24 April 2012
Stobart case highlights the importance of TUPE compliance
A recent decision by the employment appeal tribunal that Eddie Stobart had failed to comply with its TUPE obligations should serve as a warning to other businesses which are involved in third party logistics contracts, says the UK Warehousing Association (UKWA).
Simon Edwards (pictured), legal advisor for UKWA, says the Transfer of Undertakings (Protection of Employment) Regulations 2006 can create problems for both incoming and outgoing logistics service contractors – notably where warehouses are used by several parties – but all businesses running warehouses need to be aware of the implications.
"Broadly speaking, under TUPE if a 3PL wins a new contract, it may inherit relevant workers from the previous contractor if they have been part of a group organised to serve that particular customer. This can mean becoming responsible for a group of workers' accrued service and employment rights. The 3PL may even find that it has to compensate its new inherited employees for failing to consult in advance of winning the contract," said Edwards.
"But TUPE impacts on a company that loses a contract, too. It is sometimes difficult to demonstrate that a group of workers is dedicated to one particular contract so, if that contract is lost, the workers will not necessarily transfer across to the contractor and redundancy payments may be due if they have to be laid off.. This often happens at multi-user warehouse facilities where workers are servicing a number of clients."
The Stobart case centered around a meat warehouse operated by the company. By 2009 only two suppliers were using the facility - Forza and Vion. Stobart's night-shift employees worked primarily on the Forza contract and its day-shift workers worked primarily on the Vion contract.
In 2009 Vion arranged for its work to be taken over by a new logistics company, FJG.
Stobart thought that TUPE should apply to transfer the workers to FJG on the basis that the employees spent the majority of their time performing Vion work and notified them that they would transfer. FJG did not agree that TUPE applied and did not accept that the employees were transferring.
The employment appeal tribunal agreed with FJG, finding that the Stobart workers were not 'organised' on the basis of the Vion contract, but on the basis of the shift they worked.
"The point of the EAT's decision is that it is crucial to see whether there is an 'organised grouping' by reference to the customer. Where an employer has staff working on a contract that is expected to be lost and does not want to pay redundancy, the employer should ensure that employees clearly belong to a group organised by reference to the customer, for instance, referred to as 'Contract X team' in some way," advises Edwards.
UKWA members have access to a free 24-hour legal hotline where they can discuss TUPE and other legal matters relevant to their business.
UK Warehousing Association
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