Under most construction contracts, the contractor takes on the ground conditions risk. However, a recent case has demonstrated that the risk can fall on the employer.
Only employees who form part of an organised grouping of employees, assigned to carry out the services that are the subject of the transfer, will move to the new provider upon a service provision change under TUPE. The recent case of BT Managed Services Limited v Edwards and Another involved such a service provision change and an employee on sick leave.
Mr Edwards was employed by BT Managed Services Limited (BT). He developed a heart condition that prevented him from carrying out the work that was required for his role. Mr Edwards went on long-term sick leave in January 2008 and was in receipt of permanent health insurance (PHI) payments. He remained employed by BT in order to continue receiving the PHI payments. Even when the PHI payments ceased he remained on the employer’s books and was in receipt of some payments from them, but he did not carry out any further work during this time. In fact, he was deemed permanently incapacitated for work.
In December 2012 the service contract on which Mr Edwards had worked previously was transferred to Eriksson. There was no dispute that TUPE applied and that Mr Edwards' team transferred. The question was whether Mr Edwards was part of the organised grouping of employees at the time of the transfer.
The Employment Tribunal found, and the EAT agreed, that he was not, as it was not contemplated that the employee would ever provide work, or carry out any of the services, under the contract. They considered that the link between the employer and employee only served for administrative purposes and this was not enough for the employee to be assigned.
The EAT gave the following guidance in considering the assignment of an employee on sick leave:
- if an employee is absent from work at the time of the transfer, it will be matter of fact for the Tribunal to determine if they are part of the organised grouping that transfers or not;
- even lengthy absence will not preclude the employee from being assigned, but there must be some expectation of future participation in carrying out the relevant activities;
- the Tribunal must identify the organised grouping that transfers and then consider who is assigned to that group; and
- the organised grouping is defined in the TUPE Regulations by reference to the economic activities that the grouping pursues; an employee who plays no part in those economic activities will not be assigned to the grouping.
What does this mean?
It is important to distinguish between employees who are temporarily or permanently unable to work. It is clear that employees who are only on short-term absence, or those who are on longer-term absence but have some prospect of returning, will still be considered to be assigned to the organised grouping of employees and will therefore transfer.
This decision applies to employees who are both on long-term absence and who have no real prospect of returning. Whilst it is unlikely to apply frequently in TUPE transfers, the decision does provide grounds for challenging the inclusion of employees on long-term sickness on any TUPE lists. Our advice therefore is to ensure that your TUPE due diligence is carried out with care when it comes to employees on long-term absence.
For further information
Please contact Kate Watkins
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