TUPE Podcast Series: Who Transfers?

In this fifth podcast in our TUPE Podcast Series, Amanda Glover will be focusing on ‘who transfers’ under TUPE. Looking at the definition of ‘employee’ under TUPE legislation and the tests that apply in deciding if those employees transfer. 

Determining whether an individual is an employee is by no means an easy task and is extremely fact sensitive. In this podcast, we will examine those who are likely to fall within the definition of employee under TUPE, including: 

• Employees
• Apprentices
• Workers
• Executive Directors
• Secondees provided by the transferor 
• Agency workers
• Genuinely self-employed contractors
• Secondees provided by a third party to work for the transferor
• Non-employed directors

If you have any questions in relation to TUPE, please contact our employment lawyers for advice.

Transcript

Hello, my name is Amanda Glover and I’m an Associate in the employment team at Clarkslegal.  

In this podcast we will be focussing on who transfers under TUPE.  

We will look at the meaning of ‘employee’ under TUPE and the tests that apply in deciding if those employees transfer.

So, who transfers?

TUPE says that any person employed by the transferor and assigned to the organised grouping of resources or employees that is subject to the relevant transfer will transfer if their employment would otherwise be terminated by the transfer and provided they have not objected to the transfer. 

TUPE also highlights that a person will be treated as employed if they were employed immediately before the transfer or, they would have been employed, had they not been unfairly dismissed because of the transfer. 

So, it applies to employees only, but what exactly is an employee in this context. 

The definition of an ‘employee’ under TUPE is broader than that usually used for other forms of employment protection (such as unfair dismissal).  It includes any individual who works for another person under a contract of service, apprenticeship or otherwise.  It will not include anyone who is genuinely self-employed. 

Determining whether an individual is an employee is by no means an easy task and is extremely fact sensitive.  

Let’s take a look at some categories of individuals and whether they satisfy the definition.  

Let’s start with those who are likely to fall within the definition of employee under TUPE.

Unsurprisingly, employees, in the typical sense of the word, will be employees for the purposes of TUPE. 

Identifying employees, in most cases, is straightforward as they have a contract of employment and are recognised as employees by the employer.  However, there may be individuals who work under a different label but, in reality, meet the legal test of being an employee.  We won’t go into the test for employment status in this podcast, but it’s important to just flag up that it is the reality of the working relationship that matters here, not the label that the parties adopt to describe it and so employers need to think carefully about their workforce in determining who is an employee for this purpose.

Apprentices are expressly included in the statutory definition of employee under TUPE.

A worker is a category of individual created by employment legislation to plug the gap between employees and those who are genuinely self-employed.  They do not possess the key features of an employment relationship with the transferor, but they provide their personal services to the transferor under a contractual arrangement which has an element of certainty/frequency and their work is subject to the transferor’s control and supervision.

It’s unclear whether workers are intended to be covered by TUPE.  In the case of Dewhurst v Revisecatch Ltd an employment tribunal held that they are.  However, as this is a tribunal decision and not one of the appellate tribunals or courts, it is not binding on other tribunals so it’s unclear if other tribunals will take the same approach.  

Workers here should not be confused with agency workers who will we talk about shortly.

A directorship is a role distinct from the particular director’s employment status.   However, most executive directors, even if they are shareholders in the company, are likely to also be employees of the company, particularly if they are working under a service agreement and are receiving a salary. Such employed directors would therefore be covered by TUPE. 

Secondees are individuals employed by one party and supplied to another party for a particular purpose. Where a transferor seconds one of its employees to a third party that individual could still fall within the definition of an employee under TUPE on the basis that they usually remain an employee of the transferor even if they are working elsewhere for another party. 

So turning now to categories of individuals who are unlikely to meet the definition of employee under TUPE.

Agency workers will not usually be employees under TUPE because there is usually no contract directly between the transferor and the agency worker.  The agency worker usually only has a contract with the agency which supplies them to the transferor.

The genuinely self-employed are expressly excluded by TUPE. However, again, it’s important to consider the reality of the relationship here and not the label given to it by the parties.  

