In Inex Home Improvements Limited v Hodgkins and Others the Employment Appeal Tribunal has held that the lay-off of workers or the temporary cessation of an activity does not prevent there being a Service Provision Change (“SPC”) TUPE transfer in relation to that activity.
TUPE applies where there is a “relevant transfer – either a traditional “business transfer” or an SPC. One of the conditions for an SPC to occur is that there must be an organised grouping of employees whose principal purpose is to carry out the relevant activities. It was this condition that was under scrutiny in the Inex case.
Inex Home Improvements Limited (“Inex”) employed the Claimants to carry out painting and decorating work which was sub-contracted to Inex by Thomas Vale Construction Plc (“Thomas Vale”). Thomas Vale released the work to Inex in tranches each with a dedicated works number. During November and December 2012, Inex completed works order 8 and it was anticipated that Thomas Vale would release works order 9 in January 2013. In the meantime, there was no work for the Claimants and they were temporarily laid off on various dates in November and December 2012, although, importantly, the Claimants remained employees of Inex because it was anticipated that further work would be available in January 2013. In January 2013, Thomas Vale issued works order 9 to Localrun rather than Inex. The work to be carried out under works order 9 was substantially the same as that previously carried out by the Claimants on behalf of Inex.
The Claimants brought employment tribunal proceedings against Inex and Localrun claiming that there had been a TUPE transfer by way of an SPC and that employment had transferred to Localrun. It was held at first instance that there was an SPC under TUPE however, because the activities undertaken by Inex had come to an end and its staff laid off prior to the date of the SPC, there could not be a TUPE transfer because Regulation 3(a)(i) of TUPE was not satisfied – namely, there was no longer an organised grouping of employees which had as its principal purpose the carrying out of the relevant activities.
The Employment Appeal Tribunal (EAT) overturned this decision. It concluded that there was nothing in the language of Regulation 3, or any of the authorities, that requires the organised grouping of employees to be actually engaged in the activity immediately before the SPC, or that suggests that a temporary cessation of activities would preclude the continued existence of the organised grouping. It held: “common-sense suggests that a temporary cessation of employment including for the purpose of holidays, sickness, or expressed to be a temporary lay-off should not of themselves deprive employees of their employment if there is a service provision change during the period of temporary cessation.”
In coming to this decision the EAT had regard to the purpose of the TUPE Regulations being the protection of employment and commented that a finding in the alternative could have identified a significant loophole in preventing TUPE from applying to an SPC situation. However, it is important to understand that this case was based on it being established on the facts that there was a temporary cessation of work, rather than a permanent one. The case was remitted to the Employment Tribunal to consider whether, taking all relevant factors into account, immediately before the SPC the Claimants were an organised grouping of employees within the meaning of regulation 3(1)(b) of TUPE 2006.
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