Court of Appeal Gives First Decision on Service Provision Changes

Rynda (UK) Ltd v Rhijnsburger [2015] EWCA Civ 75

For the first time the Court of Appeal has given guidance on what constitutes an ‘organised grouping’ for the purposes of regulation 3(3) of the Transfers of Undertakings (Protection of Employment) Regulations 2006, or ‘TUPE’. The judgment of Jackson LJ sets out the correct approach to such questions, and the threshold which must be applied.

The Facts

Ailien Rhijnsburger was originally employed by Drivers Jonas to manage the H20 property portfolio in the Netherlands. From October 2009 Drivers Jonas sought to expand her role to include properties in Germany, with the aid of some assistants. However, this proved too great a strain on the claimant and, following a brief period of illness, in a conversation with her manager in March 2010 it was agreed that she would cease work on the German portfolio until further clarity was achieved on the proposed merger between Drivers Jonas and Deloitte LLP.

That merger went ahead on 1 April 2010 and thereafter, due to restrictions in Germany and France on auditors carrying out property management work, the newly-merged Drivers Jonas Deloitte (‘DJD’) was unable to manage the German portfolio. The Claimant remained the only employee managing the Dutch portfolio until the contract was surrendered by DJD and taken on by the Respondent on 1 January 2011. When the claimant was dismissed 9 months later and claimed unfair dismissal, she had to establish a TUPE transfer in order to have sufficient continuous service to bring her claim. Employment Judge Grewall sitting at Central London found that there was a transfer

The Law

To establish a ‘service provision change’ transfer under reg. 3 TUPE it must be shown that immediately before the transfer there was “an organised grouping of employees situated in Great Britain which has as its principal purpose the carrying out of the activities concerned on behalf of the client”.

Two rival tests of ‘organised grouping’ developed in the caselaw. In England & Wales, Underhill J in Eddie Stobart Ltd v Moreman [2012] IRLR 356 held that it:

“necessarily connotes that the employees be organised in some sense by reference to the requirements of the client in question.  The statutory language does not naturally apply to a situation where, as here, a combination of circumstances … mean that a group … of employees may in practice, but without any deliberate planning or intent, be found to be working mostly on tasks which benefit a particular client.  The paradigm of an ‘organised grouping’ is indeed the case where employers are organised as ‘the [Client A] team’, though no doubt the definition could in principle be satisfied in cases where the identification is less explicit.

In Scotland, Lady Smith in a series of decisions including Argyll Coastal Services Ltd v Stirling UKEATS/0012/11/B proposed a rather higher and more formulaic threshold:

“Parliament envisaged a situation where a group of an employers’ employees is put together by that employer to carry out some particular work that a contract with a particular client requires and does so. The group will be subject to the same employer control and direction, to the same client confidentiality requirements (if applicable) and the same duties of care all stemming from that single contractual relationship. They can properly be regarded as bound together in a single joint enterprise to fulfil their employer’s contractual duties to the client.”

However, the Inner House, although affirming Lady Smith’s decision, specifically approved the approach in Eddie Stobart.

Rynda denied the Claimant constituted an ‘organised grouping’ sufficient for TUPE. Relying on Eddie Stobart, Rynda argued that her re-assignment to the Dutch portfolio was by reason of her illness and/or the DJD merger and was did not arise ‘by reference to the requirements of the client’. Moreover, they argued that it was only intended by the employer to be temporary or ‘subject to review’. Rynda argued it was not sufficient that the employer merely instruct the employee to carry out work for the client in question.

The Court of Appeal

The Court of Appeal disagreed. Since the Claimant did all of the work providing the service of managing the Dutch properties and she did so alone. She was specifically instructed to carry out those activities by her employer – that was ‘a positive decision of the employer’ and there was deliberate planning and intent, as required under Eddie Stobart.

The correct approach is:

  1. Identify the service which is being provided to the client by the transferor;
  2. List the activities which the transferor’s staff performed in order to provide that service;
  3. Identify the employee(s) who ordinarily carried out those activities;
  4. Consider whether the transferor organised those employee(s) into a ‘grouping’ for the principal purpose of carrying out those activities.

Comment

Much of the argument before the Court of Appeal centred on the level of ‘organisation’ required of the employer to establish an organised grouping; was it necessary that employees were organised at the client’s request, or in response to the client’s requirements? Some had considered that only where an employer explicitly organised its operation into ‘Client A’ and ‘Client B’ teams would the test be satisfied in practice.

Ultimately, the Court opted for a more straightforward test, which confirms the threshold established in Eddie Stobart is a low one; it is sufficient that the employer instructs their employee(s) to carry out the activities required to service the client.

This must be ‘a positive decision’ or ‘with deliberate planning and intent’. It will not be sufficient if the employee is merely covering a colleague on sickness or maternity leave, or if the employee is instructed to cover a number of projects and by happenstance only in fact works on one client’s work for a period.

In practice, it may be easier to establish a single-employee ‘organised grouping’ in such scenarios than multi-employee groupings, since the former only requires an express instruction from the employer for one person to cover the whole of one client’s requirements.

Aidan Briggs acted for the successful Claimant at trial, at the EAT and in the Court of Appeal, instructed by Lyons Davidson.