TUPE Regulations (Thorogood Reports)

A Thorogood Special Briefing NEW TUPE REGULATIONS Robert Mecrate-Butcher IFC A Thorogood Special Briefing NEW TUPE...

Author: Robert Mecrate-Butcher

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A Thorogood Special Briefing

NEW TUPE REGULATIONS Robert Mecrate-Butcher

IFC


NEW TUPE REGULATIONS Robert Mecrate-Butcher

Thorogood Publishing Ltd 10-12 Rivington Street

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THE AUTHOR

The author Robert Mecrate-Butcher is a partner in the employment department at Pinsent Masons in London. He has particular experience of advising clients in the financial and insurance sectors. Bob has extensive experience of advising in relation to TUPE both in connection to business sales and outsourcings, public and private sector. He is a member of the Employment Lawyers Association working group on TUPE which inputted into the DTI consultation exercises regarding amending TUPE in 2001 and 2005. He also inputs to the CBI in relation to issues concerning TUPE and is a frequent conference speaker regarding TUPE. Bob’s other principal areas of expertise relate to discrimination and the enforcement of restrictive covenants.

A THOROGOOD SPECIAL BRIEFING

iii

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CONTENTS

Contents

1

BACKGROUND NEW TUPE

1

Legislative background ...............................................................................2 Consultation process ...................................................................................3 Major problem areas with the 1981 Regulations .....................................3

2

CIRCUMSTANCES WHERE TUPE CAN APPLY

7

General application .....................................................................................8 Share saves ...................................................................................................8 Joint venturing ...........................................................................................10

3

ASCERTAINING WHETHER TUPE WILL APPLY

11

Two types of transfer.................................................................................12 Type A – case law transfer ........................................................................12 Type B – service provision change transfer ............................................30

4

TUPE AND OFFSHORING

39

Geographical requirements......................................................................40 Position before the 2006 Regulations ......................................................40 The significance of the 2006 Regulations ................................................42 Position regarding dismissals ..................................................................44 Possible future amendment of the Directive re cross border transfers .........................................................................................44

5

SUMMARY OF THE LEGAL IMPLICATIONS OF TUPE

47

Transfer of employees on existing terms and conditions ....................48 TUPE dismissals are automatically unfair unless they are for an ETO reason ...............................................................................49 Information and consultation obligations ..............................................49


v

N E W T U P E R E G U L AT I O N S

Obligation on transferor to provide employee liability information.....50 Transfer of collective agreements and Trade Union recognition .........50

6

IMPACT OF TUPE – WHO TRANSFERS?

51

Regulation 4(1) TUPE ................................................................................52 Who will transfer? .....................................................................................52 Temporary assignments............................................................................54 Absent employees......................................................................................55 Dismissed employees ................................................................................56 The right to object to transfer ..................................................................57

7

IMPACT OF TUPE ON EMPLOYMENT CONTRACTS – WHAT WILL TRANSFER?

61

Provision within the Directive ..................................................................62 Provision within TUPE ..............................................................................62 Particular rights that will transfer ...........................................................62 Case law on what transfers ......................................................................63

8

PENSIONS – TUPE

75

Regulation 10(1) – no transfer rights under occupational pension schemes ........................................................................................76 Regulation 10(2) – rights not relating to benefits for old age, invalidity or survivors transfer.................................................................76 Provision within the Directive ..................................................................77 Regulation 10(3) – no constructive dismissal claim as a result of loss/reduction rights under OPS ...........................................77 Case law previous provision.....................................................................78 What pension rights can transfer under TUPE?....................................80

9

PENSIONS – THE PENSIONS ACT 2004

87

The position prior to the Pensions Act 2004...........................................88 The Pensions Act 2004 ..............................................................................89

vi


CONTENTS

10

INFORMATION AND CONSULTATION UNDER TUPE

93

Overview.....................................................................................................94 The new obligation to notify of employee liability information ...........95 Source of the obligations to inform and consult....................................99 The obligation to provide specified categories of information ............99 The obligation to consult ........................................................................104 Sanctions for non-compliance with obligations to inform and consult ..............................................................................107 Will liability for failure to inform and consult transfer across to the transferee? .........................................................................109 Special circumstances defence...............................................................111 The decision in Hagen v ICI [2002] IRLR 31 ..........................................112

11

TRANSFER OF COLLECTIVE AGREEMENTS AND RECOGNITION

115

Collective agreements .............................................................................116 Trade union recognition..........................................................................118

