A GUIDE TO THE TRANSFER OF UNDERTAKINGS (PROTECTION OF EMPLOYMENT) REGULATIONS 2006

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1 A GUIDE TO THE TRANSFER OF UNDERTAKINGS (PROTECTION OF EMPLOYMENT) REGULATIONS 2006 Jennifer McGrandle & Abigail Black Mayer Brown Type: Published: Last Updated: Keywords: Legal Guide Protection of Employment, NGO Mergers, NGO outsourcing

2 This document provides general information and comments on the subject matter covered and is not a comprehensive treatment of the subject. It is not intended to provide legal advice. With respect to the subject matter, viewers should not rely on this information, but seek specific legal advice before taking any legal action Any opinions expressed in this document are those of the author and do not necessarily reflect the position and/or opinions of A4ID Advocates for International Development 2012

3 1.Overview The Transfer of Undertakings (Protection of Employment) Regulations 2006 ( TUPE ) may be useful to NGOs and charities, who are governed by the law of England and Wales, and that are in the process of merging their activities with another organisation, or in the process of outsourcing organised groupings of resources, such as employees or assets. The TUPE Regulations are designed to safeguard the rights of employees on the transfer of a business or activity. 2. Application of TUPE A business transfer occurs when an organised grouping of resources, for example employees or assets, is transferred from one business (the "transferor") to another business (the "transferee") and retains its identity. TUPE will also potentially apply when activities originally undertaken by one party are subsequently contracted out to another party, for example, if a company outsources its cleaning services to an external cleaning company. Where TUPE applies, those employees who work in the business being transferred automatically transfer from the transferor to the transferee on their current terms of employment. All rights and liabilities relating to those employees will also transfer although there are some exceptions such as certain benefits under occupational pension schemes. Trade Union recognition and collective bargaining agreements also transfer. If employees do not wish to transfer, they can opt out. In that event, they will be treated as having resigned and would not be entitled to any statutory or contractual compensation unless their employer agrees otherwise. Special rates apply in case of insolvency, depending on the type of insolvency involved. 3. Information and Consultation Both the transferor and the transferee are required to provide certain information to recognised trade unions or elected employee representatives. If either party does not recognise a trade union or does not have elected employee representatives already in place, they will need to hold elections for representatives to be appointed before the information process can begin. The information required to be given is: the fact of the transfer, when it is to take place and the reasons for it; the legal, economic and social implications of the transfer for the affected employees; the measures which the transferee envisages it will take in connection with the transfer in relation to any affected employees (or that no measures will be taken); and the measures which the transferor envisages it will take in connection with the transfer in relation to any affected employees (or that no measures will be taken). This information is often given in a "TUPE information letter". Both the transferor and transferee owe a duty of care to the employees to ensure that the information provided to them is accurate.

4 The obligation to consult only arises where the transferee and/or transferor envisage taking "measures" in relation to the affected employees. A "measure" is any proposal by the transferor or the transferee which will affect the employment arrangements of the affected employees, such as making changes to terms and conditions, working practices or headcount. Where either the transferor or transferee envisages taking measures, it must enter into consultation with the affected employees, with a view to seeking their agreement to the proposals. It is not necessary to obtain that agreement, provided there has been genuine consultation. Consultation involves considering and replying to any representations made by the employees and, where representations are rejected, stating the reasons for rejection. There is no set timeframe for consultation, but in order it to be effective the consultation should take place sufficiently in advance of the transfer. Where there is a failure to inform and/or consult, the recognised trade union or elected employee representatives may complain to an Employment Tribunal. If that complaint is upheld, the Employment Tribunal can award compensation to the affected employees of up to 13 weeks' pay for each affected employee. Both transferor and transferee are jointly and severally liable. 4. Employee Liability Information TUPE requires the transferor to provide the transferee with employee liability information not less than 14 days before the transfer takes place. This information includes: the name and age of the transferring employees; the particulars of employment of the transferring employees, e.g. job titles, place and hours of work; information about any disciplinary or grievance procedures brought by any of the transferring employees within the previous two years; information about any court or tribunal case, claim or action brought within the previous two years, or that it is reasonable to believe may arise; and information about any collective agreement. Often, more information than this will be sought, and earlier than 14 days before the transfer, as part of the transferee's due diligence exercise. A Tribunal can award fair and equitable compensation if there has been a failure to provide the employee liability information and will not award less than 500 per for each employee whose information is not provided.

5 5. Dismissals Employees with the requisite length of service 1 who are dismissed either before or after the relevant transfer, because of the transfer or for a reason connected with it, will have a claim for automatic unfair dismissal. The only exception is if the employer can show that the main reason for the dismissal is an "economic, technical or organisational reason entailing changes in the workforce" (known as an "ETO reason"). Even if the dismissal is for an ETO reason, it must still be carried out in a procedurally fair manner; otherwise the employee can still claim ordinary unfair dismissal. The maximum award for an unfair dismissal claim is around 70, Changing Terms and Conditions Any changes made to the terms and conditions of employment, where the reason for the change is the transfer or a reason connected to it, are generally void under TUPE, unless there is an ETO reason. Employees are entitled to resign if the transfer involves a substantial working conditions change which is to their material detriment. In these circumstances the employee will be treated as having been dismissed with notice by the employer. The employee will have statutory rights in relation to that dismissal, and particularly for unfair dismissal, if they have the requisite length of service. Links The Transfer of Undertakings (Protection of Employment) Regulations 2006 BIS Guidance A guide to the 2006 TUPE Regulations for employees, employers and representatives 1 This is currently one year but the Government is proposing to increase this from 6 April 2012 to two years