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Transfer of an Undertaking

Where an employer is selling a business as a going concern or where a purchaser is buying such a business, or where there is a ‘service provision change’ (see below), it is important that the Transfer of Undertakings (Protection of Employment) Regulations 2006 (‘TUPE’), as amended from 31 January 2014, are not overlooked. TUPE contains far-reaching rules for the protection of employees’ rights on the transfer of a business or part of a business (under TUPE, a business is called an ‘undertaking’), and in certain other circumstances. 

The application of TUPE depends on circumstances which are specific to each business, therefore we strongly advise you to contact your Legal Advisor in the event you believe that TUPE may or may not apply.

Definition of a relevant transfer

TUPE applies to ‘relevant transfers’.  There are two categories of relevant transfer. 

1. Business transfers

A relevant transfer can occur when a business or undertaking, or part of a business or undertaking, is transferred from one employer to a new employer as a going concern. This involves three elements:

1. An ‘economic entity’;

2. a transfer of that economic entity; and

3. the economic entity retains its identity following the transfer.

The party who is transferring the business is called the ‘transferor’ and the party who is taking on the business is called the ‘transferee’.

In deciding whether there has been a relevant business transfer all the factual circumstances will be considered, including:

  • The type of business.
  • Whether tangible assets such as premises, assets and equipment are transferred – although a relevant transfer may still take place even where no property is transferred to the transferee by the transferor.
  • Whether intangible assets such as goodwill and customer lists are transferred.
  • Whether the majority of employees are taken over by the transferee and, if not, the motive of the transferee in not taking them on.
  • The degree of similarity between the activities carried on before and after the transfer.
  • Whether there has been any break in the performance of the activities (although a break in itself will not necessarily mean TUPE does not apply).

Whether TUPE applies to a particular business transfer is not an easy question to answer since each case will turn on its own facts and ultimately it will be a matter for the employment tribunal to decide.  It is therefore recommended that both the transferor and the transferee seek independent legal advice.

2. Service provision changes

A relevant transfer can also occur where there is a ‘service provision change’, that is a situation in which either:

1. activities cease to be carried out by a client on his own behalf and are carried out instead by a contractor (contracting-out or outsourcing);

2. activities cease to be carried out by one contractor on a client’s behalf and are carried out instead by a subsequent contractor on the client’s behalf (second generation contracting-out); or

3. activities cease to be carried out by a contractor or subsequent contractor on a client’s behalf and are carried out instead by the client on his own behalf (contracting-in or insourcing). 

To qualify as a relevant transfer on a service provision change, there must be an organised grouping of employees which has as its principal purpose the carrying out of the activities concerned on behalf of the client and the client must intend that the activities will, following the service provision change, be carried out by the transferee, other than in connection with a single event or task of short term duration.  This therefore excludes cases where there is no identifiable group of employees or cases where the employees principally carry out the relevant activities on behalf of the client without any deliberate planning or intent.  Note that a grouping of employees can constitute just one person.  In many cases it will be clear whether or not there is an organised grouping and who is assigned; however, often this is unclear and can be a point of challenge by either the outgoing or incoming contractor.

Case law sets out useful direction on the correct approach to determining whether or not there is an organised grouping in relation to a service provision change as follows:

  1. Identify the service the company was providing to the client
  2. List the activities performed in order to provide that service
  3. Identify the employees who performed those activities
  4. Consider whether the company organised those employees into a grouping for the principal purpose of carrying out those activities.

Note also that TUPE will not apply where there is a change in the ‘client’ of the services which are being provided. A client need not be a single entity but can be a number of individual entities that group together to commission a particular service.

In addition, the activities to be carried out post-transfer must be "fundamentally the same as the activities carried out by the person who has ceased to carry them out". The contractual business transfer document may be relevant in determining the nature of the activities.

Whether TUPE applies to a particular service provision change will depend on the facts of the particular case.  Legal advice should always be taken.

Some transfers can be both a business transfer and a service provision change.

