Outsourcing – who will transfer?

In a recent case a client firm named Seawell over the operation of their own warehouse (i.e. ceased using the services of another firm Ceva).  The Ceva employee based at the warehouse  did not transfer because they were not part of an organised grouping that transferred.

One learning point here is that the dispute arose from a failure to agree this matter beforehand (contractually) AND in a failure to consult (TUPE regulations).

As often the case with EAT claims, the facts determine the outcome.

In this case Ceva (the employer) had only deliberately organised grouping of employees into outbound” operation and an “inbound” operation.

The employee was part of the “outbound” operation and the only one of eight employees, whom spent all his time on Seawellwork.

The EAT found that on no view could the findings about the “outbound” grouping amount to it having had the carrying out of activities on behalf of Seawell as its principal purpose. The “outbound” grouping could not, accordingly, have satisfied the requirements of reg 3(3)(i); whilst it does appear to have been a deliberately organised grouping of employees, there are no findings to indicate that it was organised for the purposes of the Seawell contract or that Seawell work was its principal purpose.
The facts

Ceva are in the business of freightforwarding and management logistics. They have a place of business at Dyce, where they have a warehouse. Mr Moffat used to be employed by them there, as a logistics co-ordinator. became a client of theirs in or about April 2008.

Seawell had acquired the platform drilling business being formerly carried on by Noble Drilling UK Ltd on a number of oil platforms. That business involved the supply of personnel and various goods and materials to those platforms. The service provided by Ceva was that when supplies were required for a platform, Seawell arranged for the purchase of them, specifying that delivery was to be made to Ceva’s warehouse at Dyce. Ceva would then receive the goods there, store them in different bays within the warehouse and ship the goods offshore to the relevant platforms when required, together with the appropriate paperwork. The latter could involve the provision of safety certificates in respect of particular items of drilling/oil well equipment. That is, there was a paperwork/organisational aspect to carrying out the services for Seawell and there were also physical receipt, storage and delivery aspects.

Seawell were not Ceva’s only client. The workforce at Ceva’s Dyce operations was organised into two separate parts, one for “inbound” goods and one for “outbound” goods. Mr Moffat was included in the outbound group which comprised eight people. Two of his colleagues in that section dealt with an account for another client, Diamond Offshore. Mr Moffat, on the other hand, spent 100% of his time on the Seawell account.

He was not, however, the only person who worked on the provision of services by Ceva to Seawell. His line manager, Brian Rough, spent about 20% of his time on the Seawell account, the Ceva General Manager spent about 10% of his time on it and two of the warehousemen working for Ceva at Dyce spent about 20-30% of their time on the Seawell account.

From the outset of Seawell’s contractual relationship with Ceva, Seawell made it clear that it would not be a long term arrangement. The storage and supply of materials to the various oil platforms was a job that Seawell would be able and intended to take “in house”. Thus, from 1 September 2009, Seawell took over storage and supply of goods and materials in relation to the BP Clair platform, on 1 December 2009 they took over that work in relation to the Alba North and Captain platforms and on 1 January 2010 they took over the remainder of the work, that being for the Apache Forties platforms. That is, as at 1 January 2010, Seawell ceased being a client of Ceva, the activities formerly carried out for them by Ceva thereafter being carried out by Seawell on its own behalf.

In correspondence Ceva asserted and Seawell refuted that TUPE applied so as to transfer the Claimant’s employment to Seawell. Ceva nonetheless wrote to the Claimant on 24 December 2009 advising him that their position was that there was a TUPE transfer and that he would require to report to Seawell for work on 5 January 2010; they did so knowing that Seawell’s position was that the Claimant’s employment would not transfer to them.

LawyersTravers Smith LLP, in there September 2012 newsletter advise employer” who wish to ensure their workforces are structured according to client work should perhaps make this clear in documentation to employees and in

internal notes about business structure, although what happens in practice will be equally important. In contrast, employers who are in-sourcing work or taking over a contract from another service provider could rely on this case to avoidtaking on staff from the outgoing supplier by arguing that they do not constitute an “organised grouping” for the purposes of TUPE. However, whether employees constitute an “organised grouping” will always depend on the facts of the case.”

They also suggest that “a different tribunal could easily take a different view of very similar facts”