Service provision changes – When will employees follow the work?

Posted by Oliver Weiss on
When work is undertaken by a new service provider (that is to say, it is outsourced, brought in-house, or a contract is reassigned), the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) may apply, provided that certain conditions are met.

Where TUPE applies, the employment contracts of the employees who carry out the work will pass to the new service provider.

One of the conditions is that there must be an "organised grouping of employees" whose principal purpose is to carry out the activities concerned on behalf of the client. The recent case of Edinburgh Home-Link Partnership and others v The City of Edinburgh Council dealt with this point before the Employment Appeal Tribunal (EAT).

The issue in this case was whether two directors of a company could be said to be part of the organised grouping of employees.

Edinburgh Home-Link Partnership (Home-Link) was a charity which provided care services to vulnerable and homeless people on behalf of The City of Edinburgh Council (the Council). The Council was Home-Link's only client, and Home-Link employed between 35 and 40 staff including two directors, Mr McAleavy and Ms Morrison. In April 2009, the Council decided to take the provision of the services in-house.

There was clearly a service provision change. It was agreed that there was an organised grouping of employees whose principle purpose was to carry out the activities on behalf of the Council, and that the employees' employment contracts would therefore transfer to the Council under TUPE. The dispute concerned whether Mr McAleavy and Ms Morrison should be assigned to this organised grouping. The Employment Tribunal found that the roles of the directors at Home-Link were largely strategic and involved the maintenance of Home-Link itself rather than delivery of services to the Council. The directors were also responsible for dealing with the Care Quality Commission, compliance issues and tenders. The Tribunal held that neither Mr McAleavy nor Ms Morrison had been assigned to the organised grouping of employees, so their contracts had not been transferred.

The directors appealed to the EAT on the basis that the Tribunal's decision was perverse. The EAT upheld the Tribunal's decision, finding that it had been entitled to conclude, on the facts available to it, that the directors did not fall within the organised grouping. The fact that the Council was Home-Link's only client did not mean that every Home-Link employee had been carrying out work for the Council. The EAT was clear that not every employee who could be linked in some way to the client should be included in the organised grouping, and gave the example of a handyman who kept the building safe so that the client services could be delivered and a cook who fed the staff to enable them to work effectively for the client. It could not be said that the handyman or the cook would have been part of the group who provided the client service. In the same way, it could not be said that either Ms Morrison's or Mr McAleavy's principal purpose was to work on the Council's behalf. The substance of their roles as directors involved running Home-Link, and they had not satisfied the Tribunal that they were sufficiently involved in the delivery of services to the Council to be included in the organised grouping. This was a finding of fact which the Tribunal was entitled to make, and which the EAT upheld.

The important point to take from this case is that only those employees whose principal purpose is to provide front line service to the client will be considered to be an "organised grouping", and it should not be assumed that every member of staff will be included because an organisation only has one client, as this will be a matter of fact to be determined on an individual basis.

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Oliver heads up the London Employment, Pensions & Benefits and Immigration Team.

Oliver Weiss
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