TUPE transfer revelation | Do the regulations apply to workers as well as employees?

With ‘employment’ literally in the title, it has long been understood that the TUPE regulations exist to protect employees when a company changes hands.

However, in a potentially groundbreaking decision, an Employment Tribunal has now ruled that workers fall under the definition of employee for the purposes of TUPE.

As a first-instance decision, the judgment isn’t binding in other Tribunals and is likely to be appealed; however, if the appellate courts concur with the Tribunal’s findings, the ramifications of both employees and workers falling within the scope of the regulations would be huge.

The worker/employee distinction

The rights workers are entitled to is dictated by their employment status, with only employees benefitting from the full suite of statutory rights. Workers enjoy some of the same rights and entitlements – such as those in respect of national minimum wage, holiday pay and protection from discrimination – while self-employed individuals benefit from the least amount of protection under law.

With Britain’s gig economy having reportedly doubled since 2016, the distinction between these categories of worker has been heavily scrutinised, with a number of companies receiving criticism for incorrectly categorising individuals in an attempt to limit their legal rights. However, until now, TUPE – the transfer of an individual’s rights when the company they work for changes ownership – was never part of the conversation, as it was accepted that only employees will be automatically transferred to any purchaser of the employer’s company under a TUPE transfer.

Dewhurst v Revisecatch & City Sprint

The claimants in this case, three cycle couriers, brought a claim against two courier companies who engaged their services for failing to inform and consult (contrary to regulations 13 and 14 of TUPE) after the first company lost a contract for the provision of these services to the second.

With the regulations stipulating that TUPE protection applies only to ‘employees’ – and the broadly accepted view that workers don’t qualify – the case was one of on statutory interpretation. On the face of it, the definition of ‘employee’ given by the regulations refers to those engaged on a Contract of Employment and excludes those working on a contract for services. As agency workers, the claimants’ employment status appeared to exclude them from protection under TUPE; however, the Employment Tribunal contemplated whether the definition of ‘employee’ given by the regulations should be interpreted as including workers as well.

In particular, the Tribunal considered the following definitions side by side:

A worker, according to section (3)(b) of the Employment Rights Act (ERA) 1996, refers to “an individual who has entered into or works under… a contract of employment, or any other contract… whereby the individual undertakes to do or perform personally any work or services for another party to the contract…”
An employee, under The Transfer of Undertakings (Protection of Employment) (TUPE) Regulations 2006, refers to “any individual who works for another person whether under a contract of service or apprenticeship or otherwise but does not include anyone who provides services under a contract for services and references to a person’s employer shall be construed accordingly”.

The claimants, who claimed that they were workers under the definition given by the ERA, argued that they should be treated as employees for the purposes of TUPE as the regulations clearly apply to Contracts of Employment plus a further, undefined category – “or otherwise”.

The Tribunal agreed. Taking these statutory definitions into account, it held that a ‘worker’ within the meaning of the ERA is, in essence, an ‘employee’ within the meaning TUPE.

The case is the first time a Tribunal has explicitly ruled that where a transfer is covered by the regulations, the provisions apply not just to employees but those who are properly classified by workers too.

James Tamm

Director of Legal Services

Expert Comment

This is potentially groundbreaking, but the message at the moment has to be nothing has changed – yet. As a first-instance decision, it does not have to be followed by other Tribunals, and given the wider significance for the respondent in the case, I am sure the decision will be appealed. As a result, and unless employers are particularly cautious, they may not wish to change their practices around TUPE at the moment.

However, employers who do not adapt their consultation procedures to include workers should note that this decision may lead to other workers chancing their arm. That could be costly given a successful claim for failure to inform and consult under TUPE Regulations could lead to a protective award of up to 13 weeks’ pay per worker.

Should this decision be upheld, other rights and liabilities that attach to workers (such as pay and accrued holiday entitlement) would also transfer. It’s therefore important that transferees consider whether they need additional indemnities within their relevant commercial contracts with the transferor to cover these off.