Case law: Employees working for employer's only customer are not automatically protected under TUPE rules
Employers should note that TUPE does not automatically protect employees working exclusively for one client who then takes the work in-house, if the company only has one client, following a legal ruling.
This update was published in Legal Alert - February 2015
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The TUPE rules are designed to protect employees in certain circumstances by preserving their jobs and their terms and conditions of employment. The circumstances when jobs are protected include a 'change of service provision' when work they do as an independent contractor is brought in-house. However, in order for TUPE to apply on a change of service provision there must be an 'organised grouping of employees' which 'has as its principal purpose the carrying out of the activities concerned on behalf of the client'. In those circumstances, the employment contracts of the employees assigned to the organised grouping of employees will pass to the client, but not otherwise.
The local authority argued there had been no organised grouping of employees at the company so it did not have to take the employees on. The Employment Appeal Tribunal (EAT) ruled that the correct approach was to look at the organisational structure of the company, and the employees' contractual roles within it. In this case, the company could have required the employees to do other work (including work for other customers) at any time. The employees had not been consciously allocated to the local authority work – it just so happened that there was no other work available at the time. One employee had also taken on extra work internally, by becoming company secretary.
There was therefore no organised grouping of employees dedicated to the local authority's work, and TUPE did not apply.
- Businesses wishing to claim that TUPE protects their employees if there is a 'service provision change', should ensure their employees are consciously allocated to an organised grouping of employees, and cannot – and do not - call upon them to do other work.
Disclaimer: This article from Atom Content Marketing is for general guidance only, for businesses in the United Kingdom governed by the laws of England. Atom Content Marketing, expert contributors and ICAEW (as distributor) disclaim all liability for any errors or omissions.
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