The TUPE King’s Top Five Cases of 2020

Posted in : Supplementary Articles NI on 9 December 2020
Dr John McMullen
Spencer West LLP
Issues covered: TUPE

Dr John McMullen has been variously described as “the King of TUPE” and the “TUPE guru”. Indeed, he is the author of Business Transfers and Employee Rights, the leading work on TUPE. First published in 1987, it is a loose-leaf encyclopaedia, known affectionately as the “purple book”, and is subscribed to by all major law libraries and law firms and by the Bar.

John is also an employment Partner at Spencer West, as well as being Visiting Professor of Law at Leeds University Business School and serving on the editorial board of ELA Briefing, the journal of the Employment Lawyers Association. He was previously Head of Employment at Pinsent Masons.

John is one of the UK's leading employment lawyers with a national and international reputation. He is the country's leading expert on TUPE and is involved in a wide range of TUPE related matters, including service provision change, mergers and acquisitions, and public sector and third sector transfers.

And why are we telling you this? Because John will be delivering short summaries of the most important TUPE cases of 2020 and dealing with your TUPE queries in our free webinar on 9th December.

If you want to hear the leading expert on TUPE explaining how these five cases can impact on you and your organisation and what you should do as a result, then watch this webinar recording.

The Recording

Transcript

Scott: Good morning, everybody. My name is Scott Alexander. I'm from Legal Island and as you can see, we've been joined today by Dr John McMullen from Spencer West. We're going to be dealing with TUPE today, Transfer of Undertakings and the top cases as far as John is concerned that came out in 2020. So, hopefully, you've got a few questions. You can have a look on your right-hand side of your board, and you'll see this little question box here. So if you do have any questions as we go through, then drop them in the question box and I'll ask John as we proceed.

Now, this isn't the only thing we'll be doing with John in the next few months. We do have a TUPE masterclass as you can see coming up. This is for people in the UK. I know there are people in Ireland listening, and we're hoping to do something with a solicitor next year as well. But on the Thursday, 25th of February as you can see, we'll have a full day event, and I'll be with John and Adam Brett and Jones Cassidy Brett, and Rachel Penny from Carson McDowell, two renowned TUPE specialists from Northern Ireland. And we'll be looking basically, I suppose it's a series of interviews with John, looking at it from the different aspects of TUPE from the client point of view, from the transferor's point of view, from the transferee's point of view, and we'll be using a series of checklists to make sure. So it's all very practical what we'll be going through, and we'll send out further information there. But if you want to drop that, we can loop that in your diary. That'll be the 25th. It won't be on this platform. It will be on an interactive online training platform.

About Dr John McMullen

So today's guest is John McMullen. I'm just going to read out. His bio is quite sizable because this man knows more than anyone about TUPE, so he is the Visiting Professor of Law at Leeds University. It used to be at Durham, but Leeds is a step up, in my opinion. So there you go. He's at the University of Leeds Business School Centre of Employment Relations, Innovation and Change. And he is an employment partner at Spencer West LLP. He has over 25 years' experience in employment law and is noted as being both a strategic thinker and the leader in his field as well as being practical hands-on lawyer. By peer acclaim, he is one of the leading lawyers in the UK with national and international reputation. Legal 500 has described John as "one of the country's highest profile employment lawyers," and Chambers & Partners Guide to the Legal Profession stated the John inspires tremendous confidence.

John is regarded as the leading expert in the UK on the Transfer of Undertakings. And he also has an international reputation in that field. He's the author of the book which is the "Business Transfers and Employee Rights," the leading work on transfers, which also contains a chapter on transfer law and practice in Ireland. The fourth edition of his highly acclaimed "Redundancy: The Law and Practice" is also due out. He's an all-around employment advisor. He's an editor of Harvey on Employment Relations and Employment Law which everybody knows as the Bible in employment law circles. He handles a wide range of equality claims across all protected characteristics under the Equality Act 2010 in GB, and he frequently advises on disability issues, and in particular the duty to make reasonable adjustments in work.

