on the activities being transferred.  Sometimes, the fact that an individual spends a large proportion of their time on the relevant activities is considered to be firm evidence that they will transfer under TUPE.  However, percentages are by no means the whole story and can be misleading, as the very recent EAT decision in Costain Limited v Armitage reminds us.

Where a service provision change occurs under TUPE, an employee will only transfer if:

  • there is an organised grouping of employees in Great Britain;
  • whose principal purpose is to carry out the activities; and
  • the employee is assigned to the organised grouping.

The correct way to identify who transfers is to address each point in order.   Merely asserting that an individual spends a large proportion of his time on the activities is not sufficient.

Organised grouping: this implies an element of conscious organisation by the employer.  There must be a "deliberate putting together of a group of employees for the purpose of the relevant client work ... it is not a matter of happenstance" (Seawell Ltd v Ceva Freight (UK) Ltd and Eddie Stobart Ltd v Moreman).

Principal purpose:  this is a question of fact.  It is the grouping’s principal purpose that is relevant, not just a particular employee’s.

Assignment: being involved in the carrying out of the relevant activities immediately prior to the transfer will not necessarily mean that the employee was assigned to the organised grouping and it is wrong to assume that every employee carrying out the activities is assigned to the organised grouping.  Working out who is assigned requires an examination of all the facts and circumstances.  An approximate percentage breakdown of how an employee spends their time may be a useful guide, but will not be conclusive by itself.

In the Costain case, the tribunal failed to apply this analysis and so its decision that Mr Armitage had transferred under TUPE because he spent around two-thirds of his time on the relevant activities was overturned (and the case sent back to be heard again).  Although the case concerned a service provision change, similar caution should be applied in business transfer situations.

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