In Seawell Ltd v Ceva Freight (UK) Ltd and another UKEATS/0034/11, the Employment Appeal Tribunal (“EAT”) held that an employee who spent 100% of his time working for a single client was not an “organised grouping of employees” for the purposes of regulation 3(3)(a)(i) of the Transfer of Undertakings (Protection of Employees) Regulations 2006 (“TUPE”). Therefore when the client brought in-house work previously carried out by the Claimant’s employer, there was no service provision change.

What happened in this case?

The Claimant, Mr Moffat, was employed by Ceva Freight (UK) Limited as a logistics coordinator in its warehouse. Ceva provided logistics and freight forwarding arrangements for Seawell Limited. The Ceva workforce was organised into two separate parts, one for “inbound” goods and one for “outbound” goods. Mr Moffat worked in the “outbound” group, which comprised of eight employees. Mr Moffat dedicated 100% of his time to the Seawell account, while other employees in his group spent between 10-30% of their time working on the Seawell account. Two of the employees of that group worked exclusively for another customer. Seawell’s contract with Ceva was never intended to be a long term arrangement and in January 2010, Seawell took back in-house the work carried out by Ceva.   Following this, Ceva asserted that TUPE applied so as to transfer Mr Moffat’s employment to Seawell. This was disputed by Seawell. Mr Moffat’s employment was terminated by Ceva and he claimed unfair dismissal against Ceva and Seawell. Ceva considered that TUPE applied, asserting there was a service provision change under Regulation 3(3)(a)(i) of TUPE. This provision requires certain conditions to be met; one of these is that there must be an “organised grouping of employees” the “principal purpose” of which is carrying out the relevant activities on behalf of the client. TUPE provides that a single employee can be an “organised grouping of employees” (Regulation 2(1)). If there had been a service provision change and TUPE therefore applied, any claim of unfair dismissal would properly be against Seawell rather than Ceva, as all liabilities under Mr Moffat’s contract would have transferred to Seawell when the service was taken back in-house.

The Employment Tribunal ruled that Mr Moffat’s contract of employment had transferred to Seawell by virtue of TUPE and that he had been unfairly dismissed by Seawell. The rationale for this was that either Mr Moffat was himself “an organised grouping of employees”, or alternatively, he was assigned to an “organised grouping of employees” which included others in the “outbound” group, as he spent 100% of his time working on the Seawell contract.

Seawell appealed the decision to the EAT, arguing that the Tribunal had applied the wrong tests. In particular they argued that the Tribunal were wrong to conclude that, because Mr Moffat spent 100% of his time on the Seawell contract, he was responsible for carrying out 100% of the activities concerned. The EAT agreed with Seawell and upheld the appeal, finding that Mr Moffat had been unfairly dismissed by Ceva. The EAT found no evidence to suggest that Mr Moffat was an “organised grouping of employees”, or that the principal purpose of the “outbound” grouping was to carry out the Seawell contract – i.e. that the grouping had been organised by reference to the needs of the client, and so met the test set out in the recent case of Eddie Stobart v Moreman & Others (see our previous blog Service provision changes: UK EAT gives guidance on the meaning of an “organised grouping of employees”). Therefore, on the facts the test under regulation 3(3)(a)(i), as developed by Stobart, had not been met in respect of either Mr Moffat or the “outbound” grouping, and the EAT found therefore that (in the absence of any “organised grouping”) there had not been a service provision change.

What does this decision mean for employers?

Following the EAT’s clarification of the test for an “organised grouping of employees” in Stobart earlier this year, the decision provides further guidance on the workings of the TUPE service provision change test. It is clear from this decision that the fact that an employee works exclusively on one client’s contract will not necessarily mean that they will “go with the work” following the transfer. Whether such an employee will transfer is to be assessed on a case-by-case basis, but TUPE will only operate to this effect where there is a grouping of employees who are clearly organised in such a way as to meet the needs of a particular client to be served by that grouping.

When assessing which staff will transfer following a service provision change, employers should consider the position of a sole employee who spends 100% of their time working for a particular client in the same way as they would a group of employees. A two-stage analysis should be carried out. First, is there a client-focused, “organised grouping of employees”, (which may or may not comprise a single employee)? Second, which employees are assigned to that grouping? These questions are clearly distinct, and should be considered independently. The present case principally concerned the first issue – the criteria for determining whether there is an organised grouping (which is an essential element of a service provision change). However, it is also clear that the fact that an employee works solely for a particular client does not suggest that they are assigned to a grouping that is in fact organised by reference to the needs of that client. The EAT’s decision, whilst uncontroversial, should enable to employers to act with greater certainty when considering the position of employees on a service provision change.