Now the way it's going to work today is we're going to take a case, one of the top five, John is going to talk about that for a few minutes, and then we're going to see if there's any questions. So if you drop your questions as we go along. So the first case that we have coming up here is as you can see is P14 Medical Ltd v Mahon, and it's TUPE and it's on restrictive covenants. Over to you, John. Thank you very much for coming today.

Restrictive Covenants and TUPE - P14 Medical Ltd v Mahon

John: Yeah, so the question here is when there is a TUPE transfer, if an employee's contract contains a restrictive covenant, does that go with the transfer so that if the employee breaches the covenant, the new employer rely on the covenant to restrain these competing activities? Surprisingly, few cases on this subject. It was last dealt with in detail by the Court of Appeal in Morris Angel v Hollande. They said yes, in principle, TUPE can apply to transfer a restrictive covenant. In this particular case, this was in the High Court of England and Wales presided over by Mr Justice Cavanagh, newly promoted judge, very famous employment lawyer in the UK, and he said there's no doubt whatsoever these days, that a restrictive covenant transfers under TUPE, all terms in the employment contract transfer for the benefit of both parties under a TUPE transfer, and that includes a restrictive covenant.

Mr Mahon was a fairly senior chap. He was a sales director for a company which was called Platform Medical, and this was a very specialist company dealing with pain relief products. His main customers were the NHS and some private hospitals, but he was quite a big cheese at Platform Medical. He was the sales director, and one of the three main directors. Well, Platform Medical got taken over, and the new company changed its name to P14 Medical Limited, so P14 Medical was the transferee. Now P14 Medical, formally Platform, had a distribution agreement for its products, an exclusive distribution agreement with a company called Avanos. And so they knew a lot about his products. They then gave notice to terminate that distribution agreement. The moment they did, they recruited Mr Mahon as a business development director in order to compete with P14 Medical, who weren't too pleased, as you can imagine.

Well, Mr Mahon said fair enough, there were restrictive covenants in my contract with Platform Medical, but I haven't signed a new contract and there are no restrictive covenants binding me now. Well, Mr Justice Cavanagh disagreed very strongly. He said, first, there was a TUPE transfer here, and there was no doubt there was a TUPE transfer because everything was transferred from the old company to the new company as suppliers, employees, business contacts and premise premises, a classic TUPE transfer. Even if there hadn't been a TUPE transfer, this is a case where the judge took the view that there was an agreement by Mr Mahon to continue his old terms and conditions. He enjoyed exactly the same benefits as previously, same pension, same car, all that sort of thing. And therefore, Mr Justice Cavanagh said that if there hadn't been a TUPE transfer, then there would have been a novation or a transfer by agreement of the restrictive covenant. So the covenant transferred. The remaining question was, was it enforceable? Well, due to seniority of Mr Mahon, he was the sales director. He knew everything about the company. He had all of its contacts under his belt. And therefore, the covenant restraining him from competing for a reasonable period was enforceable, because the claim by P14 Medical against Mr Mahon to restrain him working for Avanos for this limited period was likely succeed for trial, an injunction was given.

So, in principle, if a covenant is reasonable and enforceable in its terms, there's no need to get an employee to sign a new contract for a new restrictive covenant. The old restrictive covenant should, in principle, transfer to the new employer for its benefit.

Scott: Thank you very much, John. That was a very important case, I think. There will be people who are listening from Ireland. There is a case that will be of particular importance coming up on Ireland, but restrictive covenants are pretty much the same in both jurisdictions or all three jurisdictions in Northern Ireland, GB, and Ireland. So what should employers do now? Should they be checking their restrictive covenants if they're thinking of TUPEing any kind of parts of their business or services? Should they be checking their covenants to ensure that they're reasonable? Because presumably an unreasonable contract, John, or covenant wouldn't transfer.

John: Well, that's right. Well, it would transfer but it would be unenforceable. So if you are an HR director undertaking due diligence and you're trying to make sure that your key people come over, it's very important to check the restrictive covenant in their current contracts is reasonable, is enforceable. You can, of course, if somebody comes over, ask them to sign a new contract, but then you have the problem of asking them to do that. And they may well say no. So it's very important in due diligence to make sure that the restrictive covenant in the transferor's contract is soundly drafted, meets the concerns required, and is enforceable as a matter of principle in the courts.

