TUPE, or not TUPE: that is the question. This case examines whether subcontractors whose work is halted by their employers can TUPE over to a new company whilst not working?
Mr Mustafa, the Claimant, worked in traffic management for Amey, the 2nd Respondent. The 2nd Respondent was then awarded a large highway maintenance contract in London. The 2nd Respondent sub-contracted its traffic management work to Trek, the 1st Respondent. The Claimant transferred from the 2nd Respondent to the 1st Respondent and continued to work in traffic management.
The 2nd Respondent’s maintenance contract was put out for tender and won by Ringway Jacobs, the 3rd Respondent. The 3rd Respondent believed that any traffic management employees would transfer under TUPE once the contract was active.
However, before the transfer took place, a dispute arose between the 1st and 2nd Respondents. The 1st Respondent told all its staff, including the Claimant, to not report for work and stay at home until notified. The 1st and 2nd Respondent then mutually agreed to terminate the subcontract and the Claimant transferred back to the 2nd Respondent.
On the supposed date of transfer the 3rd Respondent stated only traffic management from the 1st Respondent would transfer and not the 2nd Respondent, where the Claimant had now been placed. The Claimant then reported to work at the 2nd Respondent but was told he had transferred to the 3rd Respondent.
The Claimant went to tribunal but the ET ruled that the Claimant had not been employed immediately before the transfer date and that the 2nd Respondent had not been operating as an economic entity before the transfer. It added that the 2nd Respondent had dismissed the Claimant when its subcontract with the 1st Respondent was terminated.
The Claimant appealed and the EAT allowed the appeal. It completely set aside the ET’s decision and ruled that the cessation of work prior to the transfer did not mean the 2nd Respondent was not an economic entity as it still had all the equipment and personnel needed to operate, they just were not on site. It also found that the Claimant was not dismissed upon termination of the subcontract between the 1st and 2nd Respondent and that therefore he may be entitled to TUPE over to the 3RD Respondent.
The lesson for employers? Just because an employer stops operating that does not mean the employees who are no longer reporting to work cannot TUPE transfer. If such a situation arises both the transferee and transferor should tread carefully. For more on TUPE can be found here.