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Most operators understand the principles of the TUPE. If a company buys another then it must take on its staff or pay redundancy at their existing terms and conditions if their services are not required.

However, a case where 35 workers claimed they had been wrongly sacked by two operators has shown that the matter is less clear cut where a contract changes hands.

The recent Employment Appeal Tribunal decision in the case of Eddie Stobart Ltd v Moreman & Others provides welcome guidance as to what constitutes an “organised grouping of employees” for the purposes of a service provision change where a contract is outsourced from one contractor to another.

Shift patterns

The 35 claimants were employed at a Manton Wood, Nottinghamshire, warehouse that Stobart closed in April 2009. At the time, Stobart provided warehousing and distribution for two clients involved in the meat trade. The shift patterns meant that night-shift employees worked mainly on a Forza contract, whereas day-shift employees worked mainly on a Vion contract.

When the depot closed, FJG Logistics won the Vion contract. Stobart believed that all employees engaged wholly, or employees who had spent more than half of their time on Vion-related work, should transfer to FJG. Stobart wrote to each of the affected employees, informing them that:

■ they constituted an organised grouping of employees whose principal purpose was to carry out the work required by the Vion contract;

■ a relevant transfer, by way of a service provision change, had occurred, with FJG as the transferee; and

■ accordingly, contracts of em-ployment assigned to that group-

ing had transferred to FJG.

FJG did not accept that there had been a service provision change or that any of the employees identified by Stobart as being assigned to the Vion contract had transferred to it and the claimants were dismissed by Stobart.

The 35 former employees brought claims in an employment tribunal against Eddie Stobart and FJG Logistics for unfair dismissal, wrongful dismissal and breach of the information and consultation obligations under regulation 13 of TUPE. They demanded redundancy payments.

The tribunal ruled in their favour. The warehouse workers were not an “organised grouping of employees” and there was no service provision change under TUPE. This meant that the obligation to employ or compensate the workers rested with Stobart, not FJG. Had it ruled they were an organised grouping then their transfer to FJG would have been correct.

Working time

The tribunal said the claimants spent all, or the majority, of their time working on the Vion contract because of the way Stobart organised its shift patterns and not because they worked specifically for Vion. A 24-hour operation at Manton Wood meant a shift system was inevitable, as well as a division of labour in each shift.

Stobart appealed unsuccessfully to the Employment Appeal Tribunal (EAT), which concluded that the tribunal “came to the right answer for the right reasons”.

The EAT held that: “TUPE does not merely say that the employees should in their day-to-day work... carry out the activities in question: it says that carrying out those activities should be the (principal) purpose of an organised grouping to which they belong.” The employees must be organised for the requirements of the client (in this case Vion) and not simply because of a combination of circumstances, namely shift patterns and working practices on the ground.

By March 2009, the employees found themselves to be working mainly on the Vion contract but this was not the result of any “deliberate planning or intent” by Stobart.

The EAT underlined that there must be a clear intention by the employer. It is not sufficient that the employees principally carry out activities on behalf of the client without any deliberate planning or intent.

Responsibility for the 35 employees now reverts to Stobart. By law, they are entitled to redundancy at their existing terms and conditions or the offer of suitable alternative employment.

Clarity

This decision provides some clarity regarding the complex situation that arises where a contract is outsourced from one contractor to another. Early legal advice should be sought about the position in law and the commercial options available. Where there is no client-focused element of organisation to meet the client’s specific needs, the argument for an “organised grouping of employees” may be weak or non-existent.

■ Laura Hadzik, road transport law specialist, and Claire Deane, employment law specialist, are solicitors at JMW Solicitors, Manchester.

laura.hadzik@jmw.co.uk; claire.deane@jmw.co.uk

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