Scott: Okay, and from a GB point of view, there's a new consultation our from the Department of Business about restrictive covenants which doesn't specifically deal with TUPE elements. But are there any aspects here that the listeners, particularly those in GB, who are going to be covered by a consultation should know about?

Review of Restrictive Covenants – Consultation

John: Yes, it's a very strange thing to bring to the fore when you're looking at reform of employment law, but I think there are two strands to it. The first is that the government wants to reiterate that low paid workers, workers on zero-hours contacts, are not prevented from getting spare-time jobs. So what they definitely would like to do, I think, is to ban exclusivity clauses in the zero-hours contacts, but they also want to look at whether there should be some limits on restrictive covenants in other contracts. What they're saying is that it might prevent people from engaging in startups if they're asked immediately to sign a restrictive covenant. I'm a little sceptical about that.

For example, if I'm joining colleagues in a startup business, I'd want to make sure that we're all in it together, and somebody can't simply waltz off with the intellectual property and sales contacts that the company has, so I'm not sure how far that will go. But I think there will be more protection for people on zero-hours contacts in a lower paid sector.

Pension Rights and TUPE

Scott: Okay, we've got a couple of questions in here, John, on the question boxes. Just to remind everybody, they're anonymous. I can see you sent them up but I'm not going to read any names. All terms transfer you mentioned, does this include pension rights?

John: No. Under TUPE, pension rights as such, or at least pension rights under an occupational pension scheme do not transfer under TUPE. If you pay into a private pension scheme, an insurance scheme, then the new employer would have to make the same contributions to that as the old employer did, but a traditional occupational pension scheme does not, in theory, transfer under TUPE. So the new employer can invite transferring employees to join the transferees' scheme.

Outsourced Contracts and TUPE

Scott: Okay, we've had a question that we might hold back because we're doing an outsourcing case coming up, but as I started, I wanted to ask about obligations under TUPE for outsource contractors and our obligations to them when a vacancy arises. For example, or that is outsourced financial function, the vacancy is named within the organisation, can we TUPE them across? Not entirely certain . . .

John: Can you explain that a bit? The vacancy is where?

Scott: When a vacancy arises, that is the outsourced financial function, and a vacancy is now within the organisation, can we bring people, presumably internally, from an outsourced situation? I don't like that. I'm maybe going to need more details on that to the person who sent that one in, because I can't quite understand it.

John: Yeah. I can't quite follow that. Is there the vacancy is with the outsourcing . . . ?

Scott: Yeah. They're looking to bring the external consultant into the organisation so it's contracting in. Would that be TUPE?

John: That would be TUPE. Yeah.

Enhancing Terms and Conditions and TUPE - Ferguson v Astrea Asset Management Ltd

Scott: Okay, no problem. Right. We'll leave that one there. If there are questions, send them in. You can see the question box there, and we'll deal with them after the next case, which as you can see is Ferguson against Astrea Asset Management Limited and it's about artificially enhancing benefits. This was a very clever case. I thought it was quite funny, this one. So anyway, there you go, John. I'll see you in a couple of minutes.

John: Yeah, Well, this is a very interesting case. As we began today, TUPE transfers all terms and conditions from a transferor to a transferee. And the purpose of TUPE is to protect those terms and conditions. And back in the 1980s, there was a case called Daddy's Dance Hall, which said that if an employer tries to change any employment terms to the detriment of the employee, then that attempt is void.

However, subsequently, in the UK Court of Appeal, the question arose. Does this prevent an employer and employee agreeing a change in the contract to a TUPE transfer which is beneficial to an employee? So this was a case called Power against Regent Security. On the transfer the new employer promised the employee that the retirement age could be increased from 60 as it was then to 65, which the employee saw as a benefit to him, because he wanted to work a few more years. And he accepted that proposition. When he reached the age of 60, the employer tried to renege on that agreement, saying sorry, we weren't allowed to agree that change because Daddy's Dance Hall says the changes in the context of a TUPE transfer are void. Well, in the Court of Appeal, the court said that the Daddy's Dance Hall rule is really intended to cover changes to the detriment of the employee. It's not designed to stop an employer agreeing a beneficial change with the employee.

