Employers conducting a sale or transfer of a business under the Transfer of Undertakings (Protections of Employment) Regulations 2006 (“TUPE”) have generally understood that the protections only apply to their employees, and not to their “workers”, that is, persons engaged neither on their own account, nor by an employment contract.
According to 2201909/2018 Dewhurst v Revisecatch Limited, an Employment Tribunal (ET) decision handed down on 27 November 2019, this understanding is wrong, and workers are protected under TUPE.
The judgment follows a preliminary hearing in which the Claimants brought claims for among other things, a failure to consult them during a TUPE transfer. The ET was asked to decide whether the reference to “employee” under TUPE included workers as defined under the Employment Rights Act 1996 (“ERA96”), known as “limb (b) workers”. The issue of limb (b) workers is a live issue at the moment, particularly in the Gig Economy cases where those engaged as contractors have been found to be limb (b) workers and therefore entitled to rights such as holidays and holiday pay.
The ET decided that workers are included, concluded that the TUPE definition of employee was intended to be wider than the ERA96 definition, commenting @ : “It is clear …that …TUPE 2006 is intended to confer rights and protections on a broader class of employees than those employed under a contract of employment or apprenticeship…”. It was said that interpreting this otherwise would result in absurdity.
Limb (b) workers still do not acquire unfair dismissal rights against an employer, even after 2 years’ service, so the effect of this ruling may end up being somewhat limited. This may be the reason that this issue has not come before a tribunal in the 38 years since TUPE was first introduced in 1981.
However, failure to consult under TUPE carries a maximum penalty of 13 weeks’ pay per employee, so potential liability is still high.
Employers should therefore treat any workers the same way as employees, allowing them to be part of the consultation process, to assume roles (should they wish) such as becoming employee representatives, and working on the basis that they will continue after transfer on their same terms and conditions.
Conversely, persons working as independent contractors, on their own account, are expressly excluded from TUPE protection and are not affected by this ruling. They should ideally not be included in any TUPE processes, the risk being that doing so might be evidence of worker status, with the attendant holiday pay and Working Time Regulation rights. Worker status is already an area of heavy contention.
Decisions of one ET are not binding on any other ET. It is perfectly possible that should this issue come up again, a different ET might decide differently. Employers will now have to consider carefully whether to act in accordance with the ruling in Dewhurst, or continue as before.
The decision was handed down last week; it is, one would imagine, likely to be appealed. The difficulty for employers, in the meantime, is that the issue is now “out there”. Treating people in a TUPE transfer as workers, who until now have been called and treated as contractors, will cause them to question the other rights to which they are entitled. Employers when conducting a TUPE transfer will need to consider carefully how they treat those who might be limb (b) workers. Equally buyers will want to ensure that the information and consultation phase has been conducted appropriately and that there are suitable warranties in place to protect them, in the event of later claims.