Exclusions

TUPE does not apply to:

  • The transfer of shares in a company.  This is because when a company’s shares are sold to new shareholders, there is no transfer of the business – the same company continues to be the employer.  For TUPE to apply, the identity of the employer must change. Exceptionally, TUPE transfers have been found to have occurred within a share sale but this is very rare and fact specific.
  • The transfer of empty premises or assets only (for example, the sale of office equipment alone would not be covered, but the sale of a business as a going concern which includes the equipment would be covered or where the economic entity itself is essentially based on assets e.g. a farm where the land effectively is the economic entity).
  • The situation where a client buys in services from a contractor in connection with a single specific event or task of short-term duration i.e. a one-off contract rather than the two parties entering into an ongoing relationship for the provision of the service.  There is no statutory definition of what exactly constitutes ‘short-term duration’. However, case law suggests that tribunals will consider the intention of the client at the time of the transfer when determining whether the activities carried out by an incoming supplier constitute a single specific event or task, and whether it was intended to be of a short-term duration. Where there is no evidence of the parties' intention at the time, the tribunal may imply the intention from the event in question.
  • Arrangements between client and contractor which are wholly or mainly for the supply of goods for the client’s use.

Effect of a relevant transfer on contracts of employment

Where a relevant transfer takes place, employees who are employed by the transferor immediately before the transfer automatically become the employees of the transferee from the time of the relevant transfer, on the same terms and conditions of employment that they previously enjoyed with the transferor, with the exception that special provisions apply to the transfer of occupational pension rights (see below).  However, the transferee does not take over the contracts of employment of any employees who were only genuinely temporarily assigned to the organised grouping. Similarly, where individuals are absent from the business on a temporary basis, such as in relation to holidays or for a period of temporary lay-off, then tribunals are likely to take a common sense approach to assignment and such individuals are unlikely to be deemed not to be assigned to the organised grouping on that basis.  However, those individuals who have been out of the business for an extensive period of time, such as on long term sickness absence, are unlikely to be deemed to be assigned to the organised grouping of employees unless their continued absence is temporary.   

Generally, the transferee will inherit the transferor’s rights, powers, duties and outstanding liabilities arising from the transferring employees’ contracts of employment, except for criminal liabilities and some benefits under occupational pension schemes.  There is a risk that the transferee will therefore be liable for claims which it has not caused and which it may not be aware of.  The solution here is for the transferee to require the transferor to indemnify him against any losses that may arise from events that occurred pre-transfer.  TUPE requires the transferor to inform the transferee in advance of the transfer about such liabilities towards the employees.  This is discussed further below.

The transferee also takes over any collective agreements made by or on behalf of the transferor in respect of the transferring employees and in force immediately before the transfer.  The transferee is not bound, however, by post-transfer collectively agreed terms if it is unable to be involved in the negotiating process.  In addition, there is provision to change collectively agreed terms and conditions provided the variation takes effect more than one year after the date of the transfer and, following the variation, the rights and obligations in the employee's contract "when considered together" are no less favourable to the employee. You should seek legal advice in relation to the transfer of trade union recognition.

An employee’s service or period of continuous employment is not broken by a relevant transfer.  The date that the continuous employment started with the old employer is the one on which to base entitlement to statutory employment rights, for example, the right to claim redundancy pay and/or unfair dismissal.

Where TUPE applies, it applies as a matter of law and it is not possible for the contracting parties to opt-out of TUPE or agree that it will not apply.  As stated above, the parties may, however, validly agree that one shall indemnify the other for sums payable in consequence of the operation of TUPE, or this may simply be reflected by an appropriate adjustment to the purchase price.

Occupational pension schemes

As far as pension provision is concerned, the Transfer of Employment (Pension Protection) Regulations 2005 (made under the Pensions Act 2004) applies.  The regulations set out the mechanics of pension protection following a TUPE transfer.  The Pensions Act 2004 provides that for TUPE transfers taking place after 6 April 2005, employees who were members of an occupational pension scheme provided by their old transferor employer will be entitled to have a pension scheme provided by their new transferee employer.  However, there is no obligation on the transferee to match the type or value of the scheme from which the employee benefited under the transferor.  Instead, the transferee is free to choose the type of scheme to be provided for transferred employees.  This could be either a final salary scheme, a money purchase scheme or a stakeholder pension arrangement.  The Act provides that where a transferee opts to provide a final salary scheme, that scheme must satisfy either the statutory standard laid down in the Pension Schemes Act 1993 or an alternative standard set out in regulations.  These regulations set out that alternative standard.  Prior to 6 April 2014, the alternative standard required that either the value of the benefits provided for by the transferee's scheme must have been at least 6 per cent of pensionable pay for each year of employment in addition to any contributions made by the employee, or that the scheme must have provided for the employer to make 'relevant contributions' on behalf of his employees.  The obligation to make 'relevant contributions' was defined as matching employees' contributions subject to an upper limit of 6 per cent of basic pay.  The same 'relevant contribution' requirement also operated where the transferee decides to provide a money purchase or a stakeholder pension scheme. Since 6 April 2014, the Occupational Pension Schemes (Miscellaneous Amendments) Regulations 2014, have given the transferee the option of matching the transferor's level of employee contributions as an alternative to matching the employee's chosen contributions rate up to 6%.

