TUPE: in a nutshell. Newsletter 1 December 1 st
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1 TUPE: in a nutshell Newsletter 1 December 1 st
2 TUPE in a nutshell By Natalie Peacock Employment Solicitor for Education What is TUPE? TUPE is an abbreviation for the Transfer of Undertakings (Protection of Employment) Regulations 2006 as amended by the Collective Redundancies and Transfer of Undertakings (Protection of Employment) (Amendment) Regulations 2014 in January of this year. When does TUPE apply? TUPE applies to a relevant transfer. This is one of the following: 1. A business transfer: This is when there is a sale or all or part of a business. This can occur when some or all of a business moves to a new owner or if there is a merger between 2 businesses. In the school context an example would be where a school converts to an academy and/or joins a multi academy trust. 2. A service provision change (SPC): This is where there is a transfer of a service from one provider to another. For example, if a School out-source or bring a service back in house (e.g. catering services). There will also be a SPC when a service goes from one contractor to another (also known as re-tendering). What does it do? If TUPE applies (see above) then it basically means that employees who transfer (see more below) should not see any changes to their terms and conditions of employment. Employees will automatically transfer from the old employer to the new employer seamlessly. Any changes made to employees terms and conditions will be void. A dismissal of an employee where the sole or principal reason is the transfer will be treated as automatically unfair provided the employee concerned has the required 2 years service in order to bring an unfair dismissal claim. It is possible to make changes to terms and conditions and/or dismiss employees for a reason connected to the transfer that is an economical, technical or organisational reason entailing changes to the workforce. This is called the ETO exception (more information on ETO exceptions next week!). Who does it apply to? TUPE applies only to existing employees of the old employer who are assigned to the organised grouping of resources. Whether or not an employee is assigned to an organised grouping has always been one of those annoying grey areas in employment law that is mainly based on the facts of each situation. However we have recently had some guidance on this.
3 This question is easy where all employees spend all their time doing one thing and that is the one thing that is transferring i.e. if a school outsourced its cleaning department, and then everyone engaged in the cleaning department would transfer. However, if we have a situation where employees do more than one function or work on more than one contract the position becomes more complex i.e. if a school has an employee who works in both the cleaning and catering departments and the school transferred the cleaning department only. Here, the question of whether that employee transferred or not would depend on whether that employee would be considered as being assigned to the organised grouping of employees that is transferring. So, the question is whether that employee is assigned to the service that is being transferred. One factor is often relied on quite heavily is a breakdown in terms of a % of time spent at work on the transferring service. The general rule has been that if that % is more than 50% then that employee will transfer. If it is 50% or less then they won t. This % must be taken from a period before the transfer, not just the day before. We would suggest 6 12 months as an accurate snapshot in time. However this is not the only important consideration. The simple % of time spent is not enough in itself. There must also be an organised grouping of employees who are assigned to the service that is transferring. This means that there must be a conscious plan that this employee spends his time on that work, not just a development over time. For example, an employment solicitor may spend some time advising on debt recovery; however that is not what they are employed for. That is not a part of the organised grouping. What if the firm of solicitors decided to transfer debt recovery to another firm? In this example, even if the employment solicitor was spending more than 50% of their time doing debt recovery on the day before the transfer they would not transfer. This is because they are not a part of the organised grouping doing debt recovery. It was not planned that they should be doing debt recovery that just happened. How do I know if someone transfers or not? What you should be looking at when deciding if someone transfers is: 1. What is the conscious organisation of employees? Are the employees in question consciously organised to the service or part of the business that is being transferred? If the answer is no, then it is likely that they won t transfer. 2. If the answer is yes, then you will have to do a breakdown of percentages of work done by the employees on the service that is transferring. 3. If the employee in question spends more than 50% of their time on the service that is transferring then they will likely transfer. If not then chances are they won t.