12

TUPE CONNECTED CONTRACTUAL VARIATIONS

121

Background ..............................................................................................122 The new provisions..................................................................................123 Options open to an employer seeking to vary......................................127

13

TRANSFER CONNECTED DISMISSALS

131

Provision within the Directive ................................................................132 Provision within TUPE ............................................................................132 Case law under the 1981 Regulations on transfer connected dismissals ...............................................................................134 Case law regarding “economic, technical or organisational reason” ...138 Case law regarding “entailing changes in the workforce” .................141 Can the transferor rely on the transferee’s ETO reason? ...................143 Can a place of work redundancy provide an ETO defence? ..............146 Litster principle – Regulation 4(3) ..........................................................147


vii


14

CONSTRUCTIVE DISMISSALS UNDER TUPE

149

The position under the 1981 Regulations – did TUPE create a wider category of constructive dismissal? .............................150 The position under the 1981 Regulations – combined impact of right to claim constructive dismissal and right to object to transfer..............151 Constructive dismissal claims arising out of changes proposed by the transferee.....................................................................152 The new provision – Regulation 4(9), 4(10) and 4(11) of the 2006 Regulations ...........................................................................153 The new provision – the practical impact of Regulation 4(9)..............153 The new provision – how do Regulation 4(9) and 4(11) interrelate with the right to object to transfer and who will be liable in what circumstances? ...............................................................................155 The new provision – how does this analysis impact on the need for indemnities?..............................................................................159 The new provision – can Regulation 4(9) be relied upon against the transferee following transfer?............................................159

15

TUPE AND INSOLVENCY

161

Background ..............................................................................................162 Summary provision made.......................................................................162 Applicability of TUPE to insolvency sales.............................................163 The meaning of “relevant insolvency proceedings” – application to different types of UK insolvency proceeding...............164 What statutory liabilities will not pass where the transfer or is subject to relevant insolvency proceedings? ...............................165 Some issues arising regarding insolvency variations .........................166

16

CONTRACTING OUT OF TUPE

167

Provision within TUPE ............................................................................168 Case law ....................................................................................................169 Contracting out of claims of failure to inform and consult.................170

viii


CONTENTS

17

NEGOTIATING A TRANSFER AGREEMENT

173

Background ..............................................................................................174 Seller transferor in a business sale context ..........................................175 Purchaser transferee in a business sale context...................................177 Client transferor in a service provision change context .....................180 Contractor transferee in a service provision change context ............182

18

PUBLIC SECTOR TRANSFERS

185

Background ..............................................................................................186 Cabinet Office Statement of Practice: Staff Transfers in the Public Sector (“the Statement”) ...................................................187 Annexure to Cabinet Office Statement of Practice: Staff Transfers from Central Government: a fair deal for staff pensions (“Annex A”) ...............................................................188 Office of the Deputy Prime Minister (“ODPM”) Circular 03/2003 – Annex D Code of Practice on Workforce Matters in Local Authority Service Contracts (“the LA Code”) .........190 Code of Practice on Workforce Matters in Public Sector Service Contracts (“Public Sector Code”) .............................................192 Retention of Employment Model (“REM”)............................................192


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Chapter 1 Background New TUPE Legislative background Consultation process Major problem areas with the 1981 Regulations


Chapter 1 Background New TUPE

Legislative background The source/history of the Transfer of Undertakings (Protection of Employment) Regulations 2006 is as follows. •

EU Acquired Rights Directive Adopted 14th February 1977. The full title of the Directive being as follows: “Directive on the approximation of the laws of the Member States relating to the safeguarding of employees’ rights in the event of transfers of undertakings, businesses or parts of undertakings or businesses.”

The title makes clear the overriding purpose of the Directive; protecting employee rights in the circumstances of a transfer. This purpose has been fundamental to the development of case law regarding the applicability of the Acquired Rights Directive within the EU and, given the purposive approach to be adopted by UK courts and Tribunals, whereby UK legislation must be interpreted as far as possible to give effect to the purpose of the EU Directive which it was bought into force in order to implement, the interpretation given by UK courts and Tribunals to TUPE. •

The Transfer of Undertakings (Protection of Employment) Regulations 1981 (“the 1981 Regulations”) Came into effect on 1st February 1982. Applied in relation to transfers taking place prior to 6th April 2006.

