Download - Providing a service? The new TUPE Regulations. Stephen Cavalier Richard Arthur Thompsons Solicitors
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Providing a service? The new TUPE Regulations.
Stephen Cavalier
Richard Arthur
Thompsons Solicitors
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Controversy, Confusion and Litigation• When is there a TUPE transfer?
• Can employers change terms and conditions?
• Which employees transfer?
• Which employer is liable for a failure to inform or consult?
• Do collective agreements transfer?
• Can employees object to transferring?
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When is there a TUPE transfer?• “Standard transfers”;• New definition of “service provision
changes”;• TUPE applies to public and private
sectors; • Exclusion of “administrative
reorganisations of public administrative authorities”; and
• Share transfers still excluded.
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“Standard Transfers”
• Transfer of an undertaking (or part) situated immediately before the transfer in the United Kingdom;
• Where there is “a transfer of an economic entity which retains its identity”;
• Encapsulates existing case law.
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“Economic Entity”
• “An organised grouping of resources which has the objective of pursuing an economic activity, whether or not that activity is ancillary or central”;
• Needs to be stable;
• Doesn’t need to be separate from the rest of the old employer’s undertaking.
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“Retains its identity”
• Type of operation;
• Whether assets transfer;
• Whether or not a majority of the workforce is transferred; and
• The extent to which activities carried out before the transfer are the same as those carried out after.
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Contracting-out
• ECJ rulings that the Directive applied to the transfer of ancillary services, and contracting-out;
• Similar cases won by the unions in the UK – eg Dines;
• Uncertainty from Ayse Suzen case;• Distinction drawn in the ECJ between
asset-reliant and labour-intensive undertakings.
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“Service Provision Changes”
“Activities cease to be carried out by”:
• The client and are instead carried out by a contractor (contracting-out);
• A contractor and are instead carried out by a new contractor (second generation contracting); or
• A contractor and are instead carried out by the client (contracting-in).
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Condition 1: Organised Grouping of Employees
• “..Organised grouping of employees…which has as its principal purpose the carrying out of the activities…”;
• “Organised grouping of employees” does not need to retain its identity;
• No exemption for “innovative bids”; and
• Includes a single employee.
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Condition 2: Exclusion of “One-off Events or Tasks”
• The client must intend that the activities will be carried out “other than in connection with a single specific event or task of short term duration”.
• DTI example-contracts for security for the Olympic games.
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Condition 3: Exclusion of Contracts for Supply of
Goods or Services• The activities must not “consist wholly or
mainly of the supply of goods or services”.
• DTI example – staff canteen/contract to provide sandwiches and drinks.
• No exclusion of “professional business services”.
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Public Sector: Government Policy
• TUPE will usually apply;• Cabinet Office Statement of Practice:
“Staff Transfers in the Public Sector”;• Case-specific legislation;• “Staff Transfers from Central Government:
a Fair Deal for Staff Pensions”;• NHS Retention of Employment Model; and• Code of Practice on Workforce Matters in
Local Authority Service Contracts 2003.
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Public Administrative Authorities
• TUPE does not apply to “an administrative reorganisation of public administrative authorities or the transfer of administrative functions between public administrative authorities”.
• Exclusion to be interpreted narrowly.
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What Happens When TUPE Applies? (1)
• “Assigned” employees transfer automatically;
• Rights and liabilities under or in connection with the contract transfer;
• Continuity of employment is preserved;• Relaxation of automatic transfer provisions
in the event of insolvency;• Dismissals: automatically unfair (ETO
reasons).
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What Happens When TUPE Applies? (2)• Variations to terms and conditions (ETO
reasons);
• Information and consultation;
• Recognition and collective agreements transfer; and
• Notification of “employee liability information”.
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Who Transfers (and When)?
• Employees “assigned” to organised grouping of employees or resources;
• “Assigned” “other than on a temporary basis”;• Includes those who would have been employed
if they had not been unfairly dismissed for a reason connected with the transfer;
• Date on which “responsibility as employer” transfers.
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The Right to Object to Transfer• If the employee refuses to transfer, without
more, she is treated as having resigned;• Where the transfer “…involves a substantial
change in working conditions to the material detriment…” the employee can treat herself as dismissed;
• DTI examples: major relocation of workplace;• No need for fundamental breach of contract;• No right to pay in lieu of notice.
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Transferring rights and obligations
• Continuity of employment;
• Rights and liabilities under or in connection with the contract;
• Personal injury claims;
• Collective agreements;
• Not pensions.
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The Werhof case
• Unions’ success in arguing for transfer of entitlements to pay awards;
• Werhof: “static” interpretation. Only applies to collective agreements in force at the date of transfer;
• Werhof not conclusive.
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Changes to Terms and Conditions: New Mechanism (1)
Where the reason for the variation is:
• The transfer itself; or• A reason connected with the transfer that is not
an “ETO” reason
the variation is void.
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Changes to terms and conditions: new mechanism (2)
Variations are permitted where the “sole or principal reason for the variation” is:
• A reason connected with the transfer that is an “ETO” reason; or
• A reason that is not connected with the transfer.
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“ETOs”
“Economic, technical or organisational reason entailing changes in the workforce”;
• Change in job description or headcount;
• Harmonisation itself not permitted;
• Query whether variations for ETO reasons permitted by the Directive.
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Transfer-Connected Dismissals: New Mechanism
• Mirrors scheme for permitted variations to terms and conditions;
• When is the reason for a dismissal or variation “the transfer itself” as opposed to “connected with the transfer”?
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Insolvency (1)
Where the employer is subject to insolvency or bankruptcy proceedings “instituted with a view to the liquidation of the assets..”
• Rights in connection with the contract do not transfer; and
• There is no protection from dismissal.
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Insolvency (2)
Where the employer is subject to “relevant insolvency proceedings”:
• The new employer is exempted from inheriting debts up to the limits which would have been payable under the statutory schemes if the employee had been dismissed; and
• An employer can agree “permitted variations” to terms and conditions.
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Pensions
• Not transferred by TUPE (but see Cabinet office Statement of Practice);
• Limited protection in Pensions Act 2004;
• Employees can not resign and claim constructive dismissal; and
• The Beckmann and Martin cases: enhanced redundancy payments.
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Information and Consultation (1)
Information to be provided:• The fact of the transfer, when and why;• The legal, economic and social implications for
affected employees;• The measures the transferor envisages it will
take in relation to affected employees; and• The measures which the transferor envisages
the transferee will take in relation to affected employees.
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Information and Consultation (2)
Two further changes:
• Liability rests with the employer in default; and
• Joint and several liability for transferor’s default.
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Employee Liability Information
The transferor must provide “employee liability information” to the transferee.
No right for the union to receive that information.
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Interface with Other Employment Legislation and the Future
• Equalities Legislation;
• Industrial action;
• Statutory recognition;
• Territorial scope;
• Beware: the Government will attempt to amend the Directive to permit harmonisation.