Now at that time, TUPE was silent on the point. The TUPE regulations 1981 said nothing about this. When TUPE was revised in 2006, they sort of translated Daddy's Dance Hall into the 2006 version of TUPE, and what they said was that any change to the employment contract, where the reason is the transfer is void. So did that mean that a beneficial change can be challenged by the new employer? Well, Ferguson is a case exactly on this point. There were a number of senior employees, directors in a company, which was about to be taken over and with a view to artificially enhancing their benefits, so as to pass these benefits on the transferee, they gave themselves extraordinary bonuses and pay rises.

When the company was taken over, the new employer said this just stinks basically. And we are not going to honour these changes you put in just before the transfer for your own benefit. How could this be done? Well, this change in TUPE 2006 was employed by the judge to strike down the change. What he said was that now TUPE says that any transfer-related variation is void. Therefore, this is void too. If that were wrong, he said that this is an abuse of EU law for the employees to do this. There is a long-standing principle that EU rights should not be abused beyond their intended purposes. And the purpose of TUPE was to transfer existing rights, not to enhance them. For those two reasons, the new employer was able to say these artificial enhancements don't apply. We're not going to enforce them. It was all a fiddle, and I'm afraid, nice try, but it doesn't work.

This leaves open whether an employer and employee can ever agree a beneficial change to an employment contract, either just before a transfer or after a transfer. I think it does make it difficult for this to happen. So what I think the parties will have to do to make the change work is to say that this is a perfectly normal payment in the ordinary course of business. You normally get a pay rise. If the pay rise happens to be just before the transfer, then that's fine because it would have happened anyway. You could get a Christmas bonus. Again, that is payable in any event. It's not because of the transfer. It's enforceable of itself.

But it does beg the question, what would happen, for example, if I were the owner of a company. I wanted to sell it. And I wanted to make sure my key employee stayed with the business, as he was an asset, in order that the sale would go through. If I promised him a bonus, a loyalty bonus, would that now be enforceable? I think the Ferguson case casts some doubt on that.

Does the Ferguson Case Mean Annual Pay Rises Do Not Transfer?

Scott: Okay, thank you very much. The questions are piling in here, John, on that particular case. We have one here, is the Astrea an extreme case? You mentioned normal pay rises and bonuses and so on where the employees were enriching themselves. Will it be harder to pursue if the change is for the benefit of a junior employee and not directors? Is that the kind of thing you were meaning there with the normal pay rise as opposed to the loyalty bonus?

John: Yes, I think the question is the construction of the new wording, relatively new wording in TUPE, is the change in the employment contract by reason of the transfer? If you can establish that it's not by reason of the transfer, but it would have happened anyway, or it's a regular payment, i.e., pay rise that you would give across the board in the company or a Christmas bonus or whatever, that would be okay.

But I think this is, to an extent, an extreme case, because these were very senior employees, and they deliberately enhanced their benefits to a considerable extent for the purposes of passing them onto the new employer.

Scott: Yeah, and of course, I suppose we should emphasise there that you're talking about pre-enhanced benefits post-enhancement. That's a new contract that's transferred over. Would you necessarily get a pay rise or a bonus?

John: Well, post-transfer you still have the English authority of Power against Regent Security where after the transfer the new employer and the employee agreed a beneficial retirement date. Power is a Court of Appeal case. So in theory, you might be able to rely upon the fact that is a more senior authority to say that post-transfer variations are okay. The problem is that Power was decided under TUPE '81, which didn't have this particular wording in and this particular wording in the 2006 regs say that any change to the employment contract where the reason is the transfer is void. If a new employer voluntarily agrees a change in terms and conditions with a transferred employee, I think a court would be very reluctant to apply the Ferguson case.

Scott: Okay. And what about a European level? Would this Ferguson case be applicable or the principles be applicable in Europe?

John: Yes, in theory. Although the clear purpose of a Daddy's Dance Hall case was to stop changes to the detriment of employees. So I suppose in European law it hasn't specifically been addressed.