•

The Amending Directive Adopted 29th June 1998. The Amending Directive provided member states with a number of options regarding amending national legislation already in force to comply with the Acquired Rights Directive. The implementation date for the bringing into force of national legislation complying with the Amending Directive being 17th July 2001.

•

The Transfer of Undertakings (Protection of Employment) Regulations 2006 (“the 2006 Regulations”)

2


1 BACKGROUND NEW TUPE

Brought into force in the UK in order to implement the Amending Directive. The 2006 Regulations apply to transfers taking place on or after 6th April 2006. They revoked the 1981 Regulations. Within the remainder of this report references to particular TUPE regulations will be to the 2006 Regulations unless otherwise indicated. References to “the Directive” shall be to the Acquired Rights Directive as amended, unless otherwise indicated.

Consultation process Prior to the coming into force of the 2006 Regulations the DTI undertook a major process of consultation. In particular, a first consultation process following the publication of a consultation paper on 10 September 2001 (URN98/513) and a second consultation process following publication of a consultation document on 15 March 2005 (URN 05/926 (“the Consultation Paper”). These consultation papers are interesting reading insofar as they set out the DTI’s thinking regarding changes now implemented.

Major problem areas with the 1981 Regulations Those seeking to apply TUPE have for many years had to deal with legal uncertainties; both in ascertaining whether TUPE applies in any given set of circumstances and its consequences. Much of this uncertainty has stemmed from conflicting approaches and authorities from the European Court of Justice (“ECJ”) on the Acquired Rights Directive and UK Courts and Tribunals on TUPE. In particular, in relation to the test for ascertaining whether TUPE will apply to second stage contracting out. There is, therefore, a lengthy history of ECJ and UK case law regarding when TUPE will apply, characterised by changing levels of discordance between the approach of the ECJ and UK Courts and Tribunals and, as a result, differing levels of certainty as to when TUPE will apply. This has caused real practical problems for contractors who have understandably wanted certainty that if they inherited a workforce under TUPE on winning a contract, they could be sure that TUPE would similarly apply on their losing the contract so that they would not be left with an expensive workforce for which they no longer had a requirement.


3


UK Courts and Tribunals have noted what at times has been a far from satisfactory state. For example, in the case of Complete Clean Ltd v Savage (EAT 2002) the EAT memorably stated: “the law in the UK is in a state of critical uncertainty. It is almost impossible to give accurate advice to [those] involved in possible transfers with any degree of certainty.” In another memorable judgment, in the case of AEEU v Lyndon Scaffolding (EAT 2000), the EAT stated: “We [the EAT] have watched, with some dismay, the apparent twists and turns in the decided cases on [the transfer definition], both in the European Court of Justice and domestically. That dismay is not so much for ourselves, but for those engaged in industry, whether employers, trade unions or employees, particularly in the service contracting fields, who cannot be expected to know precisely where they stand in any given situation.” There have also been for many years a number of other difficult TUPE issues which have never been adequately clarified/resolved by the authorities. In summary, some of the major practical problem areas pre the 2006 Regulations included the following: •

the application of TUPE to 2nd stage contracting out (discussed in Chapter 3, rationale for new Type B Transfer);

•

the geographical ambit of TUPE/application to off-shoring (discussed in Chapter 4);

•

TUPE information – difficulties of obtaining from first contractor on second stage contracting out (see Chapter 10, The new obligation to notify of employee liability information);

•

the extent to which there is an obligation to consult appropriate representatives of transferring employees regarding the transferee’s envisaged measures (see Chapter 10, The obligation to consult);

•

whether liability for failure to inform and consult transfers (see Chapter 10, Will liability for failure to inform and consult transfer across to the transferee?);

•

TUPE dismissals – particularly the applicability of the ETO Defence to place of work redundancies (see Chapter 13, Can a place of work redundancy provide an ETO defence?);

4


1 BACKGROUND NEW TUPE

•

TUPE constructive dismissals (see Chapter 14, Constructive dismissals under TUPE);

•

harmonising terms and conditions – the extent to which it has been possible for a transferee to harmonise terms and conditions after a TUPE transfer (see Chapter 12);

•

dealing with the implications of Beckmann (see Chapter 8, What pension rights can transfer under TUPE?).


