#15482 - Transfer Of Undertakings - Employment Law

Transfer of Undertakings

• Transfer of Undertakings (Protection of Employment) Regulations 2006 - relevant transfer:

  • a business transfer (undertaking transferred) - Reg. 3(1)(a) EXCLUDES SHARE TRANSFERS

    1. Transfer of economic entity (Reg. 3(2) - can comprise just one person);

    2. Economic entity must retain its identity after the transfer

    • Spijkers: consider -

      1. Type of business;

      2. Transfer of tangible assets;

      3. Transfer of customers

      4. Majority of staff taken over

      5. Degree of similarity between outgoing business and incoming one

      6. Duration of any interruption

  • service provision change (e.g. company changes office cleaning contractor) - Reg. 3(1)(b)

    1. Where activities outsourced for the first time from client to a third party

    2. Subsequent outsourcing (from one third party to another)

    3. Insourcing (from third party back to client)

Activities post-transfer must be fundamentally the same as pre-transfer (Reg. 3(2A))

Satisfy Reg. 3(3)(a)(i): must be an organised grouping of employees in the UK, principally carrying on activities for employer.

• Must be a conscious effort to organise employees (Eddie Stobart Ltd v Moreman & Seawell Ltd v Ceva Freight)

Exceptions: Regulation 3(3)

(a)(ii): client intends to use contractor for a specific event/task of short term duration;

(b): activities consist wholly or mainly of the supply of goods for the client's use.

• Botzen v Rotterdamsche: court will look at an employee’s function rather than the terms of his/her contract to determine if employee works in part of the business being transferred.

• Duncan Webb v Cooper: in determining if employee assigned consider: amount of time, value given, contractual terms, allocation of cost of services

• Effect:

  1. employees employed Transferor immediately before the TUPE transfer/would have been so employed had they not been unfairly dismissed automatically become employed by Transferee from the time of transfer on the same terms - Reg. 4(1) & (3)

     • Reg. 4(7): employee can object, they will not be treated as dismissed by the seller and will not have any right to claim unfair dismissal, subject to:

       • Reg. 4(9) - resign if substantial detrimental changes to working conditions & Reg. 4(11) - constructive dismissal (Oxford University v Humphreys)

     • Reg. 4(2): rights, duties, powers and liabilities under contracts of employment as well as anything done in respect of transferring by Transferor will transfer to Transferee, except criminal liability (Reg. 4(6)).

     • Transferor and transferee jointly & severally liable for failure to inform + consult.

     • Pensions:

       • Reg. 10: buyer does not take on contractual liability of seller to provide benefits for old age, invalidity, or survivors under occupational pension schemes.

       • TUPE transferees are entitled to have a scheme provided by the buyer, but there is no obligation on the buyer to match the seller’s scheme (Pensions Act 2004 & Transfer of Employment Regs 2005) - but must meet minimum standard (employees can 'opt out').

       • Does not transfer occupational pension obligations - Reg. 10(1) & (2) (cf. personal pension scheme) and criminal liabilities.

2. any changes to terms and conditions by the Transferee because of the transfer will be void unless one of the exceptions applies;

3. any dismissal by reason of transfer is automatically unfair, unless the reason is an ‘economic, technical or organisational reason entailing changes in the workforce’.

   • Reg. 7(1): sole reason for dismissal is transfer = automatically unfair (ETO reason = redundancy - Reg. 7(2) & (3): fair reason AND fair in all circumstances). Q of fact.

   • ETO defence:

     1. Economic (profitability/business performance) or Technical (equipment/production process) or Organisational (management/organisational structure) reason for dismissal:

     2. Reason must entail a change in the workforce

   • "Entailing a change in the workforce" = includes change to place of employment (Reg. 7(3A)) --> genuine workplace redundancies will fall within defence.

• Changes to terms

  • Article 3 Acquired Rights Directive = employees are entitled to insist on all the rights under their old contract.

  • Changes to terms must be agreed - constructive dismissal if not.

    • Void if principal reason for variation is transfer - Reg. 4(4)

    • Unless:

      • ETO reason & parties agree (Reg.4(5)(a)),

      • Contract terms permit (Reg.4(5)(b))

      • Change entirely positive (Regent Security - additional beneficial right) or

      • 'Relevant insolvency proceedings'

    • If dual purpose, consider circumstances.

    • Collective agreement exception if variation does not take effect within 1 year of TUPE transfer & overall terms are not less favourable than under previous contract (Reg.4(5B)) - e.g. trade union.

    • Wilson v St Helens BC: "there must come a time when the link between the transfer and the dismissal is broken."

      • Each case assessed on own facts - no definite rule.

• Duty to inform and consult with elected rep/trade union: "appropriate representatives"

  • Information re "measures" - Reg. 13(1)

    • Info = Reg. 13(2):

      1. Fact of transfer, date/proposed date and reason

      2. Legal, economic and social implications for affected employees

      3. Measures (or lack of) Transferor intends to take

      4. Measures (or lack of) Transferee intends to take

Must be provided long enough before the transfer to allow adequate consultation.

• Consultation if "measures" are planned - Reg. 13(6)

  • Almost anything can be a "measure"

  • Consultation should be with a view to reaching agreement

  • "Micro-businesses" = Amendment Regs 2014 --> can inform and consult directly with employees (Regulation 13A)

• Information and Consultation of Employees Regulations 2004

  • Business with more than 50 employees = must identify a Domestic Works Council (‘DWC’) and consult with it re measures.

    • Can notify DWC in writing before obliged to inform and consult so that ICE Regs do not apply.

• Affected employees:

  • Those being transferred;

  • Colleagues employed by Transferor who will not transfer but whose jobs may be affected by the transfer;

  • Individuals employed by Transferee who will not transfer but whose jobs may be affected by the transfer

• Employee Liability Info - provide to Transferee (Reg. 11): at least 28 days before transfer

  1. Identity of employees who will transfer;

  2. Age of transferring employees;

  3. Info in employment particulars of those employees;

  4. Info relating to any applicable collective agreements;

  5. Instances of any disciplinary action taken within the last 2 years against those employees where ACAS Code applied;

  6. Instances of any grievances raised by those employees within the last 2 years where ACAS procedures applied;

  7. Instances of any legal action taken by those employees against Transferor in the last 2 years and instances of potential legal action Transferor has reasonable grounds to believe might occur.

+ amend & update if any changes.

• Remedies

  1. Damages for unfair dismissal

     • Claim in ET within 3 months of EDT (subject to ACAS conciliation)

  2. Reinstatement/re-engagement for unfair dismissal

  3. Declaration that contractual variation is void

     • Employment continues on old terms

  4. Failure to comply with Regulation 13 or 14 (duty to inform and consult) = employees can bring a Tribunal claim against the Transferor and the Transferee (Regulation 15) and if successful can be awarded a sum of up to 13 weeks’ actual wages (Regulation 16(3))

  5. Failure to provide employee liability information/information inaccurate = Transferee can apply to the Employment Tribunal under Regulation 12 - declaration and award compensation for loss (at least 500 for each employee in respect of whom information was not provided unless unjust/inequitable)

Seller will give warranties and indemnify the buyer in relation to employment issues/breaches of TUPE & related costs.