Case update (1): TUPE – too sick to transfer?

Summary: Is an employee who is permanently off work due to sickness and receiving Permanent Health Insurance (PHI) “assigned to” a particular grouping of employees on a TUPE service provision change?

No, held the EAT in BT Managed Services Ltd v Edwards available here.

Background: The Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) operate to transfer employees’ contracts of employment where a contractor stops carrying out activities for a client and those activities are either performed by another contractor, or, brought in house; i.e. there is a service provision change. The test for which employees transfer in these circumstances is any employees in an “organised grouping” whose principal purpose is the carrying out of activities on behalf of the client.

The question in this case was whether a permanently incapacitated employee could be a member of such organised grouping.

Facts: In this case an employee was taking long periods of sick leave for a heart condition from May 2006 and he did not work after January 2008. He firstly received PHI payments and then discretionary sick pay until 2010 and his only contact with the company during this time was occasional and described as “pastoral” in nature. He then remained on the books (without pay) for contractual and administrative convenience.

In 2013, the team of which he notionally remained a member, was contracted-out on a service provision change. The issue then arose whether the employee’s employment transferred under TUPE – it was accepted that his team was an “organised grouping” for this purpose. This question was whether he was still “assigned” to that team, notwithstanding his permanent absence. The original employer argued he was and the prospective employer (to whom the team was to be transferred) said not.

The Tribunal found that the employee was not assigned to the grouping; he had ceased to be assigned in 2010 when the employer took the decision to keep him permanently absent. After that time, there was no suggestion that he was fit or could return to work. His links with that grouping was therefore historic and for the administrative purpose of receiving PHI/sick pay.

The prospective employer appealed. The EAT dismissed the appeal – it held that to be assigned to an organised grouping, an absent employee “will generally require some level of participation or, in the case of temporary absence, an expectation of future participation in carrying-out the relevant activities on behalf of the client”. The EAT contrasted permanent incapacity with long-term sick or maternity leave, where the absence was likely to be temporary and therefore the employee would be assigned. However, an administrative connection with a transferring grouping (e.g. for pastoral purposes) and no prospect of return was not enough.

Implications: This is a welcome clarification of the law from the EAT and a pragmatic approach. Permanently incapacitated members of staff will not transfer on a service provision change.

However, when seeking to rely on this principle, employers do need to take care that the central element of the test is met – i.e. the employee will at no point return to work. The ill-health needs to be permanent. Employers are advised to ensure they have this clearly spelled out in a medical report.