Outsourcing and 'organised grouping of employees'

In an outsourcing scenario, there will be a TUPE transfer if certain conditions are met. One condition is that there is an organised grouping of employees situated in Great Britain which has as its principal purpose the carrying out of the activities concerned on behalf of the client. Whether an individual is assigned to that grouping, and therefore caught by any TUPE transfer, is a separate, secondary question, albeit a related one.

Three EAT cases this year have considered the meaning of “organised grouping of employees” and it is now clear that the word “organised” is of crucial importance. It connotes a deliberate “putting together” of a group of employees to do a client’s work rather than such a group simply evolving over time. The fact that a group of employees works mostly for a particular client is not enough. The amount of time that individuals spend working for client is only relevant to whether they are assigned to the group – the secondary question; there must first be a group deliberately organised into a particular client group, for example “the Boots team” or the “M&S team”.

In the most recent case (Seawell v Ceva), one individual spent all of his time working for a particular client but because there was nothing deliberate or intentional about the organisation of the group in which he worked, there was no TUPE transfer.

These cases are good news for service providers concerned about inheriting staff when they win new contracts. They may also be good news for companies bringing outsourced functions back in-house. This is because unless the current service provider has its employees clearly working in specific client teams, it may be difficult for it to argue that the employees transfer to the new provider or the client when the contract ends.

For the same reason, the cases are potentially bad news for service providers whose staff are not organised into specific client teams. Such service providers should consider whether it would be prudent to change their arrangements, although in many cases the loss of flexibility this will entail could be a decisive factor.

This approach to the interpretation of the legislation works against the interests of employees (who are likely to lose their jobs as a result of the change in service provider) and is arguably contrary to the purpose of the underlying EC Directive (which is to preserve jobs). However, it must be borne in mind that the service provision change aspect of TUPE is UK gold-plating of, and therefore in some respects separate from, the Directive. Whether these decisions will survive scrutiny by the Court of Appeal is debatable: an appeal is awaited.
 

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