|
|
|||||
Search through over a thousand pages of free legal information written by our selected team of legal experts |
|||||
TUPE |
|||||
Transfer of Undertakings (Protection of Employment) RegulationsWhen a business is sold or ownership transferred to another party this will affect employees of that business. Legal provisions have been made and these attempt to minimise the effect of such activities on employees. The rest of this article will describe the Act and its implications in more detail. Under common law a change of employer terminates contract because contract seen as involving ‘personal service.’ However, the ERA provisions protect statutory continuity of employment where there is a change of employer:
Types of transferThere are two types of transfer covered by the Regulations.
Transfer of a business to another personThis is the transfer of an undertaking, business or part of an undertaking or business situated immediately before the transfer in the United Kingdom to another person where there is a transfer of an economic entity which retains its identity. The Regulations here have adopted the classic test – an economic entity which retains its identity. Economic entity means an organised grouping of resources which has the purpose of pursuing economic activity but not necessarily in the private sector or for profit. Perhaps surprisingly, leases, franchises, and contracted-out parts of undertakings are included. Change of control by acquisition of shares is not a transfer: there is no transfer of an undertaking from one person to another because the legal person who is the employer does not change. However, there may be exceptions, for example, where share acquisition masks what is really a transfer: Millam v Print Factory (London) 1991 Ltd [2007] IRLR 526 (CA). When does the transfer occur? In CELTEC Ltd v Astley, a case taken under the Directive rather than TUPE, the ECJ held that the transfer takes place at a particular point in time rather than over a period of time (although TUPE reg. 3(6) expressly covers a transfer involving two or more transactions). Service provision changesA service provision change is where an activity ceases to be carried out by a person (the ‘client’) and is carried out instead by another person on their behalf (the ‘contractor’). The definition also embraces the replacement of a contractor with a subsequent contractor and the client performing the activity themselves instead of contracting it out. It thus covers initial contracting out of services, change of contractor and taking the service back in-house. Prior to the change, there must be an organised grouping of employees with the principal purpose of carrying out the activity and the service provision change must not relate to a single event or be of short-term duration. The activity must not be wholly or mainly concerned with the supplying of goods to the client. The service provision changes are expressly included in TUPE for the first time because although the case law has largely determined that they are included in the transfer of an undertaking there is the possibility that some may not be. Such changes will now be protected under TUPE even if they do not amount to transfers of undertakings. Determining whether or not TUPE appliesThis has been a major issue in interpreting the Regulations. It has been held that there is a transfer if: either there is a transfer of significant tangible or intangible assets or a take-over of a major part of the workforce. What if transferee deliberately avoids taking over staff to side-step the Regulations? In ECM Ltd v Cox, the Court of Appeal held there to be a transfer under such circumstances. This was one of a number of cases where the entity transferred was labour-intensive, with not a great deal else to be transferred. Transfer of the Contract of EmploymentWhat is transferred?
Changes in the terms of employmentThe change in terms will be unlawful if the sole or principal reason for it is
A change in terms agreed by the employer and employee is permitted if the reason for it is an ETO reason connected with the transfer entailing changes in the workforce or a reason unconnected with the transfer (reg. 4(5)). If the reason for the agreed reduced terms is the transfer itself, the agreement will be invalid (Baxendale; Wilson). Where there has been a merger or takeover, the employer will often want to standardise terms and conditions for the merged workers. Downward harmonisation is likely to breach the Regulations unless it is for an ETO reason or is unconnected with the transfer. Potentially lawful if agreed by employee and is-
Where changes are not agreed by the employee and there is a fundamental breach of contract, the employee can terminate contract without notice and allege unfair constructive dismissal (reg.4 (11)): (Rossiter v Pendragon). DismissalAutomatic unfairnessIf the reason for the dismissal is the transfer itself or a reason connected with it, and that reason is not an ETO reason, the dismissal will be automatically unfair. Dismissal and re-engagement on reduced termsHere the dismissal is effective, whether by transferor or transferee, but the dismissal will be automatically unfair if the reason is the transfer of anything connected with it (but see 18.4.2 below). Pre-transfer terms would not be protected if there was re-engagement (British Fuels Ltd v Baxendale) and (Wilson v St Helens Borough Council) The ETO exceptionThe exception is where there is an ETO reason entailing changes in the workforce (reg. 7(2)): see Thompson v SCS Consulting. Where an ETO reason applies, the reason for dismissal is to be treated as either redundancy (under ERA s98 (2) (c)) or ‘some other substantial reason’ (under ERA s98 (1) (b)), depending on the facts, and to be tested for reasonableness (under s98 (4)). Where reg.7 (2) (the ETO exception) applies, reg.7(1) does not apply. Dismissals unconnected with the transferThe liability here will lie with the dismissor, that is, the transferor or transferee, depending on the facts (in particular, the effective date of termination: ERA s97). Pre-transfer dismissal because of or connected with the transferWhere there is an ETO reason, the action will lie against the transferor. Where the dismissal is because of the transfer itself or a reason connected with it that is not an ETO reason, the contract will be deemed to continue up to the transfer and pass to the transferee by virtue of reg 4(3). This is because transfer will take place only if the employees are employed ‘immediately before the transfer’ or would have been if not dismissed under reg 7(1). The 2006 Regulations here put right the problem discovered earlier in Litster v Forth Dry Dock. Post-transfer dismissal because of or connected with the transferIf the dismissal is because of the transfer itself or a reason connected with it that is not an ETO reason, or there is an ETO reason but the dismissal failed the reasonableness test in ERA s98(4), the transferee will be liable but if re-engaged, the employee will not have their terms protected under reg. 4 (Baxendale; Wilson). Notification of employee liability informationRegulation 11 requires the transferor to provide the transferee with information about the employees being transferred. This must be done in advance of the transfer and in writing or in some other readily-accessible form. The information must relate to a specific date not more than fourteen days before the date when the information is sent to the transferee. The following information must be provided:
The transferee may complain to an employment tribunal under reg.12 that one or more of the above requirements have not been satisfied. InsolvencyThe preservation of contract terms and the protection against dismissal do not apply where the transferor’s business is in liquidation (reg.8 (7)). The statutory payments set out in Part XII of the ERA 1996 will now be payable to transferred employees where the transferor is insolvent even though the transferor did not dismiss them. The same applies to those unfairly dismissed by the transferor (reg.8 (1)-(6)). The aim here is to reduce the burden on the transferee in order to encourage a rescue of the business. The same applies to the next paragraph. In the context of insolvency there can be 'permitted' variations in terms, by the transferor or transferee, where the aim is to safeguard jobs by preserving the business (reg.9).
Summary of Key Points
|
|||||
Still have unanswered questions?Ask your legal question using the box below and have a response from solicitor or barrister within minutes. |
|||||
|
|
|||||
|
Copyright © InBrief.co.uk, All Rights Reserved. About In Brief Contributors Advertising Jobs Terms of Use Contact Us |
|||||