Challenging Unlawful Changes Post Transfer

Scott: Okay. We've another couple of questions just coming in here. One would any detrimental change affected by the transferee, which is void under TUPE, does not have to be challenged within the three months within the UK to a tribunal?

John: Well, how you challenge a change which is void under TUPE involves various options. You can, for example, say that you've broken my contract. And you can resign and claim constructive dismissal. In which case, you've got a three-month time limit to do that. Or alternatively, if it's money, you could bring a claim for unlawful deduction from wages, where there is no time limit in effect, or indeed a claim for breach of contract in the ordinary courts where the limitation period is much more generous.

Transfer of Contractual Terms Under TUPE - Metroline Travel v D’Auvergne

Scott: Okay, we're going to move on to the next case. I can see some other questions coming in. If we have time, we'll go back to them, folks. But I want to move on to this Metroline and D'Auvergne case, so if you want to take that one away, John. It's obviously it's about only contractual terms, and then we'll have a discussion with what is a contractual term, and what's not a contractual term.

John: Yes, the problem with this case is that in due diligence you must take a good l look at terms and conditions and benefits that employees currently enjoy and take a view whether they are contractual or non-contractual. In this case the employees were unsuccessful in saying what benefit they got was contractual. Before a TUPE transfer, a bus company gave bus drivers meal relief payments when they have to take meal breaks away from their normal base. Then there was a takeover and Metroline, the new employer, changed its base, and said because we changed the base, we are not going to make these payments any longer. The employees said well, fair enough. We understand why you're saying that, but nonetheless it's part of our contract and we still want our meal relief payments.

When you're making a claim for breach of contract, and they were, the burden of proof is on you to show that the term you're complaining about was contractual, and in this case, they had not established that the meal relief payments, although they were made regularly on the facts of this case, they were not contractual. So mere regularity of payment of a benefit doesn't necessarily mean it's contractual and the rule is that only contractual matters transfer under TUPE.

Scott: Thank you very much, John, for that one. So only contractual matters transfer. In general, what should the people listening now check all their contracts and maybe, I don't know, colour code the ones that they think are contractual, the ones that aren't? Would that be part of the due diligence thing they'd have to convey?

John: That would be very much part of the due diligence exercise. Anything from payments through to policies and procedures. Some are contractual, some are non-contractual, and really, you have to make a judgment call before the transfer takes place as to which you think are contractual and which are non-contractual. If they're non contractual, of course, they can be changed. If they are contractual, then you have a problem with TUPE.

Scott: Okay. You're listening obviously, folks, to John McMullen from Spencer West. He's talking about TUPE things. This recording will be available for subscribers to Legal Island afterwards. And we'll also be getting it transcribed so you can follow that in writing, as well.

Service Provision Change - Grafe and Pohle v OSL Bus Gmbh

The next case, John, is most relevant to people who are based outside the UK and including our listeners here in Ireland. It's a kind of extension on the well-known case of Oy Liikenne, and the bus company in that particular one here. So take it away. Let's deal with this. It's about service provision change which obviously operate very differently in the UK than they do in the rest of Europe. So off to you, John.

John: As you know, in the UK, we have a special regime protecting employees on service provision change. TUPE applies on a service provision change where a new employer simply takes over the activity that was being carried out by the old employer. This applies only in the UK and nowhere else in Europe. In Europe and Republic of Ireland, whether there is a TUPE transfer on a service provision change depends on whether there is a business transfer under the usual European law rules.

The story starts really as far as outsourcing under European law with the case of Ayse Süzen. That's a case concerned whether cleaners employed by a contractor working for a school could transfer to a new contractor, where the new contractor refused to take them on. The European Court in that case said that there are basically two types of business. There's a business, which is labour intensive. Cleaning is a labour-intensive case. It says a labour-intensive undertaking, there's no transfer unless the employees are taken on, which they weren't in the Ayse Süzen case, so no transfer. If the business is asset reliant, then there's no transfer unless the assets are taken over by the new employer.

