18/06/2014. Overview BIS Consultation. Changes not made in 2014
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1 TUPE 2014 Richard Arthur Thompsons Solicitors LLP Starting Point..to ensure as far as possible that the contract of employment or employment relationship continues unchanged with the transferee, in order to prevent the workers concerned from being placed in a less favourable position solely as a result of the transfer... CJEU: Case 287/86 Ny Molle Kro, 1987 Sources EU Acquired Rights Directive 2001; Transfer of Undertakings (Protection of Employment) Regulations 2006 ( TUPE ); Collective Redundancies and Transfer of Undertakings (Protection of Employment) (Amendment) Regulations 2014 ( CRATUPE ); and BIS Guidance on TUPE, re published in 2014, available at 1
2 Overview When? Standard Transfers and Service Provision Changes; Who transfers? Employees permanently assigned to the undertaking; What transfers? All rights (except pensions); Variations to terms and conditions; Dismissals; Insolvency: relaxation of the rules; Employee Liability Information: (but not to trade union representatives); Information and Consultation; Pensions; and (now) Pre transfer collective redundancies consultation (under TULRCA) BIS Consultation Gold plating, over regulation and business concerns ; Objective 1: abolish Service Provision Changes; Objective 2: make it easier to harmonise terms and conditions; Objective 3: make it easier to dismiss workers (and faster); and Objective 4: (in so many words): continue to dismantle collective bargaining Changes not made in 2014 Service Provision Changes retained; Harmonisation of terms and conditions still not permitted; and Transferor still can t borrow a transferee s ETO reason 2
3 Overview of main 2014 changes For Service Provision Changes, activities after the transfer must be fundamentally the same as those before the transfer; Permitting re-negotiation of terms and conditions derived from collective agreements to take effect one year after the transfer; Imposing a static approach to the transfer of rights derived from collective agreements; Removing the concept of variations for a reason connected with the transfer ; Extending ETOs to include changes in job location; Requiring employee liability information to be provided to the transferee at least 28 days before the transfer; and Through amendments to TULRCA, permitting the transferee to begin collective redundancies consultation before the transfer. Two types of transfer: Standard Transfers; and Service Provision Changes Features common to both: Transfer from one person to another. Shares transfers excluded; Apply to public and private, for profit and not for profit, undertakings; Capable of applying to transfers from inside to outside the EU; and Form of the transfer not significant.. TUPE does not apply to an administrative reorganisation of public administrative authorities or the transfer of administrative functions between public administrative authorities Reg. 3(5) Source: Henke CJEU 1996 Seemingly no appetite to extend coverage in the CJEU (see Scattalon); Query more appetite in the UK (see Law Society of England and Wales and Adult Learning Inspectorate). 3
4 Standard Transfer : A transfer from one person to another.. of an economic entity which retains its identity.. Reg. 3(1)(a). Provided for in the Directive; Purposive construction ; and No change in Economic entity is: an organised grouping of resources which has the objective of pursuing an economic activity, whether or not that activity is ancillary or central.. Reg. 3(2) In certain sectors, eg cleaning, an organised grouping of wage earners assigned to a common task may be sufficient; But the economic entity must not be defined solely by reference to the activities performed; and Mrs Schmidt Retains its identity : Factors include: type of undertaking; assets transferred; majority of employees taken on by the transferee; customers transferred; degree of similarity between the activities; and any period of suspension of the activities. Spijkers CJEU 1986.But Mrs Schmidt (again). 4
5 Ayse Suzen CJEU 1997: Asset reliant undertakings: the decisive factor would be the transfer of assets; and Labour intensive undertakings: the decisive factor would be whether the transferee took over a major part in terms of their numbers and skills of the transferor s workforce. Upshot: much uncertainty. Buses in Helsinki; German hospital catering contracts; x ray machines at Dusseldorf airport; and In the UK: even more uncertainty. Major part of the workforce? Service Provision Changes : to give more comprehensive coverage to service contracting operations, with the aim of improving the operation of the market, promoting business flexibility and reducing insecurity for employees affected by such operations.. DTI June 2005 Response to the uncertainty generated by Ayse Suzen; Unique to the UK, permitted, but not required, by the Directive; Branded unnecessary gold plating ; and Earmarked for abolition in the 2013 BIS consultation. Activities cease to be carried out by: the client and are carried out by another person (contracting out); a contractor and are carried out by another person (second generation contracting); and a contractor and are carried out by the client (contracting in). Common sense and pragmatic approach.has been eroded: activities sufficiently similar (form and quantity); activities not unduly fragmented; and must be carried out for the same client. 5
