Comments (0)

By Michael Scutt, 18/11/2009 10:30 am

I said 'TUPE, not toupee'

This can be a real headache for employers where they have “inherited” employees following a transfer of an undertaking under the TUPE (Transfer of Undertakings (Protection of Employment) Regulations 2006.  It is quite well known that if TUPE applies to a transfer then if the Transferor (let’s call it NewCo for ease if not originality) dismisses an employee from the transferee (OldCo) for a reason connected with the transfer, the dismissal will be automatically unfair, unless NewCo can show that an “economic, technical or organisational” reason applied entailing changes in the workforce.  TUPE has the effect of transferring all employment contracts and rights from OldCo to NewCo.

However, what is the situation where the TUPE transfer occurred some time ago and NewCo now wants to ensure that the employees from OldCo are on the same pay deal, the same holidays, sick pay arrangements etc?  This presents a problem for NewCo because Regulation 4(4) of TUPE provides that any variation to a term of a contract covered by TUPE will 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 (ETO) reason entailing changes in the workforce”

So, if the proposed variation is because of the transfer of the undertaking or is linked to the transfer but is not an ETO reason, the variation will not be legally valid, even if the affected employees agree to the change.  On the other hand if the proposed variation is because of the transfer but is an ETO reason then it can take place.  An ETO reason usually, but not always, entails reductions in the workforce but whether the proposed variation will be an ETO reason will usually be a matter for close factual analysis. 

 When employees seek legal advice on this issue it is usually the case that the proposed variation would adversely affect the employees, but it doesn’t have to be the case.  In 2007 the Court of Appeal confirmed that any changes that were beneficial to the affected employees would be binding.

Many people think that if much time has passed since the transfer of the undertaking (OldCo to NewCo) that is sufficient defence, but mere passage of time is not the whole answer.  The real issue is “what is the reason for the proposed variation?”  The fact that many months, or even years has passed, since the transfer is not going to be conclusive on its own. A case involving Dale Langley (my partner’s) previous firm, Langley & Co, called Taylor v Connex South Eastern EAT/1243/99 [2000] held that a lapse of two years was insufficient.  As ever though, as in all cases, they all turn on their own facts: this is a difficult area and legal advice should be taken (especially by employers) before proposing a variation that might fall foul of TUPE.   Even if TUPE is not engaged, an employer that tries to implement a unilateral change in an employee’s terms and conditions e.g. by reducing employee’s pay may find itself facing a claim for constructive dismissal and/or unfair dismissal.  Employers should proceed with care…

If I can assist please do not hesitate to contact me on 0207 464 8433 or at michaelscutt@dalelangley.co.uk.  Nothing contained in this post or anywhere else on this blog constitutes or is intended to constitute legal advice or creates a solicitor-client relationship between me and you the reader.

Comments (0)

By michaelscutt, 07/04/2009 9:00 am

Apart from the post below I haven’t touched upon these regulations, mainly because they are not the most interesting regulations in the world to read.  However, I have been spurred on by posting on the case of Royden & others v Barnetts  (see below) and TUPE comes up quite a few times on the search engines as a keyword.  In future posts I will look at the TUPE issues on the insolvency of the employer as well as the consultation obligations imposed upon employers by TUPE.

So, what do the Transfer of Undertakings (Protection of employment) Regulations 2006 (TUPE) actually do?

It protects those employees where the employing business changes hands, by;

 (1) protecting them from dismissal because of the transfer,

(2) by requiring the employer to inform and consult those employees affected, and

(3) transferring all rights  liabilities and obligations from the transferor company (“oldco”) to the transferee (“newco”).  

There must be more than a transfer of shares.  All employees employed by oldco at the point of transfer automatically move across to newco with the same terms and conditions of employment.  This means that if newco tries to provide amended terms and conditions to transferred staff they will be in breach of contract and may end up facing claims for constructive dismissal.

Furthermore, if newco dismisses transferring staff for a reason connected with the transfer that will be an automatically unfair dismissal , although if newco can argue that there were “economic, technical or organisational” reasons entailing changes in the workforce of either the Transferor or Transferee”  for the dismissal, it won’t be automatically unfair.  It might still be an unfair dismissal if the reason for the dismissal (not being the transfer) was also unfair. 

An ET would look at all the circumstances of the dismissal before making its finding.  In particular the ET will consider whether the employee was likely to have been dismissed even if the transfer had not occurred.  If yes then the dismissal will probably not have been for reason of the transfer, but it might still be unfair (i.e perhaps unfair selection for redundancy, or maybe discriminatory reasons were involved; the list is long).   One of the potentially fair reasons for a dismissal under the Employment Rights Act 1996 is “some other substantial reason” (SOSR).  For an employer to escape liability altogether for the dismissal it will have to show that the reason for dismissal comes within SOSR and that it was reasonable for them to rely upon that as the reason for dismissal. 

If an employee is found to have been unfairly dismissed (whether automatically or not) the maximum amount they can recover from an ET (up to February 2010 anyway) is £66,200 plus a basic award of £350 (or £525 depending on age) per week per year of service.  The employee needs 12 months continuous employment experience with oldco to be able to claim unfair dismissal.

Claims involving TUPE can be complex and if you are concerned about your position or think you might need legal advice do call me on 0207 464 8433 or email me on michaelscutt@dalelangley.co.uk

Comments (0)

By michaelscutt, 27/03/2009 2:59 pm

Of course they do I hear you shout.  In a recent case before the Liverpool Employment Tribunal a firm in Southport got themselves into a serious mess with the TUPE (Transfer of Undertaking (Protection of Employment) Regulations 2006.  TUPE, for those who haven’t had the misfortune to be acquainted with it, are the Regulations that protect employees when a business (“an undertaking” in the Regs) gets transferred from one business to another.  The Regs are very complicated and most employment lawyers, if being honest, would admit to loathing them.  If an employee is dismissed because of a reason connected with a transfer of an undertaking, TUPE provides that the dismissal is automatically unfair. 

What in fact occurred in this instance was that Barnetts won a contract to supply conveyancing services to the Britannia Building Society, in place of the firm then doing the work.  When the TUPE regulations were updated in 2006 one of the alterations was to allow “service provision changes” to be covered by the Regs.  This meant that if, for instance a local authority decided to outsource its school dinner function to a private company, the dinner ladies would TUPE across, thus preserving their employment rights.  It also applies to solicitors  and I am only surprised that more firms haven’t been caught by it before now.

In this case some of the employees who were transferring did not want to do so (because it meant moving to offices further away) and thus they claimed that the effect of the transfer was to repudiate their contracts of employment.  They brought claims for unfair dismissal against Barnetts, the new company and of the six employees that brought claims, two succeeded.  The two that succeeded were able to show that they were “assigned” to the Britannia work; their fellow claimants couldn’t. Both Barnetts and their predecessor firm agreed that TUPE didn’t apply; bad decision. 

This must have been something of a blow for Barnetts after the inevitable pleasure that would have ensued in winning the work in the first place.  The Tribunal hasn’t awarded compensation yet to the successful claimants but it will, no doubt, be fairly large and, on top of the amount of management time expended in defending the claims, will take the gloss off winning the Britannia work in  the first place.

The above article will appear in the “Docklands” and “Peninsula” newspapers week commencing 30th March.