No Transfer of Directors' Employment under TUPE on Loss of Company’s Sole Contract

Directors of a charity providing services to a single client did not transfer under TUPE when it lost the contract and the client took the service back in-house. 

In Edinburgh Home-Link Partnership v The City of Edinburgh Council, HL provided outreach services to Edinburgh City Council.  The Council was its only client.  When the Council decided to take the contract back in-house, it accepted that TUPE applied but argued that the directors were not assigned to the organised grouping of employees whose principal purpose was to carry out the services on its behalf and so did not transfer.

The tribunal found that the directors’ roles were largely of a strategic nature for the charity and any direct involvement with service delivery was only a small part of their role.  It held that the directors were not sufficiently assigned to the organised grouping and so did not transfer.

The EAT dismissed the directors’ appeal.  The tribunal had correctly found that the directors were not assigned to the organised grouping as they were not sufficiently dedicated to the provision of services to the Council.  It did not follow that because the Council was HL’s only client, all of its employees would be assigned to carrying out activities for the Council.  The directors were senior employees whose roles were principally focused on running the organisation and these strategic duties were distinct from the actual provision of services to the client.

It is fairly common for contractors who have only one client to argue that all employees, including directors, transfer when the contract is lost - so that liability for any dismissal costs, including redundancy payments, transfers.  This case demonstrates that directors or other senior employees will not transfer where the focus of their role is running the organisation, rather than any direct involvement in delivering the service to the client.  Whilst the outcome in each case will depend on the facts, this is a helpful case for incoming contractors and for clients taking services back in-house.