Secondees provided by a third party to the transferor, are usually employed by the third party not the transferor.  Therefore, they will not be considered to be an employee of the transferor under TUPE.  

A tribunal might be prepared to look through complex contractual arrangements and find that the transferor is in fact the employer of the secondee if it considers this better reflects the true nature of the employment relationship.    This is more of a risk in long-term or open-ended arrangements or those which are set up for tax or other administrative reasons rather than to reflect a genuine secondment. 

We talked earlier about executive directors who have a directorship but also an employment contract.  In contrast, non-executive directors are not usually employees of the business as their role tends not to be involved in the day to day operation of the business.  Non-executive directors are not usually, therefore, employees for the purposes of TUPE.  However, a detailed review of the factual situation will still be required to check that they do not meet the employee definition. 

In summary, who falls within the definition can be difficult to ascertain – particularly if you are the transferee and have limited knowledge of the transferor’s working arrangements.  Transferees should ensure that due diligence is carried out fully so that they are able to identify all individuals who may potentially meet the definition of an ‘employee’.

Transferors will also have duties with regard to informing and consulting its own affected employees and so it’s important that it identifies who are its employees for this purpose.

So, now let’s look at which of these employees will transfer under TUPE.

Under TUPE, the contracts of employment of all employees of the transferor will automatically transfer to the transferee provided that all of the following conditions are met:

• The employee is ‘assigned' to the organised grouping of resources or employees that is subject to the relevant transfer; 
• The employee is employed by the transferor ‘immediately before' the transfer; and
• The employee has not made a valid objection to the transfer of their employment.

Let’s look at each of these briefly.

An employee must be assigned to the organised grouping of resources or employees that is subject to the relevant transfer.

So you would first need to identity the organised grouping and then look at whether the employee is assigned to this. 

It is often assumed that the only relevant factor when determining assignment is the percentage of time the individual spends on the business or activity in question, with more than 50% being the threshold. It’s a good starting point but a tribunal will look at all of the circumstances including factors like:

•  The terms of the employee's contract showing what he or she could be required to do;
• The value given to different parts of their role
• Whether the employee can, and has, been redeployed into other parts of the business;
• The allocation of the cost of the employee's time to different parts of the business.

In most cases, employees who are temporarily absent from the business, such as those on sick leave, may still be in scope to transfer.  The relevant question being where would they be if they were not absent.

Employees who are only temporarily assigned to the transferring business or service will not transfer under TUPE.  Whether assignment is temporary will be a question of fact and the purpose and duration of the deployment and intention of the parties will be relevant here. 

Next, the employee must be employed by the transferor ‘immediately before' the transfer

Employees who have left the business prior to the transfer would not transfer unless the sole or principal reason for that employee’s dismissal was the transfer itself.  In that situation, the rights and liabilities of the former employee transfer to the transferee.   Unfair dismissal and TUPE is something that will be covered later in this podcast series.  

Finally, if the employee has made a valid objection to the transfer their employment will not transfer to the transferee.  

Any employee, in scope to transfer under TUPE, may object to the transfer.  If they object, their employment will terminate by law on the transfer date – this is neither a resignation nor a dismissal and the employee will have no right to notice pay if they object.  

There’s no formal method for objecting - the employee should simply clearly communicate to the transferor or transferee that he does not wish to transfer.  Typically, objections are communicated prior to the transfer; however, objections after the transfer can be valid in certain circumstances.

Objecting employees are not entitled to any statutory or contractual compensation on termination unless they are claiming that they have objected and resigned in response to repudiatory breach of contract or the transfer will involve a substantial change to their working conditions to their material detriment.  These claims will be covered when we talk about unfair dismissal, later in this podcast series.  

Employees retained by the transferor

In some circumstances the transferor and transferee may agree that employees who would otherwise be in scope to transfer will remain employed by the transferor.  Where certain conditions are met, this may result in the employee falling outside of TUPE, but it is a complicated area and advice should be sought if taking this approach.  

That brings us to the end of this podcast but please do watch out for our future podcasts in this series and remember that you can get in touch with the employment team at Clarkslegal any time for any TUPE advice you may need.