The transferee is therefore given considerable leeway in deciding how generous a pension scheme to provide; he is not obliged to replicate existing pension arrangements.

TUPE and preventing illegal working

Whilst TUPE and the Immigration, Asylum and Nationality Act 2006 are both silent on the obligations of employers who inherit employees on a TUPE transfer to check the rights of those employees to work in the UK, the UK Border Agency’s Code of Practice provides that:

''Employers who acquire staff as a result of a Transfer of Undertakings (Protection of Employment) Regulations transfer are provided with a grace period of 60 days in which to undertake the appropriate document checks and establish an excuse, following the date of transfer.''

As there are potential civil liabilities for breach of the illegal working provisions that can transfer under TUPE, the transferee should give consideration to seeking indemnity cover from the transferor in respect of such liabilities incurred to the point of transfer and should carry out appropriate due diligence regarding the processes that the transferor had in place to prevent illegal working.

Secondly, as ongoing civil liabilities for negligently employing illegal workers could be incurred from the point of transfer for the transferee that fails to carry out the required document checks, transferees should ensure that the appropriate checks are carried out within 60 days of the TUPE transfer.  For further information, see the fact sheet on Preventing Illegal Working.

From 6 April 2014, changes to the immigration rules have been made to widen the definition of "working for the same employer" to cover certain categories of migrants. However, the position in respect of this should always be clarified.

Employees affected by the relevant transfer

The transferee takes over the contracts of employment of all employees in the business, or that part of the business that is to be transferred, who are employed immediately before the transfer takes place or who would have been employed had they not been unfairly dismissed by reason of the transfer.  Where an employee has already been unfairly dismissed by the transferor by reason of the transfer before the relevant transfer takes place, there is no obligation on the transferee to provide a job for that person.  However, the transferee is responsible for all outstanding liabilities relating to that person which results from their former employment.  So, the transferee would be the correct respondent should the former employee make a claim for unfair dismissal, even though the dismissal was actually effected by the transferor.

Employees’ rights of objection

Employees have the right to object to the automatic transfer of their contract of employment if they so wish, so long as they inform either the transferor or the transferee that they object to becoming employed by the transferee.  In that case, the employee’s objection terminates their contract of employment with the transferor and this is not treated for any purpose as a dismissal by either the transferor or the transferee, unless there have or would have been substantial detrimental changes in their terms and conditions – see further below.  The employee is considered to have resigned and so there is also no entitlement to a redundancy payment.

Changes to terms and conditions of employment

TUPE ensures that employees are not penalised when they are transferred by being placed on inferior terms and conditions of employment.  As mentioned above, transferred employees retain all the rights and obligations existing under their contracts of employment with their previous employer and these are transferred to the transferee.  If the transferee does not provide comparable terms and conditions, an employee may have a claim for constructive dismissal if he or she resigns in response to the transferee’s actions. However, there still must be a fundamental breach of contract by the transferee.  The transferee has no power to unilaterally impose any different terms and conditions from those that he/she has inherited, however commercially convenient that may be for him/her.

  • TUPE also imposes limitations on the ability of the transferee and the employee to agree a variation to terms and conditions of employment post-transfer.  In particular, the transferee must never vary contracts of employment even with an employee’s agreement where the sole or principal reason is the TUPE transfer itself where there is not an ‘economic, technical or organisational reason entailing changes in the workforce’.
  • If contracts are varied in these circumstances then those variations are void.  The same restrictions apply to the transferor where he contemplates changing terms and conditions of those employees who will transfer to the transferee in anticipation of the transfer occurring.

