Global Sourcing Portal Know-how
Eddie Stobart tests the meaning of 'organised grouping' under TUPE
08 March 2012
by Kit Burden, Clare Gregory
More commonly known for its distinctive fleet of lorries, Eddie Stobart Limited has recently appeared in the Employment Appeal Tribunal challenging the meaning of employment legislation.
On an outsourcing (and any subsequent insourcing or retendering) a defined group of affected employees will almost certainly benefit from legal protection. The Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) requires that those employees who are permanently assigned to the work being outsourced will be treated in a particular way. They must be consulted with prior to the outsourcing and will subsequently be transferred to the new provider with their original rights remaining intact.
TUPE has been heavily litigated since its introduction, in its original form, over 30 years ago. This particular dispute, which concerned a group of employees at an Eddie Stobart Ltd warehouse, tested the meaning of an 'organised grouping' of employees - the employees who would automatically be protected and transfer under TUPE.
Stobart operated a meat warehouse. By 2009 only two suppliers remained: Forza and Vion. Because these suppliers' retailers had different arrangements for placing orders, Stobart's night-shift employees ended up working primarily on the Forza contract and its day-shift workers worked primarily on the Vion contract.
In 2009 the site closed and it was Stobart's belief that Vion arranged for the work to be taken over by a new logistics company, FJG. Stobart thought that TUPE should apply on the basis that the work in question had been carried out by an organised grouping of employees whose principal purpose was to carry out the work required by the Vion contract. It identified employees who spent at least half of their time performing Vion work and notified them that they would transfer.
FJG did not accept that TUPE applied and, it followed, did not accept that the employees were transferring.
The employees in question brought tribunal claims.
The employment judge agreed with FJG that there had been no TUPE transfer from Stobart to FJG. He said that the fact that the workers spent the majority, or indeed all, of their time on a particular task for a particular customer was not of itself evidence that they were an organised grouping of employees. Stobart's organisation of work was not by reference to its customers, but by reference to the shift system. That many of the staff found themselves working exclusively on work for Vion was a function of the time of day that Vion's customers chose to place their orders. It was not a result of the organisation of teams to be dedicated to that contract.
The employees did not regard themselves as being assigned to one contract. These factors meant that there was no reasonable prospect of success in establishing the existence of an organised grouping of employees.
On appeal, the Employment Appeal Tribunal (EAT) agreed. The requirement of an organised grouping necessarily connotes that the employees be organised by reference to the requirements of the client in question. It does not apply to a situation where a group of employees may, without any deliberate intent or planning, be found to be working mostly on tasks which benefit a particular client. If the grouping does not reflect any existing organisational unit there are liable to be real practical difficulties in identifying which employees belong to it. The EAT considered it important that on a transfer employees should know where they stand.
Implications of the decision
The government's Department for Business, Innovation and Skills (BIS) guidance on TUPE is that there is an organised grouping where a team of employees are 'essentially dedicated' to carrying out the activities which are to transfer. That interpretation suggests that the mere fact of carrying out the work in question is sufficient.
This case however clearly states that something more is needed, although it is not entirely clear what. There is some implication that the employees must know that they are working on, for example, contract A. This will move a lot of employees in the some sectors (for example, the logistics industry, where it is rare to have identified, client-dedicated teams) out of the protection of TUPE.
The most important practical implication is that where employers have employees working on contracts and expect that, if the contract went elsewhere, the employees would transfer with it, the employer should ensure that there is a clear organised grouping of employees on that contract. For example it could designate and refer to them as 'contract A workers' or in some way identify them as a 'team.'
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