6 Three requirements: An organised grouping of employees.which has as its principal purpose the carrying out of the activities concerned on behalf of the client (and that means deliberately organised Eddie Stobarts) ;..Other than in connection with a single specific event or task of short term duration ; and Not.supply of goods. Service Provision Changes and the 2013 BIS consultation: gold plating ; burdens on business ; case law more settled since Suzen ; new uncertainties over the test of assignment ; 67% of consultees favoured retention; only change in 2014 is that the activities must be fundamentally the same ; and intensified scrutiny of Service Provision Changes but still performing a useful function. Who does TUPE apply to? Employees..assigned to the organised grouping of resources or employees... Reg 4(1) Also applies to employees who would have been assigned immediately before the transfer if they had not been dismissed and the sole or principal reason was the transfer (anti avoidance); and Percentage of working time will not be determinative in isolation (see Kavanagh v Coral Racing). 6
7 Who does TUPE apply to? Guidance for groups of companies: time spent working in the part; value given to the part; terms of the contract; and how the costs of the employee are allocated. Duncan Webb Offset For each employee? Edinburgh Home Link Partnership Who does TUPE apply to? Objection to transfer (Reg 4(7)): employment does not transfer if the employee objects; but the employee is treated as having resigned; no right to unfair dismissal compensation or redundancy payment; (unless the employee also claims that the transfer would involve a substantial change to her material detriment ); and Implications for secondment / retention of employment models. What transfers? All the rights, powers and duties under or in connection with the contract of employment (except pensions) (Reg 4(2)), including: rates of pay; entitlements under severance schemes; statutory liabilities (eg personal injury and sex discrimination); restrictive covenants and profit share schemes (but note the problem of tailoring to the undertaking); and equal pay. 7
8 What transfers? Rights in relation to collective agreements are not transferred if: (i) the provision of the collective agreement is agreed after the date of the transfer; and (ii) the transferee is not party to the collective bargaining machinery. New Reg 4A applies to transfers on or after 31 January 2014; reverses well established UK case law; codifies the static approach from Alemo Herron; and therefore creates a two tier system of contractual rights. Variations to terms and conditions Under TUPE 2006: any purported variation of the contract shall be void if the sole or principal reason for the variation is (a) the transfer itself; or (b) a reason connected with the transfer that is not an economic, technical or organisational reason entailing changes in the workforce ( ETO ). Reg 4(4) Variations to terms and conditions Under TUPE 2014: (4) any purported variation of a contract of employment..is void if the sole or principal reason for the variation is the transfer. (5) Paragraph (4) does not prevent a variation of the contract of employment if (a) the sole or principal reason for the variation is [an ETO] provided that the employer and employee agree that variation; or (b) the terms of the contract permit the employer to make such a variation New Reg s 4(4) and (5) 8
9 Variations to terms and conditions Commentary: Rationale: to align with the Directive; Removes the concept of variations for a reason connected with the transfer ; But the Directive makes no provision for variations where the reason is an ETO (see Daddy s Dance Hall); Note extended definition of ETO; Is this compliant with the Directive? When is the reason for the variation the transfer itself? The test of the sole or principal reason for the variation is the transfer is a new one (see BIS guidance). Variations to terms and conditions Example: The Manchester College v Hazel CA 2013 (Dismissal case) Reasons: partly to achieve efficiency savings and because business conditions were difficult, and partly to harmonise 37 sets of terms and conditions. CA: reason was refusal to accept harmonisation; therefore no ETO; therefore automatically unfair. TUPE 2014: under the new test, the sole or principal reason for the dismissal may be the transfer itself, in which case there may be no need to consider an ETO Variations to terms and conditions For transfers taking place on or after 31 January 2014, the restrictions on variations to terms and conditions do not apply to terms derived from collective agreements if: (a) the variation takes effect at least one year after the transfer; and (b) after the variation, the rights and obligations under the employee s contract when considered together are no less favourable than those which applied previously. New Reg 4(5B) 9
