The claimants in this case were cycle couriers who brought claims for (amongst other things) failure to inform and consult under TUPE.
The claimants' employment status was not in dispute following a decision by an Employment Tribunal in earlier proceedings that they were workers.
Accordingly, the issue for the Tribunal was to decide whether a worker falls within the definition of 'employee' in regulation 2(1) of TUPE, which defines an 'employee' as any individual working under a contract of service or apprenticeship "or otherwise" but excludes the genuinely self-employed, so as to benefit from the rights and protections covered by TUPE.
The Employment Tribunal's starting point was to consider the European Acquired Rights Directive ("ARD"), which TUPE implements into UK law, and which has as its purpose the safeguarding of rights under national employment law. The ARD provides for the transfer of rights and obligations "arising from a contract of employment or from an employment relationship existing on the date of transfer". It defines an employee as "any person who, in the Member State concerned, is protected as an employee under national law".
On review of domestic legislation, the Employment Tribunal found that the term 'employee' is used to describe both employees and workers, in particular in the Equality Act 2010. Under national employment law, workers enjoy a number of employment rights substantially derived from European law, for example the right to equal pay, protection against discrimination and restrictions on working hours. Therefore, the Tribunal held that an "employment relationship" under the ARD must be read as including such individuals.
The Tribunal concluded that it was clear from its wording that regulation 2(1) of TUPE intended to confer rights and protections on a broader class of employees than those employed under a contract of employment or apprenticeship as reflected in the words "or otherwise". The Tribunal was required to interpret regulation 2(1) TUPE in accordance with the ARD and the words "or otherwise" had to be construed to include workers.
As this is only an Employment Tribunal decision, it is not binding. Given the significance of the decision, we expect it to be appealed. Therefore, employers may want to wait for the outcome of any appeal before changing their practices on a TUPE transfer.
If the decision is upheld on appeal, the consequences will be significant. As well as the rights and liabilities relating to the workers' contracts transferring (such as pay and accrued holiday) it will mean that employers will need to factor in workers as part of their information and consultation obligations. This will include providing details about the transferring workers in the transferor's "employee liability information"; whether the transferee, in relation to such workers, envisages any measures; and ensuring workers are included in any election and consultation process. Failure to comply with these obligations could lead to a protective award of up to 13 weeks' pay per worker.
It will also be important for employers to consider whether their commercial contracts cover the scenario where workers transfer under TUPE and whether any additional protection, including relevant indemnities, need to be built into these contracts to cover the additional risks.