A transferee and an employee can, however, agree to vary a contract of employment where the sole or principal reason is:

  • Not the TUPE transfer; or
  • The transfer but there is an ‘economic, technical or organisational reason entailing changes in the workforce’.  Note: a desire to achieve ‘harmonisation’ of terms and conditions of employment with existing employees does not qualify as an ‘ETO’ reason.  An ETO reason is an economic, technical or organisational reason which entails changes in the workforce – that is, a change to the number of employees or a change to particular job functions or a change of place of work. Note also that for an ETO reason to apply, the change in the numbers/job functions must apply to the relevant employee concerned, and not just to the workforce at large.  So, for example, if the job functions of employee A are changing, this will not automatically mean that you will be able to rely on the same ETO reason in relation to employee B, unless his/her job functions are also affected; or
  • Where the terms of the contract permit the employer to make such a variation.

Where you are seeking to change the terms and conditions of employees who have transferred to your employment under TUPE you should seek legal advice.

Dismissals and redundancies

The general law on unfair dismissal and redundancies still applies in situations where a relevant transfer occurs.  In addition, TUPE provides extra protections, which limit the ability of employers to dismiss employees where transfers arise.  Neither the transferee nor the transferor may fairly dismiss an employee because of the TUPE transfer itself or for a reason connected with the transfer, unless that reason is an ‘economic, technical or organisational reason entailing changes in the workforce’ (the ‘ETO’ exemption).

OR

If there is no such reason, the dismissal will be automatically unfair (provided the employee has been employed for two years or longer).

If there is such a reason, and it is the sole or principal reason for the dismissal, the dismissal will be fair provided that an employment tribunal decides that the employer acted reasonably in the circumstances in treating that reason as sufficient to justify dismissal and the employer met the other requirements of the general law on unfair dismissal.  In this case, the dismissal will either be regarded as having been for redundancy or for ‘some other substantial reason’.  Also, if the dismissal occurred by reason of redundancy, then the usual redundancy arrangements will apply and the dismissed employee may be entitled to a redundancy payment.

The onus lies on the dismissing employer to show that the dismissal falls within the ETO exemption to the automatic unfair dismissal rule.  To qualify as an ETO defence, an economic, technical or organisational reason must be one entailing changes in the workforce.  This means a change in the numbers of people employed or a change in the relevant employee's particular job functions.  Note that as with changes to terms, for an ETO reason to apply, the change in the numbers/job functions must apply to the relevant employee, and not just to the workforce at large.  So, for example, if the job functions of employee A are changing, this will not automatically mean that you will be able to rely on the same ETO reason in relation to employee B, unless his/her job functions are also affected.  If you are seeking to dismiss an employee where TUPE applies you should seek legal advice.

Dismissal by a substantial change in working conditions

As described above, employees can also object to a transfer and by doing so they terminate their contracts of employment.  However, those transferred employees who find that there has been or will be a detrimental ‘substantial change in working conditions’ as a result of the transfer have the right to treat their contracts of employment as having been de facto terminated and they are then classed as having been dismissed by the employer, with the result that they can then claim unfair dismissal.  An employee who treats their contract of employment as having been terminated in reliance on this right cannot, however, make a claim for pay in lieu of a notice period to which they were entitled under their contract and which they failed to work.  In effect, TUPE therefore classifies resignations due to a substantial change in working conditions as dismissals.

Note that this statutory right exists independently of an employee’s right to claim constructive dismissal by resigning without notice in response to the employer’s repudiatory breach of contract. Whether there has been a substantial change in working conditions to the employee's detriment is a question of fact for the tribunal to determine.

Redundancy

As discussed above, dismissals on the grounds of redundancy are permitted by TUPE, as they will normally be for an ETO reason, although the transferee will need to make sure the redundancy is otherwise fair in accordance with statutory requirements.  Redundant employees will also be entitled to a redundancy payment if they have been employed for two years or more.

Where the new employer is planning on making 20 or more redundancies post-transfer the new employer may start collective consultation with the transferring employees prior to the transfer date, so long as both the transferee and transferor are in agreement and the consultation that takes place is meaningful. Please speak to your legal adviser if you are contemplating a number of redundancies post-transfer.