5

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Chapter 2 Circumstances where TUPE can apply General application Share saves Joint venturing


Chapter 2 Circumstances where TUPE can apply

General application TUPE may apply to a broad range of transactions including: • the acquisition or disposal of a business (or part); • an internal transfer of a business (or part) within a corporate group (as confirmed in the case of Allen v Amalgamated Construction); • the contracting-out of in-house services, switching of contractors or transferring of services back in-house. Following the coming into force of the 2006 Regulations, referred to as “service provision changes”. TUPE will only apply however, if there is a “Relevant Transfer”; the transfer of an undertaking or part of an undertaking in the case of a Type A business transfer (within Regulation 3(1)(a) TUPE, when construed to comply with the Directive) and, in the case of a Type B Transfer, within Regulation 3(1)(6) TUPE

Share saves TUPE will not apply to a share sale as, in a share sale scenario, the employer remains the same, the company whose shares are being sold, and there is, therefore, no change in the legal entity employing the employees. Confirmation that this is the case was provided by the EAT in the case of Brookes v Borough Care Services. The recent Court of Appeal decision in Millam v The Print Factory Limited confirms, however, that on/following a share sale there may nonetheless be a TUPE transfer if in practice the business of the acquired company is taken on by a company within the purchaser’s group (see discussion of case in Chapter 3). In July 2007 the Transport & General Workers Union, as part of its campaign against private equity, called for TUPE to be widened to cover share sales. Given that, as already flagged, in the context of a share sale TUPE is not necessary as a mechanism to transfer employees continuity and rights; employees

8


2 C I R C U M S TA N C E S W H E R E T U P E C A N A P P LY

remaining employed throughout by the Company in whom the shares are sold, the rationale for this is questionable. This is particularly so given that the criticisms made by the unions of private equity investors principally focus on a failure to consult in relation to large redundancy exercises, in relation to pension changes and generally in relation to business developments. In relation to all three there is however, existing legislation in place which imposes more rigorous information and consultation obligations than imposed by TUPE; respectively, TULCRA, the Occupational and Personal Pension Scheme (Consultation by Employers and Miscellaneous Amendments) Regulations 2006 and the Information and Consultation of Employee Regulations, which now apply to undertakings employing 100 or more. The main point in favour of the unions’ argument is what they refer to as a “loophole in share transfers”, the absence of any obligation to inform and consult in advance of a share transfer. It can of course be argued that it does not matter that the legal identity of the employing entity is the same, what matters is the change of ownership which can impact on staff. Therefore, an obligation to inform and consult should arise. In reality of course what the unions would want is a power to veto such transfers which would not arise even if TUPE were widened to cover share sales. An interim report of the House of Commons Treasury Committee on private equity has asked for guidance from the Government to clarify the application of TUPE to share acquisitions following conflicting testimony to the Committee in relation to the issue. A final report is due in October 2007. It seems unlikely, however, that the Government would wish to widen TUPE to apply to share saves in circumstances where the rationale for doing so seems limited and where it would leave itself open to the charge of unnecessarily burdening companies with further regulation and unnecessary cost were it to do so. Interestingly, in a European Commission report to examine the effects of the Directive published on 18 June 2007, the Commission, in response to a proposal by the European Confederation of Trade Unions, indicated that it did not believe that the Directive should be revised to extend the definition of transfer to include a change of control. This being on the basis that: “although a change of control can lead to changes in the undertaking, the employees’ legal position vis-à-vis the employer is unchanged.”


9


Joint venturing A joint venture arrangement may involve a TUPE transfer. There are a number of potential scenarios.

Scenario 1 – A and B joint venture to carry on a business/ provide a service previously carried on/provided by each of them individually A and B both carry on a particular business or provide themselves with a particular service in house. A and B decide to collaborate in carrying on that particular business or providing that service in the future through a joint venturing arrangement. A and B set up a new company, “JV Co”, to carry on the business in the future. In this scenario there may be a TUPE transfer from A and B respectively to JV Co of the staff who previously were assigned by A and B to the business/provision of the service. Alternatively, A or B may have previously outsourced the service or part of the service to an external contractor in which case there may be a TUPE transfer from that external contractor to JV Co.

Scenario 2 – A and B joint venture to carry on a business/provide a service for the first time A and B have not previously carried on a particular business or provided themselves with a particular service. They decide for the first time to do so through a joint venturing arrangement. In this scenario, on the basis that a business was not previously carried on or a service previously provided by A or B, TUPE can not apply. Even if employees of A and B are offered employment by JV Co or seconded to JV Co, they can not have previously been assigned to that business/ that service, and the requirements for a relevant transfer (Type A or B as discussed in Chapter 3) would not be met. Clearly detailed advice should be taken dependent on the detailed circumstances of any given joint venturing scenario.

