The recent Employment Tribunal decision in Dewhurst and others v. Revisecatch & City Sprint has held that the protections offered to employees by the Transfer of Undertakings (Protection of Employment) Regulations (TUPE) are also to be afforded to individuals categorised as workers.
The Employment Rights Act 1996 (ERA) defines a "worker" as: (a) an individual working under a contract of employment (i.e. an employee); or (b) an individual who performs services personally for a third party which is not a client or customer of a profession or business undertaking operated by them. These "limb (b) workers" are neither employees nor self-employed, but are given some statutory protections. The decision in Dewhurst extends the application of TUPE to the limb (b) workers.
TUPE applies in two situations: (1) where there is the transfer of a business, or a part of a business, to a new owner; and (2) where a company outsources activities to a third party, where an outsourced service moves to another outsourcing provider or where an outsourced service is brought in-house. Where TUPE applies, employees who are "assigned" to the business or services are transferred (along with any liabilities to those employees) to the transferee on the same terms and conditions.
To add to the confusion about TUPE, the regulations do not use the definition of "employees" from the ERA. Instead, TUPE protects "employees" who are defined as: "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". This definition excludes individuals who are genuinely self-employed but, as a result of the words "or otherwise", leaves open the question of whether the TUPE protections extend to limb (b) workers.
The Tribunal decided that the words "or otherwise" should be interpreted so as to include limb (b) workers. It said the exclusion of individuals working under a "contract of service" was intended to deny this protection only to independent contractors who were in business on their own account.
The Tribunal gave the example of the Equality Act 2010 (under which it has already been confirmed that limb (b) workers have protection) where the definition of an "employee" includes an individual who works under a "contract personally to do work". The Tribunal therefore concluded that it would be an "absurdity" not to afford limb (b) workers the protection of TUPE.
Next steps for employers
This decision comes from an Employment Tribunal and, as such, is not binding on any future court or tribunal. It is also extremely likely that this case, or another case that follows similar reasoning, will be appealed. An appeal decision could create a precedent capable of binding other tribunals.
If this decision stands on appeal, employers will need to ensure that they account for their entire worker constituency whenever facing a transfer. That would include due diligence on a sale or outsourcing, as well as when undertaking an information and consultation process. Specifically, this includes ensuring that all workers are properly taken into account when: (a) determining whether existing trade union recognition arrangements or similar representative structures cover all those who need to be represented in the TUPE process; (b) deciding the arrangements for the election of any employee representatives; and (c) assessing what, if any, measures are envisaged which might affect their workers. Employers will also need to include details about transferring limb (b) workers in the "employee liability information" which must be provided under TUPE.
Despite the potentially wide ramifications of this extension, the decision does not open the door to workers gaining the right to unfair dismissal protection (both ordinary and automatic) under the ERA as the definition of "employee" in the ERA explicitly excludes limb (b) workers. Further, the restrictions in TUPE on changing terms and conditions of employment are limited to individuals with "contracts of employment" and so again still exclude limb (b) workers. However, there are questions over whether these exclusions are consistent with the European legislation from which TUPE derives, and which are now likely to be raised in future cases on workers and TUPE.
In addition, if you think that employment law should surely have a consistent definition of who is an "employee" by now, you will not be alone.