So this is a very strange rule. And it really allows the new employer to dictate whether TUPE in Europe applies. Because if the business is labour intensive, it can just say, we're not taking the employees. If the business is asset reliant, they can say, well, we're not taking the assets.

So Grafe and Pohle concerned an asset-reliant business and the case which proceeds Grafe and Pohle is the famous Oy Liikenne case which involved a bus company, which was running a bus franchise for a local authority, which was terminated, and the incumbent bus company was replaced by a new bus company.

Now the employees were terribly confused because most of them were taken on by the new bus company, because they needed drivers. And they said, because we've been taken on, TUPE, all the acquired rights directive must apply. The European Court said no. This is an asset-reliant business. You can't run a bus franchise without buses, without assets. And if those assets are not taken over, there is no TUPE transfer. And in this case, the new company had its own new fleet of buses and declined to take over the buses of the old employer, no TUPE.

The same fact arose, recently in the Grafe and Pohle case, a bus company lost a contract to run a bus route to the new company. The new company took most of the employees again but declined to take the buses. Because of Oy Liikenne then, was the claim of the employees to transfer under the TUPE fatal? No, said the advocate general then the European Court. This is different. There's been too much of a rigid concentration on asset-reliant versus labour-intensive undertakings. You really should be looking at transfers much more in the round. In this case there was a good reason for not taking on the buses, because they were fuel inefficient. The council now wanted electric buses. Also, what had been ignored in this case was that there was a value in the skilled workforce that came over who knew the routes, who could help the customers, and there was also a circle of customers who always use the same buses.

So the European Court, in this case, says that we are not bound by Oy Liikenne, even though this is on the face of it an asset-reliant business and the assets haven't come over. There is nonetheless a TUPE transfer. So this is a very important case in Europe and in the Republic of Ireland. In the UK, of course, it would be a service provision change because the activity of running the buses had simply change hands and there'll be no argument. But it is a very important case indeed in Ireland, because it means that you're not necessarily going to avoid TUPE in an asset-reliant situation simply by declining to take on the assets. There may be other factors which tend towards a TUPE transfer, which should be taken into account.

Scott: Yeah. So I suppose, John, on this particular case there, it's a bit like some of the but-for situations you would find in other aspects of employment law, but for the fact that there was a requirement for fuel efficient green buses, they would have taken on the busses. Is that the argument and therefore it's more nuanced and then you have to look at things in and around? So I don't doubt then the case of Oy Liikenne the original bus drivers had skills just like the ones in this case here.

John: That is why Oy Liikenne has been criticised so much over the years because of the European Court in that case, took too narrow a view, ignored the fact that most of the workforce came over, but they had skills of their own, ignored the fact there's always going to be a circle of customers when you're running a bus service, the same sort of people use the same bus service every day. But those factors probably should have been considered in the Oy Liikenne case at the time.

Scott: Presumably, this one here in the European situation, somebody just asked a question, could the employer have avoided there being a TUPE transfer by choosing not to take on the employees even though it's asset reliant? It's difficult.

John: Well, no, because as it was an asset-reliant business, refusing to take on the employees would have made no difference. It's either TUPE or it's not. And in this case, because not taking on the assets was immaterial, you can't get around it by not taking on the employees.

Scott: Okay, no problem. But I suppose with those types of things you'd have to determine, looking at number of other factors whether it is actually asset reliant or labour intensive. I suppose the labour with that, couldn't make it labour-intensive? No?

John: It might. What the case is basically saying is this, we have this old distinction which years old from Ayse Süzen that businesses are just one of two kinds. They're either labour intensive or asset reliant, and there's nothing in between, whereas in fact a TUPE transfer really involves consideration of a lot of factors which may differ from case to case.

Scott: Okay. And in this case, John, was it the local authority who required greener busses?

John: That's right. That was in the contract.

Transfer of a Business to a New Jurisdiction

Scott: Okay, we do have another question. Just want to move on to the last case and we'll extend this by a few minutes. If you have to leave at 11:45, folks, we will be recording it. So if you're a subscriber, you'll be able to listen back. But there's a question here. What's John's opinion on whether ARD applies to transfers out of the jurisdiction in which the employee is based? For example, Ireland to France, Ireland and there in Northern Ireland to whatever, would TUPE still apply outside the jurisdiction of the EU?

