TUPE made Interesting! Ed Jenneson Ed Heppel Tuesday, 8 October 2013

Transcription

1 TUPE made Interesting! Ed Jenneson Ed Heppel Tuesday, 8 October 2013

2 Topics for today's briefing: When does TUPE apply? Effects of TUPE Changes to Terms and Conditions Future changes

3 Background Pre 1981 The Transfer of Undertakings (Protection of Employment) Regulations 1981 The Transfer of Undertakings (Protection of Employment) Regulations 2006 Future changes

4 Background Why TUPE in the first place? Employers despise it! Seen as a hindrance in transfers and prevents business sales Safeguard Employees Rights when transferring a business

5 TUPE Introduced Three Concepts Automatic transfer principle Protection against dismissal in connection with the TUPE transfer The obligation to inform and consult

6 When does TUPE apply? The transfer of a business, undertaking or part of a business or undertaking where there is a transfer of an economic entity that retains its identity This is known as a Business Transfer and is in effect traditional TUPE

7 Business Transfers A traditional TUPE transfer involves three elements An economic entity A transfer of that economic entity The economic entity must retain its identity following the transfer

8 Is there an economic entity? Economic entity is defined as an organised grouping of employees and assets facilitating the exercise of an economic activity Must be more than a mere collection of assets Asset transfer will not suffice Economic entity must be stable TUPE can apply to part of an undertaking

9 Was there a transfer of the Economic Entity? Does it retain its identity? The going concern test Are the activities sufficiently similar Temporary cessation of activities

10 Share Sale No TUPE!!!!!

11 Service Provision Changes Defined as; 1. Activities ceased to be carried out by a person ( a client ) on his own behalf and are carried out by instead another person on the clients behalf (a contractor) 2. Activities ceased to be carried out by a contractor on a client s behalf and are carried out by another person (subsequent contractor) 3. Activities ceased to be carried out by a contractor or a subsequent contractor and instead are carried out by the client themselves (bringing the activity in house)

12 Service Provision Changes Introduced by Case Law Can apply to bringing contracts in house, changing contractors or contracting out

13 Has There Been a Service Provision Change? Organised grouping of employees Essentially the same activities Narrow interpretation Reduction in quantity or scope of work Must be the same client

14 Exceptions Not the supply of goods Not a single specific event or task of short term duration

15 Who Transfers? Are the employees assigned to the organised grouping? Transfers to more than one contractor although can cause problems Fragmentation

16 The Automatic Transfer Principle Employed by the transferor and assigned to the organised grouping of workers Must be an employee Must be employed by the transferor in the business or the part of the business being transferred

17 Is the Employee Assigned? Question of fact although certain factors are always considered Percentage of time spent Must not be di-minimus

18 The Right to Object No transfer although employment terminated Objection must be in the correct form Objection must be communicated properly

19 What Transfers? Dealt with who but now what Employment contracts Rights and obligations Acts and emissions before the transfer Length of service Dismissal and the right to appeal

20 Effects of TUPE Protection from dismissal - Regulation 7 Protection from changes to terms and conditions of employment - Regulation 4

21 Protection from Dismissal Enhanced protection - Regulation 7 Automatic unfair dismissal (AUD) AUD if sole or principal reason: Transfer itself, or Reason connected with the transfer that is not an ETO reason entailing changes in workforce

22 Who is covered? Transferor s (Seller) and transferee s (Buyer) employees Not limited to assigned employees Employees must have qualifying service Employees who have their employment terminated before or after the transfer

23 Dismissed by reason of the Transfer AUD if sole or principal reason is the transfer No defence If no extenuating circumstances Extenuating circumstances not defined by Regulations. Question of fact for the Tribunal

24 Dismissal for a reason connected with the Transfer Question or fact No specific time period Held: After two years there was still a connection Very fact sensitive

25 Dismissal for a reason connected with the Transfer AUD if for a reason connected with the transfer that is: Not an ETO reason; and Entailing changes in the workforce Two limbed test

26 ETO Reason - First Limb No statutory definition of ETO Must be connected with day to day running of business BIS Guidance Profitability or market performance Equipment or production process Management or organisation structure Example - Nationwide Building Society v Benn - differences in scope of Transferor and Transferee s product range

27 Entailing Changes in the Workforce - Second Limb No statutory definition Held - either: Changes in the number of employees employed; or Changes in the functions performed by the employees Not all employees. It can be a body of employees Examples: a genuine redundancy situation resulting in changes in the numbers employed Changes to entire job functions (amended T & C s) Note - changes of location alone cannot amount to an ETO reason entailing changes in the workforce

