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Service provision changes and the organisation of employees

Lyons Davidson acted for the successful claimant in the recent Employment Appeals Tribunal case of Rynda (UK) Ltd v Rhijnsburger [2013].  This article looks at the issues in the case, including changes to service provision and the organisation of employees, and the relevant provisions of the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE).

Transfer of employment

In Rynda, Ms Rhijnsburger began working for Drivers Jonas Services Company in May 2009.  In April 2010, her employment transferred to Messrs Drivers Jonas Deloitte.  Then, in January 2011, she started work for Rynda. Throughout this period, Ms Rhijnsburger managed a portfolio of properties in the Netherlands known as the H20 Portfolio.  However, up until March 2010, Ms Rhijnsburger also managed a portfolio of German properties.

On 22 October 2011, Rynda dismissed Ms Rhijnsburger.  She had not accrued the one year’s continuous service she needed to bring a claim for unfair dismissal.  (If her employment had begun after 6 April 2012, she would have needed two years’ continuous service to bring that claim).

The issue was therefore whether Ms Rhijnsburger could argue that her employment had transferred to Rynda under TUPE, such that her previous employment with Drivers would count towards her period of continuous employment.

TUPE regulations

TUPE preserves certain rights of transferring employees where there has been “relevant transfer”.  In particular, regulation 4(1) of TUPE provides that the employee’s contract of employment “shall have effect after the transfer as if originally made between the person so employed and the transferee.”

In other words, TUPE provides that the employee’s employment will continue on the same terms and conditions (other than in relation to pension rights) as they had with their previous employer and continuity of service will be preserved. A ‘relevant transfer’ is defined as including one where there has been a “service provision change.”

Definition of ‘service provision change’

A service provision change is defined in Regulation 3(1)(b) of TUPE as occurring in three sets of circumstances, which can be summarised as:

  • An outsourcing situation where the client company contracts out activities (services) that it was previously carrying out itself;
  • A change from one contractor to another;
  • An insourcing situation where the client company brings the activities (services) which were previously being carried out by a contractor back in house.

TUPE regulations

For a service provision change to be covered under the TUPE there is a requirement that: “immediately before the service provision change there must be 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.”

The transferring employee must be “assigned” to the organised grouping “other than on a temporary basis.”

Employment Tribunal decision

The Employment Tribunal held that there had been a service provision change and Ms Rhijnsburger could rely on her previous period of employment with Drivers to bring an unfair dismissal claim.

Employment Appeal Tribunal decision

Rynda argued on appeal to the EAT that the Employment Tribunal had made an error when seeking to identify the ‘principal purpose’ of the organised grouping by focusing on the actual work done by Ms Rhijnsburger and not on the question of whether there had been a deliberate grouping of employees.  They also argued that the Employment Tribunal should have treated Ms Rhijnsburger’s arrangement from March 2010 – when she stopped managing the German properties – as a temporary one and as such Ms Rhijnsburger should not have been assigned to the “organised grouping”.

The Employment Appeal Tribunal rejected the appeal.  It held that the Employment Tribunal had not made an error when determining that there was an ‘organised grouping’ made up solely of Ms Rhijnsburger with the ‘principal purpose’ of managing the portfolio in the Netherlands. The tribunal had correctly focused on the period immediately before the putative transfer as the relevant period.  The arrangement at that time was not “temporary”.

Tips for employers

This case confirms that an ‘organised grouping’ can be made up of a single employee.  More importantly, following the Court of Session’s judgment in Seawell Ltd v Ceva Freight (UK) Ltd [2013], it emphasises that “there must be an element of conscious organisation by the employer of his employees into a grouping”.  This suggests that where the organisation is by accident or happenstance, TUPE will not apply to transfer the employees.  Notwithstanding this, the tribunal will be justified in looking at what actually occurs ‘on the ground’.  Careful analysis of the facts in each case will therefore be required.

TUPE has long been an employment law minefield for employers.  If you believe your business might be affected by a TUPE transfer, we would urge you to seek specialist legal advice.  For more information or to discuss how the issues in this case affect your business, contact our Employment Law department or call us on 0117 904 6000.

Posted on Oct 11th, 2013 by Lyons Davidson

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