Employment Law Solicitors
Bethan Jones
Posted on 24 Feb 2015

Employment Law Update - TUPE Service Provision Change - Variation Clauses - Discrimination

TUPE Service Provision Change: Single Employee was an Organised Grouping (Court of Appeal)

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

Background

The Transfer of Undertakings Regulations 2006 apply to two different types of 'relevant transfer', one of which is a 'service provision change' – where a client, which engages a contractor to do work on its behalf, reassigns such a contract or brings the work back in-house. There are conditions that must be met for a service provision change to take place; one of these is that there must be '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'. The organised grouping of employees may be a single employee.

In the recent case of Eddie Stobart Ltd v Moreman and others [2012] IRLR 356, the Employment Appeal Tribunal ('EAT') held that, to constitute an 'organised grouping', it is not enough that employees carry out the majority of their work for a particular client. Rather, employees must be organised by reference to the requirements of the client and be identifiable as members of that client's team.

The Facts

The Claimant was a commercial property manager employed by Drivers Jonas, which managed a portfolio of properties across Europe (H20 properties) owned by the Rynda Group. The Claimant's main responsibilities were managing the H20 properties in the Netherlands, but she also worked on the H20 properties in Germany. Following a period of illness, her duties changed and she focused only on the Dutch properties.

In April 2010, Drivers Jonas was acquired by Deloitte LLP to form Drivers Jonas Deloitte LLP ('DJD'). The Claimant's employment transferred to DJD, where she was solely responsible for managing the Dutch H20 properties. She had no other duties and no-one assisted her in carrying out this work.

Soon after the acquisition, DJD decided to withdraw from managing the H20 properties and the Rynda Group arranged for one of its subsidiaries, Rynda (UK) Ltd ('RUKL') to take over this function. DJD's contract to manage the portfolio, and the Claimant's employment, ended on 31 December 2010. On 1 January 2011, she started working for RUKL as a senior asset manager. She continued to do exactly the same job as before, managing the Dutch H20 properties. Eight months later, she was dismissed.

The Claimant brought an unfair dismissal claim against RUKL. However, to have sufficient continuous service to bring the claim, she had to establish that she had transferred from DJD to RUKL under TUPE on 1 January 2011.

Initial Decisions

The Employment Tribunal found that there had been a service provision change. It found that the Claimant was an 'organised grouping', which had as its principal purpose the property management services for the Dutch H20 properties. The fact that the Claimant had, in the past, assumed some responsibility for the German properties, did not undermine this finding, as she had always devoted the majority of her time to the Dutch properties.

RUKL appealed to the EAT, but it upheld the Employment Tribunal's findings.

Court of Appeal Judgment

The Court of Appeal dismissed RUKL's further appeal, finding that there had been a service provision change under TUPE and the Claimant's employment had transferred to RUKL.

The court found that this was a case in which a single employee did amount to an organised grouping. It could not be said that it was a matter of pure chance that the Claimant was managing the Dutch H20 properties; at all times the employer (DJD and later RUKL) decided who she could work for. It was a conscious decision of the employer which created the situation, in contrast to Eddie Stobart.

Tips for Employers

Although this case does not take the law any further, it is a useful analysis of the current authorities in this area, including Eddie Stobart and Ceva Freight (UK) Ltd v Seawell Ltd [2013] CSIH 59, as well as Argyll Coastal Services Ltd v Stirling and others [UKEATS/0012/11]. Those decisions are likely to remain the most useful source of comprehensive guidance about whether there has been a service provision change.

Variation Clause in Teacher's Contract did not Permit School to Impose Unilateral Change

Hart v St Mary's School (Colchester) Ltd [UKEAT/0305/14]

Background

In general terms, changes to any term of an employment contract must be mutually agreed. Any right of unilateral variation must be stated in clear and unambiguous terms. Employers often reserve a general right to vary the contract unilaterally, although Employment Tribunals will rarely enforce such clauses.

The Facts

The Claimant was employed at St Mary's School from September 2001, on a part time basis. The original letter of appointment did not specify fixed hours, simply stating that the post involved two days' teaching a week, with details to be established at a later date. A contract was eventually put in place in March 2003, by which time the Claimant's hours had been increased to three days a week.