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Chapter 3 Ascertaining whether TUPE will apply Two types of transfer Type A – case law transfer Type B – service provision change transfer


Chapter 3 Ascertaining whether TUPE will apply

Two types of transfer TUPE now provides for two types of transfer as follows: •

Type A – case law transfer;

•

Type B – service provision change transfer.

Type A – case law transfer Provision within TUPE Regulation 3(1)(a) refers to: “a 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.” An “economic entity” for these purposes is defined as: “an organised grouping of resources which has the objective of pursuing an economic activity, whether or not that activity is central or ancillary.” This picks up on wording from the Directive and effectively codifies existing ECJ case law; i.e. the two stage stable economic entity and retention of business identity test applying the Spijkers list of factors.

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3 A S C E R TA I N I N G W H E T H E R T U P E W I L L A P P LY

The two stage test European case law has established that the test to be applied in deciding whether or not there is a Relevant Transfer is as follows. 1) STABLE ECONOMIC ENTITY

It is firstly necessary to identify a “stable economic entity whose activity is not limited to performing one specific works contract”. An “entity” being an: “organised grouping of persons and or assets enabling an economic activity which pursues a specific objective to be exercised ... while such an entity must be sufficiently structured and autonomous it will not necessarily have significant assets, tangible or intangible. Indeed, in certain sectors, such as cleaning, these assets are often reduced to their most basic and the activity is essentially based on manpower. Thus, an organised grouping of wage earners who are specifically and permanently assigned to a common task may, in the absence of other factors of production, amount to an economic entity.” 2) RETENTION OF BUSINESS IDENTITY

Assuming that it is possible to identify a stable economic entity: “the decisive criterion for establishing whether there is a transfer within the meaning of the Directive is whether the business retains its identity, as would be indicated, in particular, by the fact that its operation was either continued or resumed.” The above test is to be applied by looking at all surrounding circumstances, including the following shopping list of factors: •

the type of undertaking or business concerned;

•

whether the business’ tangible assets such as buildings and moveable property are transferred;

•

the value of the business’ intangible assets at the time of the transfer;

•

whether or not the majority of the transferor’s employees are taken over by the new employer;

•

whether or not the transferor’s customers are transferred;

•

the degree of similarity between the activities carried on before and after the transfer, and the period, if any, in which the activities are suspended.


13


The above factors have been referred to as “the Spijkers factors/test” or in more recent cases “the multifactorial test”. It is continually stressed, both in European and UK case law, that the above are merely single factors in the overall assessment to be made as to whether or not the factual characteristics before the Court or Tribunal are characteristic of a Relevant Transfer.

Landmark decisions on the two stage test •

Spijkers v Gebroeders [1986] 2 CMLR 486 ECJ decision setting out retention of business identity test as referred to above.

•

Rask v ISS [1993] IRLR 133 ECJ decision making clear that the Directive was capable of applying to the contracting out of services.

•

Schmidt v Spar [1994] IRLR 302 ECJ case confirming that there can be a transfer where an activity is only carried out by one employee. Often referred to as the “high water mark” in relation to the applicability of the Directive; ie the point reached at which it seemed the Directive had the widest ambit.

•

Henke v Schierke (Case C-298/94) ECJ decision concerning transfer of local government administrative functions. ECJ held that: “the reorganisation of structures of the public administration or the transfer of administrative functions between public administrative authorities does not constitute a “transfer of an undertaking””

•

Ayse Süzen v Zehnaker [ 1997] IRLR 255 ECJ decision involving second stage contracting out, making clear that in order for there to be a transfer under the Directive similarity in the service alone will not be sufficient. In the case the ECJ stated as follows: “The mere fact that the service provided by the old and new awardees of a contract is similar does not therefore support the conclusion that an economic entity has been transferred… the mere loss of a service contract to a competitor cannot therefore by itself indicate the existence of a transfer… if there is no transfer of significant tangible or intangible

14



assets or taking over by the new employer of a major part of the workforce in terms of their numbers or skills.” Following the Ayse Süzen decision, a significant issue arose in the UK as to the extent to which, on a second stage contracting out, a potential transferee could avoid the application of TUPE simply by refusing to take on staff of the outgoing contractor. •

Betts v Brintell [1997] IRLR 361 The first Court of Appeal decision following ECJ decision in Ayse Süzen. Concerned a second stage contracting out relating to the provision of a helicopter service for North Sea oil rigs. The second contractor used a different base and took on none of the first contractor’s employees. The Court of Appeal held there was no transfer because no employees and few assets went over. The Court of Appeal indicated that: “The decision in Süzen does represent a shift in emphasis or at least the clarification of the law.”