John: The most quoted case in this area is a case called Holis which involved transfer of a business from England to Israel, where the Employment Appeal Tribunal said TUPE can apply even though the business leaves the jurisdiction to another country, to another EU country, or indeed to a country, as with Israel, outside the EU. It's been qualified recently by case called Zeb against Xerox, which says that yes, TUPE can apply transnationally. But your terms and conditions transfer as they are now. So if your place of work is in Belfast, then you can't demand to work somewhere else. So that's a nuance on the old case.

Scott: Okay. Not quite sure how everything transfers if you're not allowed to move your place.

Does TUPE Apply to Workers as well as Employees - Dewhurst v Revisecatch

Anyway, the final case that we have here is Dewhurst against Revisecatch and this could be ground-breaking, I suppose. It's expanding TUPE away from employees and into workers as well. It's a much wider group. Why don't you go, John.

John: Yeah, this is a very exciting case for TUPE lawyers. I do stress it's an employment tribunal case, which may well be appealed, but it's not on its own. There is another employment tribunal case which says the same thing. The question is, who is covered by TUPE? Well, traditionally, we believe it is employees. However, the definition of an employee under TUPE is slightly nuanced. It says, it includes any individual who works for another person under a contract of service, or apprenticeship, or otherwise.

The question is, what does "or otherwise" mean? Well, in this particular case, the employment tribunal said that certain workers, what we call limb B workers under the employment protection legislation, who only get a limited rights, for example, working time rights, and certain equality rights, they too should be covered by this definition because they work under a contract of service, or otherwise.

So this means that on your transfer list, you would have to include not only employees under contract to employment, but those workers who are not employees and who are only entitled to holiday pay, minimum wage, and so forth.

In one sense, its consequences aren't too dramatic because, of course, workers are not employees before the general employment legislation purposes. So they can't claim unfair dismissal. But a new employer for example might be liable for arrears in holiday pay and national minimum wage. They would have to be included in your list of employee liability information given by transferor to the transferee, and they would have to be included in the information and consultation process under TUPE. So watch this space. It may well be appealed, but it is very well-reasoned, and there must be some meaning to these additional words under a contract of service, or otherwise.

Scott: Okay, thank you very much, John. And just a final couple of questions coming in there, which would this capture agency workers, is one. And what about the gig economy style workers who are often put down as self-employed but are now generally been re-categorised by the courts as workers, would they be covered?

John: Well, a lot of zero-hours workers are actually workers, as opposed to employees even though described sometimes as self-employed and they will be entitled to holiday pay and national minimum wage. Those gig economy workers could well be covered by this definition under TUPE, and should be looked at by the new employer, as part of the cohort coming over. It shouldn't catch agency workers, because there isn't a contract at all between the agency worker and the transferor.

Scott: Thank you very much. Thank you very much to everybody that's taking part today and has been watching. As I say, you can listen back to this on the website. We'll have it up, hopefully, this week. I don't have many people working on at Legal Island at the moment coming up to Christmas. Just a reminder, the TUPE masterclass with a John and with Adam Brett and Rachel Penny will be on the 25th of February next year. We'll send you out details on that but for now, thank you to everybody for listening. Hope you have a lovely Christmas. There is John's details. You can get in touch with him if you want to follow up on any of those issues but thank you, John. We'll see you see you next year. I hope you have a wonderful Christmas and Happy New Year when it comes.

John: And to you, goodbye.

Scott: Thanks very much, everybody. Bye, John. Thank you.

      

This article is correct at 09/12/2020
Disclaimer:

The information in this article is provided as part of Legal-Island's Employment Law Hub. We regret we are not able to respond to requests for specific legal or HR queries and recommend that professional advice is obtained before relying on information supplied anywhere within this article.

Dr John McMullen
Spencer West LLP

The main content of this article was provided by Dr John McMullen. Contact telephone number is 07769299610 or email drjohn.mcmullen@spencer-west.com

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