10 Variations to terms and conditions Commentary: Not a unilateral right to vary; Impact of Article 11 ECHR / Wilson and Palmer; and When considering overall value of rights and obligations, a value should be ascribed to having terms and conditions determined by collective bargaining. Dismissals Three types of dismissal: Actual dismissal; Constructive dismissal; Where the transfer involves, or would involve, a substantial change in working conditions to the material detriment (Reg 4(9)). Dismissals Under TUPE 2006, similar to variations to terms and conditions: Any dismissal where the sole or principal reason was (i) the transfer itself; or (ii) a reason connected with the transfer that was not an ETO was automatically unfair. Otherwise, dismissals were potentially fair. Reg 7(1) 10
11 Dismissals For transfers taking place on or after 31 January 2014: the dismissal is automatically unfair if the sole or principal reason for it is the transfer; and the dismissal is not automatically unfair if the sole or principal reason for it is an ETO. (new Reg 7). If the dismissal is for an ETO, the reason will either be redundancy or some other substantial reason. Dismissals Example 1: Spaceright Europe Ltd v Ballavione Executive dismissed on the day the company was placed into administration. No transferee identified. Company then sold one month later; EAT: the dismissal was connected with the transfer; no ETO; automatically unfair dismissal; Under TUPE 2014, arguably the same result should be achieved because, under the new test, the sole or principal reason would be the transfer. Dismissals Example 2: Kavanagh v Crystal Palace FC Cash flow problems at Crystal Palace FC. Administrator mothballed the club and sold a number of non playing staff. Sale later agreed; CA: the transfer itself was not the reason for the dismissals; the sole or principal reason was a reason connected with the transfer; ETO applied; therefore dismissals fair; and Under TUPE 2014, if the Tribunal concluded that the sole or principal reason for the dismissal was the transfer, then the dismissal may be automatically unfair. If not, the Tribunal would not have to consider the availability of an ETO. 11
12 Dismissals Economic, technical or organisational reason entailing changes in the workforce : Under TUPE 2006, entailing changes in the workforce meant (i) a change in head count; or (ii) a change in job description (Delabole Slate and Crawford);and TUPE 2014 extends entailing changes in the workforce also to include changes in job location. Dismissals The transferor can t borrow the transferee s ETO (Hynd v Armstrong); and Compliance with the Directive? Insolvency Two types of insolvency proceedings: Insolvency proceedings instituted with a view to the liquidation of the assets of the transferor and under the supervision of an insolvency practitioner ( terminal insolvency proceedings ) (Reg 8(7)); and Insolvency proceedings opened in relation to the transferor not with a view to the liquidation of its assets and under the supervision of an insolvency practitioner ( non-terminal insolvency proceedings ) (Reg 8(6)) 12
13 Insolvency Terminal insolvency proceedings (compulsory liquidation and creditors voluntary liquidation): Automatic transfer and protection against dismissal dis applied; but TUPE otherwise continues to apply eg information and consultation. Insolvency Non terminal insolvency proceedings (voluntary arrangements, administrative receiverships and administrations): the statutory schemes for payment of unpaid redundancy payments, arrears of pay of up to eight weeks, notice payments, holiday pay and basic awards are applied; liabilities up to the maxima for those schemes are not transferred (but liabilities in excess of those maxima are transferred); and the transferor or the transferee are not prevented from agreeing to permitted variations with the appropriate representatives. Insolvency Permitted variations : Sole or principal reason is the transfer and not an ETO; Designed to safeguard employment opportunities by ensuring the survival of the undertaking, business or part.. ; Where there is a recognised trade union, union representatives are the appropriate representatives (Reg 9) Note that the UK has not to date taken up the option in the Directive of incorporating anti avoidance measures concerning insolvency into TUPE. 13
