One of the key issues to determine in the context of an outsourcing or re-tendering exercise is identifying those employees who will transfer under the provisions of the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE).
If a service provision change occurs, the employment contracts of those “employed by the transferor and assigned to the organised grouping” automatically transfer to the new service provider on their existing terms. Any individuals who are temporarily assigned to that group are not included, but what about those who might be absent at the time of the transfer?
In a recent decision, BT Managed Services Ltd v Edwards, the Employment Appeal Tribunal (EAT) decided that an employee on long-term sickness absence was not assigned to an organised grouping of employees and therefore did not transfer under TUPE.
Background
The claimant had been off work for over five years with a serious cardiac condition and there was no indication that he would ever be capable of returning to work. He remained on the payroll of a particular unit, which subsequently transferred to a new employer.
An employment tribunal held that the claimant’s employment had not transferred on the basis that he did not contribute to the economic activity of the relevant grouping of employees and was therefore not assigned to that grouping for the purpose of a service provision change under TUPE.
EAT decision
The EAT agreed with the employment tribunal and dismissed the claimant’s appeal.
In order to be assigned to an organised grouping of employees, it is necessary for there to be “some level of participation” by the employee, or an expectation of future participation. The EAT drew a distinction between an apparently permanent inability to work (as in this case) and temporary absences, including maternity leave and ordinary sickness absence. To be assigned to an organised grouping required more than a “mere administrative or historical connection”. It was a question of fact to be determined taking into account all the relevant circumstances.
Consequences of the decision
There will be relatively few cases where an individual remains employed in circumstances where there is no prospect of a return to work. In the majority of cases, an employee even on long-term sick leave will have some prospect of a return to work and is therefore likely to be assigned to the relevant grouping.
Following this decision those who remain employed but, having been assessed as incapable of work, are in receipt of permanent health insurance benefits are unlikely to be regarded as assigned to the organised grouping of employees for TUPE purposes. However, advice should be taken in any particular case.
The case is a reminder to all those acquiring staff as a result of a TUPE transfer to be alert to the risk that there may be employees who may be absent at the time of the transfer and who appear out of the woodwork at a later date.
Proper due diligence carried out prior to the transfer should highlight the existence of any such individuals, and appropriate provisions included in the contractual documentation in order to apportion liability between the parties to the transfer.
Join the experts from Birketts at the forthcoming HR Forum, “The mysteries of TUPE and outsourcing revealed”, who will guide you through a typical outsourcing exercise and highlight the key legal issues as well as practical considerations you should take into account.
The HR Forum will be held on 11 November 2015 from 2pm – 5pm at the Holiday Inn Norwich, Ipswich Road, NR4 6EP. For further details and booking instructions, see our events page.