Business transfers and the Gig Economy: Tribunal finds that workers, not just employees, are covered by TUPE

The primary focus in gig economy litigation over the past couple of years has been the question of employment status.  More specifically, whether individuals who do not meet the requisite criteria to be classed as an “employee” (and cannot therefore benefit from the full gamut of employment rights that that status confers) may nonetheless fall within the category of “worker” (and therefore still benefit from a more limited range of employment rights, including national minimum wage, rest breaks, working time limits, annual leave and sick pay); or whether such individuals are genuinely self-employed independent contractors in business on their own account, and therefore do not benefit from employment rights.

This focus shifted, in the recent Employment Tribunal case of Dewhurst and Others v (1) Revisecatch Limited t/a Ecourier and (2) City Sprint (UK) Ltd [2019] 10 WLUK 667, to the question of what happens when there is a business transfer; and, more specifically, whether the rights and protections afforded to employees by the Transfer of Undertakings (Protection of Employment) Regulations 2006 (“TUPE”) also apply to workers and to what extent. 

Following an analysis of the relevant legislation and case law, the Employment Tribunal concluded that TUPE does apply to workers, as well as employees.  This is a decision that any employer involved in a business transfer or service provision change should bear in mind, for the reasons set out below.

TUPE: “Protection of Employment”

Under TUPE, where there is either a business transfer or service provision change which satisfies the relevant criteria, all “employees” who are employed in the business or engaged in providing the services in question immediately before the transfer will transfer automatically from the Transferor to the Transferee, on their existing terms and conditions of employment (which can only be changed in very limited circumstances).  Transferring employees are entitled to be informed and, if appropriate, consulted with about the transfer.  They are also protected from being dismissed because of the transfer (if they have two years’ service), with any such dismissal being automatically unfair (again, with limited exceptions). 

An “employee” is defined, for the purposes of TUPE, as being “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” (Regulation 2(1) TUPE).

This definition of “employee” is broader than that contained in the Employment Rights Act 1996 (“ERA”) and the Working Time Regulations 1998 (“WTR”), which confer various statutory rights on employees (including in respect of protection from unfair dismissal).  Under section 230(1) ERA and regulation 2(1) WTR, an employee is defined as “an individual who has entered into or works under…a contract of employment…[which means] a contract of service or apprenticeship…” 

This gives rise to the question of whether the TUPE definition of “employee” is broad enough to include “workers”.

A worker is defined, under section 230(3) of ERA, as an individual who hasentered into or works under “(a) a contract of employment, or (b) any other contract…whereby the individual undertakes to do or perform personally any work or services for another party to the contract whose status is not by virtue of the contract that of a client or customer of any profession or business undertaking carried on by the individual”.  Those falling within section 230(3)(b) of ERA are often referred to as “limb-b workers”.  As an aside, it is the focus on “personal service” found within this limb-b worker definition that provides an important distinction between worker status and self-employed contractor status, and has been the subject of so much of the gig economy litigation of late.  Indeed some may recognise Dewhurst’s name from the earlier case of Dewhurst v City Sprint UK Ltd [2017] WLUK 16 in which cycle couriers were found to be workers engaged personally to perform services, and therefore entitled to a number of employment rights (including holiday pay), rather than independent self-employed contractors.

The question that consequently arose in the most recent Dewhurst casewas whether limb-b workers fall within the TUPE definition of “employee”, and are therefore protected by the provisions of TUPE on a business transfer or service provision change.

The Employment Tribunal’s Decision: TUPE Definition of “Employee” Includes Workers

The Claimants in the most recent Dewhurst case were couriers who worked for City Sprint, until 31 January 2018 when the contract for the provision of the services they were carrying out was awarded to Revisecatch Ltd (trading as “Ecourier”).  Since then, the Claimants have worked for Ecourier.  On transfer of the services, the Claimants brought claims for holiday pay and failure to inform and consult under TUPE against both City Sprint (the Transferor) and Ecourier (the Transferee).  In order for liability for those claims to have passed from City Sprint to Ecourier, and for the Employment Tribunal to have jurisdiction to hear the claims for failure to inform and consult, the Claimants had to fall within the definition of “employees” under regulation 2(1) of TUPE.