•

Francisco Hernandez Vidal v Gomez Perez [1999] IRLR 132 ECJ case confirming that the Directive was capable of applying to the taking back in-house of a service and setting out detailed requirements in order for there to be a “stable economic entity”, the first requirement of the two stage test, as referred to above.

•

ECM v Cox [1999] IRLR 559 Second Court of Appeal decision following Ayse Süzen again involving a second stage contracting out. In the case the second contractor refused to take on any of the first contractor’s staff because of threats of unfair dismissal claims. The Court of Appeal nonetheless found the Tribunal was entitled to find that there was a transfer and indicated: –

Spijkers and Schmidt were not overruled by Ayse Süzen;

–

Ayse Süzen set some limits, that being that mere similarity and loss of a service contract on its own will not suffice;

–

whether the majority of employees are taken on is a factual circumstance;

–

an Employment Tribunal is entitled: “to have regard as a relevant circumstance to the reason why employees were not appointed by [a transferee]”;


15


The Court of Justice had not decided in Ayse Süzen, or in any other case, that this is an irrelevant circumstance or that failure of the transferee to appoint any of the former employees of the transferor points conclusively against transfer; –

the importance of Ayse Süzen has been overstated.

Major decisions over recent years on the 2 stage test Oy Liikenne AB v Liskojarvi [2001] IRLR 171 FACTS

Change of service provider. OL was awarded the contract for bus routes. Previous contractor dismissed 45 drivers. 33 were re-engaged by OL but on less favourable terms. No vehicles or other assets were transferred. Employees claimed they had transferred and, therefore, were entitled to enjoy terms and conditions implied by previous contractor. DECISION OF THE ECJ

The ECJ seemed to draw a distinction between economic entities where activities are based essentially on manpower and those which are asset reliant. The ECJ indicated that: “in a sector such as scheduled public transport by bus, where the tangible assets contribute significantly to performance of the activity, the absence of a transfer to a significant extent from the old to the new contractor of such assets, which are necessary for the proper functioning of the entity, must lead to the conclusion that the entity does not retain its identity.”

ADI v Firm Security Group [2001] IRLR 542 FACTS

Re-contracting out of security contract for shopping centre. New contractor, following a meeting between employees and an issue being raised regarding overtime, took none of the employees on. Having written to previous contractor indicating that it did not intend to take on the employees and that, following Süzen, it was, therefore, apparent that TUPE was not an issue. The Tribunal was satisfied there was no economic entity which transferred. The EAT found that there was an economic entity. However, on the basis that no employees and no assets went across there was no TUPE transfer.

16



Decision Court of Appeal (leading judgment LJ May) Held: •

if the circumstances of an alleged transfer are such that an actual transfer of labour would be a relevant factor to be taken into account in deciding whether or not there has been a TUPE transfer, an Employment Tribunal is obliged to consider the reason why the labour was not transferred;

•

if the economic entity is labour intensive such that applying Süzen there is no transfer if the workforce is not taken on but there would be if there were, the Tribunal is obliged to treat the case as if the labour had transferred if it established that the reason, or principal reason, for this was in order to avoid the application of TUPE;

•

there is, however, no positive burden on the person arguing against the transfer to establish the reason for not taking on the workforce.

On the facts there would have been a TUPE transfer if the security officers had been taken on and if the reason why they were not taken on was in order to avoid TUPE. It was, therefore, necessary to remit the case back to Tribunal to decide on the issue as to why employees were not taken on.

MOD v Carvey [IDS Brief 703] FACTS

Rentokil was contracted by the MOD to provide security guards for an army camp. The particular camp, Copehill Down, was listed by the MOD as “category A” which required the camp to be patrolled by armed guards. The MOD, however, had granted a dispensation for the camp which meant that unarmed guards, the only type which Rentokil could provide, were considered to be adequate. Subsequently, the MOD set up an internal unit for guarding “category A” sites, terminated Rentokil’s contract and brought the security for Copehill Down back in-house. No employees were taken on by the MOD. Issue was whether there was a transfer; in particular the effect of the MOD’s reason for not taking employees on.