Information and consultation rights

There are two sets of relevant information and consultation provisions:

  • The requirements under TUPE for the transferor to provide information to the transferee about the transferring employees before the relevant transfer takes place; and
  • The requirements under TUPE on both the transferor and the transferee to inform and consult with representatives of the affected workforce before the relevant transfer takes place.

Provision of employee liability information

The transferor must provide the transferee with a specified set of information which will assist him to understand the rights, duties and obligations in relation to the transferring employees.  The information to be provided is:

  • The identity and ages of the employees who will transfer;
  • Information contained in the written statement of terms and conditions of employment for those employees;
  • Information relating to any collective agreements which apply to those employees;
  • Instances of any disciplinary action within the preceding two years taken by the transferor in respect of those employees in circumstances where the ACAS Code of Practice on Disciplinary and Grievance Procedures applies;
  • Instances of any grievances raised by those employees within the preceding two years in circumstances where the ACAS Code of Practice on Disciplinary and Grievance Procedures applies; and
  • Instances of any legal actions taken by those employees against the transferor in the previous two years, and instances of potential legal actions which may be brought by those employees where the transferor has reasonable grounds to believe such actions might occur.

The employee liability information must be correct as at a specified date, which is no more than 28 days before the date on which it is supplied to the transferee.  If any of the specified information changes between the time when it is initially provided to the transferee and the completion of the transfer, then the transferor is required to give the transferee written notification of those changes.

The information must be provided in writing or in another readily accessible form and it must be given at least 28 days before the completion of the transfer.  However, if special circumstances make this not reasonably practicable, the information must be supplied as soon as is reasonably practicable (usually where transfers take place at very short notice). 

The parties cannot contract out of the duty to supply employee liability information.

If the transferor does not comply with the supply of employee liability information, an employment tribunal may award compensation to the transferee for any loss which the transferee has incurred because the information was not provided.  The level of the compensation must be no less than £500 for each employee for whom the information was not provided or where the information provided was defective.  However, the tribunal may award a lesser sum if it considers that it would be unjust or inequitable to award the default minimum payment.

Consultation with the affected workforce

TUPE also provides for the right of recognised trade unions or elected representatives of the employees to be informed and consulted about the transfer.  Micro-businesses i.e. those who employ fewer than 10 employees may directly consult with affected employees where there are no existing appropriate representatives and the employer has not invited any affected employees to elect employee representatives.

Employers are required to consult with the ‘appropriate representatives’ of employees affected by the transfer.  Where there is a recognised trade union, its representatives must be the ‘appropriate representatives’.  Where there is no recognised trade union, an employer may choose between:

  • Employee representatives already elected by the employees (provided that they are deemed to have the authority of the affected employees, bearing in mind the purposes for and method by which they were appointed or elected); or          
  • Employee representatives specifically elected for the purpose of the TUPE transfer, provided that the process of their election complies with statutory requirements.

The relevant regulations set out a number of criteria which must be satisfied in relation to an election of employee representatives.  These include ensuring that all affected employees are entitled to vote and that none of the affected employees are unreasonably excluded from standing for election.  The employees may vote for as many candidates as there are representatives to be elected to represent them. The voting process should be secret. The employer can determine the number of representatives to be elected (subject to ensuring that there are sufficient representatives to represent the interests of the affected employees) and their term of office (subject to enabling the consultation process to be properly completed).  The employer can also decide whether the employees should be represented by a representative for a particular class of employees, or by representatives for the entire group.

Employees who participate in an election of employee representatives are entitled not to be dismissed, or subjected to a detriment, on that ground.  In addition, employee representatives and trade union officials are entitled to time off during working hours for training to perform their functions in relation to consultation.

For the purposes of consultation, the employer must disclose in writing the following information to the appropriate representatives long enough in advance of the transfer to enable the employer to consult with the representatives:

  • The fact that the transfer will occur.
  • The proposed transfer date.
  • The reasons for the transfer.
  • The legal, social and economic implications of the transfer for the affected employees.
  • Any action that the transferee or transferor envisage taking in relation to the affected employees in connection with the transfer (or if no action is envisaged, that fact) – where there is any proposed action, there should be consultation with the appropriate representatives with a view to seeking their agreement to the action to be taken.
  • Information relating to the use of agency workers, including:
  • The number of agency workers working temporarily for and under the supervision of the employer.
  • The parts of the employer's undertaking in which those agency workers are working; and
  • The type of work carried out by the agency workers.