4 TUPE: Dismissals and changing employees terms and conditions before or after a TUPE transfer Aims You will remember that last week we gave you an introduction into TUPE, which has hopefully given you a pretty good grasp of when TUPE does and doesn t apply. This week, we are continuing with the TUPE theme as promised, and we are going to look in more detail at under what circumstances you can: 1. Make changes to employees terms and conditions; and 2. Dismiss staff where there has been, or will, be a TUPE Transfer. Why would an employer want to change terms and conditions and/or dismiss staff? Imagine that you are a Multi-Academy Trust (MAT) and a school (School A) has just converted to Academy status and joined the MAT. All of School A s employees have transferred to you under TUPE. The employees that have transferred may have different terms and conditions to the staff you already have. Also, you may be worried that the MAT may now have too many employees for the amount of work that needs to be done. You may then want to think about doing the following: 1. Changing the terms and conditions of the employees that have come over to you to make them consistent with your staff; and 2. Look to dismiss some of the people that have transferred as you think you may have too many staff. What can I do in this situation? The basic position under TUPE is: 1. Any changes made to transferring employees terms and conditions will be void; and 2. Any employees who are dismissed because of the transfer will be automatically classed as being unfairly dismissed (as long as they have 2 years service). However: There are certain circumstances where an employer can make changes to the employees terms and conditions and/or dismiss. 1. Changes to contracts of employment are permitted under Tupe where; a. the reason for the variation is unconnected to the transfer; b. when the sole or principal reason for the variation is an economic, technical or organisational, entailing changes in the workforce (ETO reason) and the employer and employee agree that variation; or c. The change varies a term or condition incorporated from a collective agreement provided that; i. The variation takes effect more than one year after the date of the transfer; and
5 ii. Following the variation, the rights and obligations in the employee s contract, when considered together, are no less favourable to the employee than those which applied immediately before the variation. 2. It is possible to dismiss employees where the sole or principle reason for the dismissal is an economic, technical or organisational reason entailing changes in the workforce. What is an economic, technical or organisational (ETO) reason? So, let s break that down. In order to change someone s terms and conditions and/or dismiss someone the sole or principle reason for the variation or dismissal must be an: Economic, Technical, or Organisational reason And This reason entails changes in the workforce. There is no definition of ETO that is set in stone. However, the courts have decided that it must be concerned with the day-to-day running of the business. An ETO reason could be: A reason relating to profitability or market performance (Economic); A reason relating to a change of equipment or production processes (Technical); and A reason relating to the management or organisational structure (Organisational). The best way to get this into context is to look at some examples: Example 1 (economic) School A transfers to the MAT and the MAT inherits the staff. After the transfer the MAT discovers that there is a budget deficit, and without making staff reductions, the School would not be able to run profitably. The MAT decides to dismiss some of the staff. In this situation, the reason relied upon in making the changes would fall into the economic category. Example 2 (technical) School A has 20 catering staff, 10 staff who prepare the food and 10 staff who serve the food. However, the MAT decides that going forward whilst the food will still be prepared by the existing staff, it will be self-served from vending machines. It therefore dismisses the 10 staff who serve the food. This may be seen as a technical reason. Example 3 (organisational) School A joins the MAT and School A has a different staffing structure to the MAT. Therefore, the MAT decides to change the terms and conditions of the staff that transferred to reflect the new structure (i.e. it goes through a restructure). For instance they change their roles and responsibilities to fit with the MAT s staffing structure. This may be seen as an organisational reason. But, this isn t enough on its own to justify a change or dismissal. In addition to an ETO reason, this reason must also entail changes in the workforce. What does entailing changes in the workforce mean? The courts take a narrow approach when looking at what amounts to an ETO reason entailing changes in the workforce. They have restricted this to mean: 1. Changes in the numbers employed; or 2. Changes in the functions performed by the employees.
6 However, the TUPE regulations now expressly provide that a change to the place where an individual is employed to work amounts to a change in the workforce. Examples of changes in the workforce could include: 1. Genuine redundancy (changes in numbers); 2. Re-organisation (where job function changes for instance from a managerial to a nonmanagerial role); 3. A change in employees roles because of differences in operational structures (function). An ETO reason does not necessary need to entail changes to the entirety of the workforce; it may be enough that change affects a body of the employees who have transferred. As a result of the narrow approach taken, it is unlikely that changes of financial aspects of an employee s contract of employment (for instance, their salary or benefits) would be covered by the ETO reason entailing changes in the workforce. This is because these kinds of changes do not involve changes in the numbers employed or the functions performed. Therefore, you would find it difficult to reduce an employee s salary or benefits following a TUPE transfer. Also, you will not be able to able to change the new employees terms and conditions just because you want them to be the same as the employees you already have (sometimes referred to as harmonisation). This is specifically excluded from falling within the ETO exception. Therefore such changes will be void. Summary To summarise, in order to either change someone s terms and conditions that have been transferred under TUPE or to dismiss an employee who was affected by the TUPE transfer you will need to go through 2 stage process: 1. Is the sole or principle reason an economic, technical or organisational reason? 2. If so, does it entail changes to the workforce? If so, then those changes or dismissals may be fair and valid. Do remember it is still important for you to follow a fair process, in all cases of potential dismissal.