Following an analysis of the statutory definitions of “employee” and “worker” outlined above, as well as applicable European legislation and case law, Employment Judge Joffe found that the definition of “employee” contained within regulation 2(1) of TUPE is sufficiently broadly drafted to include “workers” within the meaning of section 230(3)(b) of ERA, and that TUPE therefore applies to workers as well as employees.

Comment

It is worth noting, first and foremost, that this is a first instance decision and as such it is not binding on other Employment Tribunals.  It is also appealable.  However, unless and until there is an appellate decision which finds differently, this decision is likely to be persuasive. 

It is also worth noting that this decision focussed on the question of whether workers fell within the definition of “employee” contained within TUPE, for the purposes of determining whether the automatic transfer of employment provisions and the right to be informed and consulted about the transfer applied to Dewhurst’s employment.  It did not explore the question of whether and to what extent workers may also benefit from the other protections afforded by TUPE, such as the preservation of terms and conditions post-transfer and the right not to be dismissed for a reason related to the transfer.

Nonetheless, this decision is significant for any employer who is involved in a business transfer or service provision change to which TUPE applies, for the following reasons.

Firstly, in light of the fact that TUPE will apply to both employees and workers, it will be important to understand the employment status of any staff involved in the business or service transferring from the outset.  Employers will also need to be alive to the risk that staff who are categorised as self-employed contractors may, in fact, be workers in practice (this issue has been a fertile battle-ground for gig economy litigation to date).  If the latter is the case, this would not only mean that those individuals benefit from the applicable rights and protections afforded by TUPE; but would also give rise to a significant liability for back-dated holiday pay for the Transferor and/or Transferee.

Secondly, details about transferring employees and workers will need to be included in the “employee liability information” provided by the Transferor to the Transferee in advance of the transfer. 

Finally, it will be important to bear in mind that both employees and workers will benefit from key rights and protections afforded under TUPE; although to what extent is somewhat unclear.  This will almost certainly include the automatic transfer of employment and the right to be informed and consulted about the transfer, following Dewhurst.  The latter is significant because a failure to inform and/or consult staff to whom the transfer applies will give rise to liability for a penalty of 13 weeks’ pay per employee. 

It is less clear to what extent the provisions in TUPE preventing amendments to existing terms and conditions of employment following the transfer will apply to workers.  On the face of it, these provisions apply to “contracts of employment” and therefore seem to preclude workers, who will not be engaged under a traditional contract of employment.  However, there is potential scope for the relevant definitions and regulations in TUPE to be interpreted and applied sufficiently broadly to include workers; particularly in the context of the wording contained in the European Acquired Rights Directive (“ARD”), from which TUPE is derived, which does not limit this right to those with “contracts of employment” but instead applies it to the wider category of those engaged under a contract of employment or in an “employment relationship”.      

For the moment, the provisions in TUPE relating to protection from transfer-related dismissals do not apply to workers (because protection from unfair dismissal is limited to “employees”, as defined by the ERA, and workers therefore fall outside the ambit of the unfair dismissal regime).  However, query whether this may be open to challenge in the future, on the basis that the ARD makes no such distinction and provides protection from transfer related dismissals to those working under a contract of employment or in an employment relationship.  Although, a further complicating factor here will of course be Brexit, and the effect that this is likely to have on the UK courts’ reliance on EU law when interpreting and applying domestic legislation. 

Either way, it is clear that workers’ rights, and the gig economy, will remain hot topics in 2020 and it will be important to carefully consider these issues if you are involved in a TUPE transfer in the future to avoid your organisation becoming the subject of the next test case.


This information is necessarily of a general nature and doesn’t constitute legal advice. This is not a substitute for formal legal advice, given in the context of full information under an engagement with Bates Wells.

All content on this page is correct as of December 20, 2019.