During consultation, the employer must consider and respond to any representations made by the representatives.  If the employer rejects those representations, he must state the reasons.

If employees have failed to elect employee representatives within a reasonable time after being invited to do so, the employer must disclose the above information to each affected employee.

The maximum protective award for failure to comply with the consultation obligations on TUPE transfers is 13 weeks’ gross pay per affected employee.  The transferor and transferee are jointly and severally liable for any protective award made by an employment tribunal for failure to comply with the consultation requirements. However, for there to be a claim against a transferee, the transferor must have relied on the transferee's failure to provide information on its measures as a defence, thus making the transferee a party to the proceedings. 

Where an employer employs fewer than 10 employees, the employer is able to consult directly with the affected employees provided there is no recognised union or existing representatives.

Insolvent businesses

TUPE makes special provision where the transferor is subject to insolvency proceedings. 

First, TUPE ensures that some of the transferor’s pre-existing debts to the employees do not pass to the transferee.  Those debts concern any obligations to pay the employees statutory redundancy pay or sums representing various debts to them, such as arrears of pay, payment in lieu of notice, holiday pay or a basic award of compensation for unfair dismissal.  In effect, payment of statutory redundancy pay and the other debts will be met by the Secretary of State through the National Insurance Fund.  However, any debts over and above those that cannot be met in this way will pass across to the transferee.

Second, TUPE provides greater scope in insolvency situations for the transferee to vary terms and conditions after the transfer takes place.  As discussed above, TUPE places significant restrictions on transferees when varying contracts of employment because of the transfer or a reason connected with the transfer.  These restrictions are in effect waived, allowing the transferor, the transferee or the insolvency practitioner in the exceptional situation of insolvency to reduce pay and establish other inferior terms and conditions after the transfer.  However, in their place, TUPE imposes other conditions on the transferee when varying contracts:

  • The transferor, transferee or insolvency practitioner must agree the ‘permitted variation’ with representatives of the employees.  Those representatives are determined in much the same way as the representatives who should be consulted in advance of relevant transfers;
  • The representatives must be union representatives where an independent trade union is recognised for collective bargaining purposes by the employer in respect of any of the affected employees. Those union representatives and the transferor, transferee or insolvency practitioner are then free to agree variations to contracts, though the speed of their negotiations may be faster than usual in view of pressing circumstances associated with insolvency;
  • In other cases, non-union representatives are empowered to agree permitted variations with the transferor, transferee or insolvency practitioner.  However, where agreements are reached by non-union representatives, two other requirements must be met.  Firstly, the agreement which records the permitted variation must be in writing and signed by each of the non-union representatives (or by an authorised person on a representative’s behalf where it is not reasonably practicable for that representative to sign).  Secondly, before the agreement is signed, the employer must provide all the affected employees with a copy of the agreement and any guidance which the employees would reasonably need in order to understand it;
  • The new terms and conditions agreed in a ‘permitted variation’ must not breach other statutory entitlements.  For example, any agreed pay rates must not be set below the national minimum wage; and
  • A permitted variation must be made with the intention of safeguarding employment opportunities by ensuring the survival of the undertaking or business or part of the undertaking or business.

The position is that the exceptions in relation to insolvency proceedings under TUPE will be construed narrowly and in circumstances where there is a transfer of a business in administration as a going concern case law has demonstrated that in such circumstances, the employees will transfer to the transferee who will be liable as in normal TUPE circumstances. Differences being that some of the transferor's debts will be taken on by the Secretary of State and that the transferee will have greater freedom in relation to varying the terms and conditions of the transferring staff. 

ANNEX

TRANSFER OF AN UNDERTAKING

 

Key Points

Issues to consider

Is it a share sale?

If so, TUPE will not apply.

 

Is it a ‘transfer’?

Examples of transfer:

  • Asset sale.
  • Outsourcing.
  • Franchise.
  • Lease.

 

Is it an ‘undertaking’?

It must be a economic entity which is determined by:

  • Type of business.
  • Tangible assets.
  • Intangible assets, goodwill and customers.
  • Taking over of a majority of the workforce.
  • Degree of similarity in activities.
  • Interruptions.