7 TUPE: Informing and Consulting So far in our TUPE update, we have covered an Introduction to TUPE and an explanation of the ETO exception. If you have missed the previous two articles, click here to download them all as a nutshell guide. The last area that we wanted to consider in this TUPE series is Informing and Consulting affected employees; providing practical tips and guidance to employers. What is informing and consulting? The answer to this is quite simple, and even more so when it is broken down into its respective parts. Firstly, let s consider the each requirement in turn. 1) Informing: What is it? Employers (both outgoing and incoming) must inform the appropriate representatives of their affected employees about the TUPE transfer. This should include reasons as to why the transfer is taking place. For more information on appropriate representatives see below. The affected employees not only includes the employees who will actually transfer, but also any other employees of the outgoing or incoming employer who may be affected by the transfer or any measures to occur due to the transfer. So what information do employers need to provide? The information provided to the appropriate representatives should be given in writing and include the following: 1. The fact of the transfer, the date (or proposed date) of the transfer and the reasons for the transfer; 2. Any social, legal or economic implications of the transfer; 3. Any measures that the employer (both outgoing and ingoing) expect to take in connection with the transfer that will affect those employees. If there are no proposed measures then you should say so; and 4. If agency workers are used, the number of agency workers engaged, the type of work they are doing and the departments they work in. 2) Consulting: What is it? The duty to consult only arises where an employer envisages taking measures in relation to affected employees. Employers must consult with the appropriate representatives (see below) about measures which they are considering taking for their own employees in respect of the transfer. These will be measures which have already been identified in the information previously provided (see above). An employer must discuss and consider the views of the affected employees before a final decision about changes are made. Does an employer have to accept suggestions during a consultation? An employer does not need to accept suggestions made by the employees, but the employer must go into a consultation process with a view to seeking an agreement to the measures envisaged. In practice, this means that employers must negotiate in good faith over the measures it intends to take. The obligation to consult must be more than simply giving the appropriate representatives the opportunity to air their views, it should always be meaningful.
8 If an employer does not reach an agreement with the employees representatives, they should provide business reasons for rejecting employee suggestions and explain why; ideally this should be in writing. Who are the appropriate representatives? It is not so simple as giving this information to all affected employees. This information should be given to employee representatives. If there is a recognised trade union for the affected employees, the information above should be given to them. If there is no recognised trade union, the employer should provide the information to employee representatives elected by the affected employees. Employers may have existing employee representatives such as a staff forum/council, if not, new ones will need to be specifically elected for the purposes of the transfer. Employee representatives are elected by employers going through a nomination process followed by a secret ballot in order to elect the representatives. Only if the employer invites employees to elect representatives and they fail to do so, can they inform affected employees directly. It is good practice for employers to keep all affected employees up-to-date with information about a transfer, even where there are trade unions and/or employees representatives in place. We would suggest regular updates to be circulated to all affected employees. If an employer has less than 10 employees overall they are not required to elect an employee representative where there is currently no existing trade unions or elected employee representatives. However, the employer must still inform and consult directly with each individual employee regarding the transfer. Where there is already a recognised trade union or employee representative in place, they must be consulted. How long should consultation take? There is no legal maximum or minimum period of time by when the information must be delivered to employee representatives. This will mostly depend on the extent of any changes which are likely to take place by a transfer. A more complex or complicated transfer should allow for more time. However, Tribunals are mindful of the often tight timescales involved in commercial transactions that cause TUPE transfers. What are the risks for an employer if they failure to inform and consult? Both incoming and outgoing employers must comply with their duty to inform and consult employees. A failure to inform and consult has both commercial and legal implications. 1) Commercially an employer who does not inform and consult with their employees runs the risk of the transfer not being successful. They also run the risk of impacting morale and uncertainty in the workplace amongst staff. 2) Legally - both employers could be liable to pay compensation of up to 13 weeks gross pay for each affected employee of the transfer, if a claim is brought in the Employment Tribunal. The award granted will be based on the seriousness of the failure to inform and consult. The above advice should give you a solid understanding as an employer of your obligation to inform and consult affected employees when a TUPE transfer is due to take place.
9 Whatever your situation, our team of expert solicitors and HR advisors can handle all of your HR and employment law needs. We ve saved schools money, time and reduced the stress of leadership teams by improving working practices and avoiding costly employment claims. Visit our website for free guides, downloads and information on our fixed fee service: For more information, please contact Mark Honeybell, Business Development Manager for Education: t: e:
10 DERBY St Michael s Lane St Michael s Court Derby DE1 3HQ Tel: Fax: A list of partners names is available for inspection at the address above. Flint Bishop LLP is a limited liability partnership registered in England and Wales. Registered number OC Registered office: St Michael s Court, St Michael s Lane, Derby DE1 3HQ. Authorised & regulated by the Solicitors Regulation Authority.
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