Costain Ltd v Armitage (Transfer of Undertakings : Transfer)

Under the Transfer of Undertakings (Protection of Employment) Regulations 2006, identifying an organised grouping of employees and deciding whether an individual was assigned to it are distinct questions. An organised grouping requires deliberate organisation for the relevant client work, rather than a fortuitous allocation of work.

Assignment requires a fact-sensitive assessment of the whole circumstances. Time spent on the relevant work may be relevant, but is not decisive. A tribunal must explain how it defined the grouping and why it concluded that the employee was assigned to it. Reasons which do not address a party’s central case, or reveal whether the correct test was applied, are inadequate.

ERH Communications Ltd lost a Welsh Assembly highways-maintenance contract to Costain Ltd. The parties agreed that the change was a service provision change. The ancillary framework agreement did not transfer.

The Employment Tribunal at Wrexham declared that Mr Armitage, a Project Manager, had been assigned to an organised grouping of employees and that his employment transferred to Costain. Costain appealed, principally contending that the Tribunal had applied the wrong approach to assignment and had given inadequate reasons.

The central issue was whether the Tribunal had properly defined the relevant organised grouping and adequately explained why the claimant was assigned to it immediately before the transfer.

1. Appeal allowed. The Employment Tribunal’s declaration that the claimant’s employment transferred was set aside. The case was remitted to a differently constituted Employment Tribunal for a fresh hearing.

2. A conceded service provision change did not remove the need to identify the organised grouping required by Regulation 3(3)(a)(i). The Tribunal had to define the grouping, including the distinction between the transferring maintenance contract and the non-transferring ancillary work, before deciding whether the claimant was assigned to it.

3. An organised grouping requires conscious and deliberate organisation by the employer, in the nature of a team whose principal purpose is the relevant client activities. Employees are not such a grouping merely because they happen, even wholly, to be working on those activities at the relevant time.

4. Assignment under Regulation 4 is a distinct, individual and factual inquiry. Applying Eddie Stobart and the authorities considered, the EAT held that percentages of time worked may be relevant but are not the legal test. The Tribunal must examine the whole circumstances, including the employee’s role, contractual duties and the reason for the work allocation. An employee’s immediate involvement in relevant activities does not necessarily establish assignment.

5. The Tribunal’s reasons did not reveal which matters were findings of fact and which were merely evidence or the parties’ contentions. They did not show that it had addressed Costain’s central case that the claimant was a project-based troubleshooter, rather than assigned to the transferring contract. The EAT could not safely determine whether the correct assignment test had been applied.

6. Applying the approach in Anya, an appellate court must read tribunal reasons fairly and as a whole, but cannot repair a patently deficient decision by reconstructing missing reasoning. The reasons were inadequate. The remaining grounds were not determined.

7. ERH, which resisted the appeal, was ordered to pay Costain £1,600 in fee costs. No costs order was made against the claimant, who had adopted a neutral position.

• Employment Appeal Tribunal: Allowed Costain’s appeal, set aside the Employment Tribunal’s declaration, and remitted the assignment issue for a fresh hearing.
• Employment Tribunal, Wrexham: In a judgment sent to the parties on 3 September 2013, held that the claimant was assigned to an organised grouping and that his employment transferred to Costain.