14 Employee Liability Information Information to be provided by the transferor to the transferee (Reg 11): age and identity of transferring employees; particulars of employment under s.1 ERA 1996; information as to grievance and disciplinaries in the last two years; possible claims by employees in the last two years; and applicable collective agreements. No obligation to make the information available to trade union representatives. Information and consultation Appropriate representatives representatives of the trade union recognised for the description of affected employees. Otherwise, elected employee representatives ; and Affected employees employees of the transferor or the transferee, not limited to those who may be transferring, who may be affected by the transfer or by measures taken in connection with it. Information and Consultation Long enough before a relevant transfer to enable consultation to take place, the employer must inform the appropriate representatives of any affected employees of: The fact the transfer is to take place, the date or proposed date and the reason for it; The legal, economic and social implications of the transfer for any affected employees; The measures it envisages it will, in connection with the transfer, take in relation to affected employees or, if it envisages that no measures will be taken, that fact; and If the employer is the transferor, the measures, in connection with the transfer, which it envisages the transferee will take in relation to any affected employees whose employment will transfer, or if it envisages that no measures will be taken, that fact. Reg 13(2) 14
15 Information and consultation That information must now also include suitable information relating to the use of agency workers : the numbers of agency workers working temporarily for and under the supervision and direction of the employer; the parts of the employer s undertaking in which those agency workers are working; and the type of work those agency workers are carrying out. (see UNISON v London Borough of Barnet) Information and consultation An employer which envisages that it will take measures in connection with the transfer in relation to affected employees must consult the appropriate representatives with a view to seeking their agreement; transferee s obligations end at point of transfer (Amicus); special circumstances which make it not reasonably practicable for the employer to comply with its obligations, provided that it takes all such steps as are reasonably necessary in the circumstances; remedy up to 13 weeks pay per affected employee; complaint to the Employment Tribunal within 3 months of the date of the transfer; and transferor and transferee may be jointly and severally liable. Pre transfer CRD consultation From 31 January 2014, new section 198A TULRCA so that the transferee can count pre transfer collective redundancies consultation for the purpose of collective redundancies to take effect after the transfer. Three conditions: there is, or is likely to be, a transfer covered by TUPE; the transferee is proposing to dismiss as redundant 20 or more employees at one establishment within a period of 90 days or less; and amongst the transferor s workforce there is at least one employee who may be affected by the post transfer dismissals. (new s.198a TULRCA). Transferee s election requires the agreement of the transferor. 15
16 Pre transfer CRD consultation Will still need to be two sets of consultation under TUPE and TULRCA; Difficulties for the appropriate representatives ; Meaningful consultation; and Compliance with the Collective Redundancies Directive (Akavan). Pensions accrued rights protected by sections 69 to 82 of the Pension Schemes Act 1993 and the Occupational Pension Schemes (Preservation of Benefit) Regulations 1991; future service rights: exclusion from transfer of so much of a contract of employment as relates to an occupational pension scheme within the meaning of the Pension Schemes Act 1993 (and associated rights); Group Personal Pensions are not occupational pension schemes, and so transfer; benefits which are not benefits for old age, invalidity or survivors transfer (Beckmann, Martin); some protection for future service rights in sections 257 to 259 of the Pensions Act 2004 and the Transfer of Employment (Pension Protection) Regulations 2005; and in the public sector, Fair Deal Conclusions In two fundamental areas, the government s plans in the 2013 consultation were thwarted: abolition of Service Provision Changes; and permitting harmonisation of terms and conditions. But even in these areas, there have been encroachments: Intensifying fact sensitive scrutiny of Service Provision Changes dedication to that particular client s work, whether the activities are fundamentally the same, fragmentation, quantity of activities; and Intensifying fact sensitive enquiry as to the protections against variations (and extension of ETOs) 16
17 Conclusions No thwarting of the government s plans when it came to: terms derived from collective agreements lesser protection than other terms and conditions; and pre-transfer collective redundancies consultation. Worrying signals form the CJEU in the Alemo Herron case: statements that the purpose of the Directive is to strike a fair balance between workers and employees interests. (Echoes of Viking and Laval) Conclusions Purpose of Directive:.to ensure, by introducing provisions covering matters such as protections and safeguards, that employees do not forfeit essential rights and advantages prior to a change of employer. European Commission,
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