Assessing which Employees are Suitable for TUPE Transfer

The recent case of Costain Limited v Armitage and ERH has reaffirmed that time spent working on an outsourcing activity determines neither whether TUPE applies nor whether an employee does or does not transfer. 

This contravenes the commonly mistaken presumption that an employee must spend more than 50 per cent of their working time on the transferring business or outsourced activity to be protected under the Transfer of Undertakings (Protection of Employment) Regulations (known as a "TUPE transfer").  

The case involved a Project Manager at ERH, Mr Armitage, who worked on a project, which was transferred to Costain Limited.  Costain disputed that Mr Armitage should be included in the grouping of employees who had transferred to it, despite that he had spent a considerable amount of time on the project.  The employment tribunal held that Mr Armitage did transfer as he had spent 67 per cent of his time on the contract, which transferred to Costain. 

Costain, however appealed the decision to the Employment Appeals Tribunal, who did not agree with the decision of the ET, finding the reasoning behind it inadequate.  The EAT then took the opportunity to provide guidance on the conditions needed for a TUPE transfer. 

Firstly, the EAT recognised that often employers do confuse the question as to whether an employee is assigned to an organised grouping of employees to be transferred.  It stated that it is a legal test which decides on whether there is a service position change or not, rather than who in particular should transfer.  

The EAT cited Eddie Stobart Ltd which affirmed that even if employees spend all of their time working on one contract, does not automatically mean that the employees are organised by reference to that client's activities.  Instead, the focus must be on why the employees spend their time working on a particular task or activity, rather than simply how they spend their time.  In other words, the essential question that an employer must ask before making an organised grouping of employers is why the employee dedicated their time as they do, as the simple mathematical calculation of a percentage of time is not enough to be determinative. 

Furthermore, the EAT emphasised that the only employees who will transfer should be those permanently assigned to the organising grouping - a temporary undertaking of work by an employee will not necessary mean they should be included in the organised grouping, as held in Duncan Webb.  Consequently, job title and description will have to be taken into account, along with where the employer sees the most value in the employee's working time, and how their salary is funded. 

Overall, the Costain v Armitage and ERH case should act as a reminder to employers that the assessment of which employees are suitable for a TUPE transfer is complex and not just an easy calculation of how much time the employee spends to the transferring activity, contrary to what many people seem to believe.

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