In 2013, the school decided to change its timetable so that particular subjects could be taught in the mornings. Therefore, the Claimant was invited to spread her working hours over five days, rather than three. There was a consultation process, but the parties could not reach any agreement. The Claimant particularly wanted to avoid working on Fridays, due to family commitments.

Ultimately, the school insisted that the changes would be implemented from 1 September 2013. On 3 September 2013, the Claimant resigned, indicating that she would remain employed at the school until 31 December 2013, but reserving her right to bring a claim. In her resignation letter, she claimed that the school was not entitled to rely on a clause in her contract, which stated that 'the teacher shall work all school hours while the school is in session and at any other time…as may be necessary…for the proper performance of her duties'.

The Claimant brought a claim of constructive dismissal against the school.

The Employment Tribunal rejected the claim, finding that the school had not acted in breach of contract. The Tribunal found that there was no custom and practice that the Claimant would only ever work three days a week. The school had a contractual right to vary the Claimant's hours and, in doing so, they consulted with her in good time.

The Claimant appealed to the EAT.

Judgment

The EAT allowed the Claimant's appeal on the first ground, which related to the construction of the contract. It held that the Claimant's contract of employment was not a comprehensive record of her terms of employment. In particular, there was nothing that fixed the number of hours of days that she was required to work. The extent of her part time working needed to be agreed separately. It seemed that, at the time the contract was signed, the parties had agreed that the Claimant would be working three days a week.

The EAT held that the phrase 'may be subject to variation depending upon the requirements of the School Timetable' permitted some variation after the initial notification of hours, but did not allow for entirely unilateral variation.

Tips for Employers

Given the consultation undertaken by the school, the apparent justification for changing the working hours and the fact that the contract specifically provided for changes, the EAT's decision is perhaps surprising. However, the EAT clearly felt that the imposition of a five day week was a fundamental change, possibly a breach of the implied term of mutual trust and confidence, even though the Claimant's total weekly hours were to remain the same.

Non-Payment of Bonus to Disabled Employees was Discrimination

Land Registry v Houghton and others [UKEAT/0149/14]

Background

Under section 15(1) of the Equality Act 2010 ('EqA 2010'), 'discrimination arising from disability' occurs where both:

  • A treats B unfavourably because of something arising in consequence of B's disability; and
  • A cannot show that the treatment is a proportionate means of achieving a legitimate aim.

Liability for discrimination arising from disability cannot occur unless the employer knew (or should have known) about the Claimant's disability.

The Facts

The Land Registry operated a discretionary bonus scheme. Under the terms of the scheme, employees who had received a formal warning during the relevant financial year were not eligible to receive a bonus. Formal warnings that had been received for a conduct-related matter could be ignored, but there was no such discretion to ignore a warning in relation to sickness absence.

The five Claimants were all disabled, and each had been absent due to sickness during the 2012 financial year, in all cases as a result of their disabilities. The Land Registry had various reasonable adjustments in place, and adjusted the normal trigger points that would usually lead to a warning. However, despite these adjustments, each of the Claimants eventually received a warning. These warnings rendered them ineligible for a bonus.

The Claimants brought a claim under section 15 of the EqA 2010, for discrimination arising from disability, which was successful before the Employment Tribunal. The Tribunal rejected the Land Registry's submission that the link between disability and the non-payment of bonus was too remote.

The Land Registry appealed to the EAT.

Judgment

The EAT dismissed the appeal, finding that automatic disentitlement to the bonus following disability related absences was plainly sufficient to amount to unfavourable treatment in consequence of the disability. Without the disability, each Claimant would not have had the same level of sickness absence, and that is why the bonus was not paid.

Tips for Employers

Although the non-payment of the bonus constituted unfavourable treatment, the Land Registry may still have been able to justify the bonus scheme as a proportionate means of achieving a legitimate aim if it had allowed for more discretion. The EAT focussed on the fact that there was no discretion to ignore the warning when determining entitlement to bonus.

Employers with bonus schemes that are linked to attendance should ensure that there is sufficient flexibility within schemes to avoid withholding payment in circumstances where it is likely to be discriminatory.