 

Is there an organised grouping of resources which has the objective of pursuing an economic activity, whether or not that activity is central or ancillary, which retains its identity after the transfer?

 

In respect of service provision changes, is there an organised grouping of employees which has as its principal purpose the carrying out of the activities concerned on behalf of the client and the client intends that the activities will, following the service provision change, be carried out by the transferee and be fundamentally the same as the activities carried out by the person who has ceased to carry out the activities.

 

Who are the transferring employees?

 

Employees assigned to the undertaking as an organised grouping. This is often apparent, but where this is unclear then take the following factors into account:

  • Amount of time.
  • Amount of value.
  • Contract of employment.
  • Allocation of employee costs.
  • Are they deliberately organised into this group?

Part-time and temporary employees are covered.

Employees have the right to object to the transfer.

 

What employee liability information must be provided to the transferee?

 

  • Identity and ages of the employees who will transfer.
  • Information contained in the written statement of terms and conditions of employment for those employees.
  • Information relating to any collective agreements which apply to those employees.
  • Instances of any disciplinary action within the preceding two years taken by the transferor in respect of those employees in circumstances where the ACAS Code of Practice on Disciplinary and Grievance Procedures applies.
  • Instances of any grievances raised by those employees within the preceding two years in circumstances where the ACAS Code of Practice on Disciplinary and Grievance Procedures applies.
  • Instances of any legal actions taken by those employees against the transferor in the previous two years, and instances of potential legal actions which may be brought by those employees where the transferor has reasonable grounds to believe such actions might occur.

 

 

Who do I consult?

 

  • Trade union representatives of any recognised trade union, otherwise
  • ‘General election’ – employee representatives appointed or elected by the affected employees with authority to receive information and be consulted on the transfers; or
  • ‘Specific election’ – employee representatives elected by the affected employees for the purpose of the transfer.
  • Micro-businesses (fewer than 10 employees) may consult directly with affected employees where there are no existing appropriate representatives and the employer has not invited any affected employees to elect.
  • To be legitimate employee representatives, the following conditions must be satisfied:
  • Election is fair.
  • Sufficient representatives exist to represent interests of all affected employees, having regard to their numbers and classes.
  • Employer decides on representation of all affected employees together, or particular classes.
  • Employer determines term of office (long enough to satisfy consultation process).
  • Candidates for election are affected employees at date of election.
  • No affected employee is unreasonably excluded from being elected.
  • All affected employees entitled to vote on date of election.
  • Affected employees may vote for as many candidates as there are representatives to represent them.
  • Voting is secret and votes are accurately counted.

 

What to tell the affected employees?

Information to be provided:

  • Fact that the transfer will occur.
  • Proposed transfer date.
  • Reasons for transfer.
  • Legal, economic and social implications.
  • Any measures transferor or transferee envisages taking.

If no consultation, risk of protective award of maximum of 13 weeks’ gross pay per affected employee.

Consultation as soon as possible, bearing in mind it may be necessary to hold an election for employee representatives.

 

Which rights are transferred?

  • Employees’ contracts of employment.
  • Restrictive covenants.
  • Bonus and commission plans.
  • Trade union recognition and collective bargaining agreements: where the entity retains its distinct identity post transfer.
  • Life assurance, private medical insurance, permanent health insurance.
  • Contractual private pension contribution.
  • Occupational pension schemes: to a limited extent only.

 

Which liabilities are transferred?

  • All liabilities under or in connection with the contract of employment.
  • Civil liability arising between transferor and employee.

 

What is not transferred?

Criminal liability arising between transferor and employee.

 

Are there to be changes to terms and conditions of employment?

 

If any changes to terms and conditions of employment are because of the TUPE transfer itself which is not an ‘ETO’ reason, the changes are void, even if the employee has agreed to them.

 

Are there to be any dismissals?

If the dismissals are because of the TUPE transfer itself they are automatically unfair, unless the ‘ETO’ defence exists.

 

Is there an ‘ETO’ defence?

There must be an economic, technical or organisational reason entailing changes in the workforce (typically, this is a redundancy).  The ETO reason to be examined is that of the employer who dismisses the employee.

 

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