Case law: Employees temporarily laid off on change of contractors may be protected by TUPE rules

Businesses taking over a contract for work previously done by another contractor should consider whether it is obliged by the TUPE rules to take over the contractors' staff, including any temporarily laid off, following a legal ruling.

Employees worked for the employer on a construction project which was being completed in phases. They were laid off when a phase was completed, while the employer negotiated the contract for the next phase. When the employer failed to win the contract the employees claimed their jobs should have been transferred to the business that did win it under TUPE rules.

The TUPE rules are designed to protect employees in certain circumstances – by preserving their jobs and terms and conditions of employment - when a business or undertaking they work for is transferred from their current employer to a new one.

One of the circumstances in which TUPE applies is when there is a service provision change - including when a contract is re-assigned to a replacement contractor. However, in order for TUPE to apply on a change of service provision there must, immediately before the transfer, 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 transferee.

Here, the employers argued that the employees had not been an organised grouping of employees immediately before the transfer because they were not employees at all at that time – they had been laid off. Therefore TUPE did not apply.

The Employment Appeal Tribunal (EAT) disagreed. It said that a temporary cessation of employment because of holidays, sickness, etc, did not necessarily stop an employee from being part of an organised grouping under the TUPE rules. By analogy, a temporary lay-off to negotiate a new contract should not necessarily stop an employee being part of an organised grouping either.

The EAT remitted the matter back to the Employment Tribunal for further consideration.

Operative date

• Now

Recommendations

• Businesses taking over a contract for work previously done by another contractor should consider whether it is obliged by the TUPE rules to take over the previous contractors' staff, including any who have been temporarily laid off while the old employer tries to negotiate further work from the client.

Case ref: Inex Home Improvements Ltd v Hodgkins & Ors UKEAT/0329/14/JOJ