28 Liability for Dismissals pre and post transfer AUD Transferee liable In practice, the Claimant often issues claims against Transferor and Transferee

29 Considerations Very difficult to terminate employment Wide range of employees can bring claims By reason of transfer or connected with transfer - transferee always liable Seek indemnity under relevant agreement

30 Changes to Terms and Conditions

31 Changes to Terms and Conditions Enhanced protection under Regulation 4 Changes void if principal or sole reason is: Transfer itself; or Reason connected with transfer that is not ETO reason entailing changes in the workforce Same legal principles for: in connected with ETO reason Entailing changes in the workforce

32 Permitted Changes A reason unconnected with the transfer A reason connected with the transfer which is an ETO reason entailing changes in the workforce

33 Harmonisation Desire to achieve harmonisation is by reason of transfer itself therefore void and no defence Even if extenuating circumstances i.e. reason connected with Still need: ETO reason; and Entailing changes in the workforce Note - Most harmonisation will not involve changes in the workforce

34 Changes Terms and Conditions in Practice Leave time Note - no set period of time breaks connection Attempt to link changes to event other than transfer Beneficial terms void but unlikely to be challenged Beneficial changes subject to acceptance of detrimental changes Contracts for repayment of benefits if employee seeks to enforce old terms Settlement Agreements - dismissal and reengagement Settlement Agreements variation of terms only - void

35 Practical considerations - Informing and Consulting

36 Obligation to inform and consult Transferor and Transferee with own affected employees All employees, not just assigned employees Affected employees BIS guidance: Employees who transfer Transferor s employees not transferring but affected Transferee s employees that may be affected Materially affected?

37 Practical Step One Buyer and Seller Identify those affected and potentially affected If in doubt assume affected

38 Appropriate Representatives - Regulation 13 Recognised Trade Union? If not, elect employee representatives No direct informing and consulting with employees in the first instance

39 Practical Step Two Identify whether employee representatives need electing If so, consider minimum of two weeks for process

40 Election Requirements - Regulation 14 Employer ensures election is fair Sufficient representatives to represent interests of all affected employees Number and class of employees relevant Determine election term Exclude no affected employee from being an employee representative Ensure all affected employees can vote Secret vote If representative ceases to act re-elect

41 Practical Step Three - Election Process Prepare the following documentation: Letter requesting nomination for employee representatives. Nomination form for completion by affected employees. Notice of ballot detailing candidates. Ballot form. Notice of election results

42 Election Result No employee representatives elected - inform and consult directly with affected employees Employee representatives elected be prepared to inform and consult Inform or inform and consult

43 Consult As an employer are you envisaging measures in relation to affected employees If so, obligation to consult Must consult to seek agreement Leave enough time to consult before the transfer Transferee to consult with Transferor employees? No! Regulation 13 (6) consult with own employees

44 Practical Step Four Consider whether informing or informing and consulting If consulting leave time before the transfer for meaningful consultation

45 Informing Informing - Regulation 13 (2) details information to be provided including: Fact of transfer, date and reasons Legal, economic and social implications Measures envisaged by the employer Measures envisaged by the Transferee Suitable information regarding agency workers

46 Practical Step Five Transferee drafts a letter to the Transferor detailing proposed measures Transferee and Transferor (usually just Transferor) prepare letter for employee representatives satisfying informing obligations Give letter to employee representatives in order to satisfy obligation to inform

47 Practical Steps - Summary At the outset of the matter: Identify affected employees Consider election of employee representatives Leave time for election process Prepare election documents Transferee draft letter to Transferor detailing measures/no measures Transferor and Transferee draft letter providing information required to inform employee representatives Consider whether time is needed to consult

48 Failure to Inform and Consult Up to 13 weeks gross pay for each employee Transferee and Transferor joint and severally liable

49 Future Changes

50 Changes to TUPE The UK is accused of gold plating TUPE the changes are as follows The service provision changes will remain although legislation will clarify for there to be a TUPE service provision change, the activities carried on after the change must be fundamentally or essentially the same The requirement to provide employee liability information will be retained, but the information will have to be given 28 days before they transfer rather than 14 days Transferee s may changes terms derived from collective agreements after 12 months provided that overall change is no less favourable

51 Changes to TUPE Changes in the location of the workforce will expressly be included within an ETO reason Microbusiness will be allowed to inform and consult where there is no recognised Trade Union or existing employee representatives. No definition yet microbusinesses thought to be less than 100. Guidance on TUPE will be improved

52 Any Questions?

53 Ed Heppel Senior Solicitor Ed Jenneson Partner