17


The Tribunal found that there was a transfer, the service was essentially the same and the MOD’s overriding reason for terminating the contract had been economic, rather than a pressing need to have armed guards. DECISION OF THE EAT

The EAT criticised the Tribunal’s indication that the MOD had failed to establish a valid reason for not taking on employees. It indicated there were two bona fide reasons; the MOD’s overriding economic reason and the subsidiary wish to employ armed guards. The EAT indicated that “the ECM point” did not, therefore, mean there had been a transfer on the basis that the Tribunal had not found that the MOD had attempted to defeat or avoid TUPE. Note the suggestion that “economic grounds” would be a valid ground for not taking on employees should be unattractive to Tribunals consistent with a purposive approach to the Directive. This is on the basis that a contractor will always argue economic grounds; i.e. the desire to avoid taking on employees on their existing terms and conditions. An interesting issue in subsequent cases assuming it is not on particular facts clear in any event that there is a Type B Transfer, could be the extent to which this is a case peculiar to its facts or whether the “economic ground” argument is followed.

RCO Support Services v Unison [2002] IRLR 401 FACTS

Re-contracting out of cleaning/contracting services to hospitals. New contractor RCO having refused to take on certain of the employees. It was held at Tribunal that TUPE applied. EAT dismissed the appeal. RCO appealed against the decision on the ECM point; i.e. argued that dicta from the case of ECM v Cox that TUPE could not be applied to allow a contractor to deliberately get round TUPE by failing to take on staff was contrary to the ECJ decision in Ayse Süzen. It was argued that the important point was that the potential transferee did not take on any staff and why was irrelevant.

18



DECISION COURT OF APPEAL (JUDGEMENT L J MUMMERY)

“The fact that none of the workforce was taken on is a relevant circumstance but not necessarily conclusive… as it is relevant… it is necessary to assess its significance by considering the context in which the decision was made.” Here, in considering that context, a number of matters were relevant: •

the fact that RCO needed a workforce to operate the contract;

•

the fact that RCO was willing to re-employ the workforce; and

•

the fact that the workforce would have been taken on by RCO if it had accepted RCO’s offer of employment on its own terms and conditions.

All these factors pointed to transfer. The Judge went on to indicate: “I am inclined to accept the submissions of RCO that a subjective motive of the putative transferee to avoid the application of the Directive is not the real point.”

P&O TransEuropean Ltd v Initial [2003] IRLR 128 FACTS

Shell took the decision to outsource the entirety of its petroleum delivery function having previously carried out the majority of the function in-house and used P&O and Initial to provide a back-up service. The issue was whether TUPE applied to transfer part of the service previously carried on by Initial. The Employment Tribunal found there was a TUPE transfer. P&O appealed arguing that the Employment Tribunal had not considered Oy Liikenne and that, following Oy Liikenne, there could not be a transfer in an asset-intensive industry such as petrol delivery using tankers without a transfer of assets; i.e. no transfer of tankers, no TUPE transfer. DECISION OF THE EAT

“In our opinion, the Court of Justice was not laying down a principle that in all cases of asset-intensive industries the absence of a transfer, to a significant extent of such assets would always lead to the conclusion that no transfer had taken place. When the judgment is read as a whole, it is apparent that the Court of Justice was reaffirming the principle that all relevant factors had to be weighed in assessing whether a transfer had taken place or not, and that the weight to be given to particular factors would vary in accordance with


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the facts of the case. Thus, in an asset-intensive industry, the fact that assets were not transferred will be “a circumstance to be taken into account”. In some cases of this type the absence of a transfer will be decisive; in some it will not. The relative significance of assets in relation to manpower and how each contributes to the performance of the particular activity will vary according to the facts of the particular case. The whole of the transaction has to be looked at in order to see whether one particular factor is decisive; that includes all the circumstances of the transaction.” Here the ET had considered the appropriate test and, even without the decision in Oy Liikenne before them, had noted that the fact that no tangible assets were transferred was an important factor. The decision could not, therefore, be criticised.

Fairhurst Ward Abbots v Botes Building [2004] IRLR 304 FACTS

The case concerned a change of contractors. The contract was for maintenance of council dwellings. The first contractor had a contract for the entire borough. On re-tender the council split the borough into two areas. The second contractor won the contract for one of the areas but refused to take on the employees of the first contractor as it took the view that none of the employees of the first contractor transferred. In particular, the second contractor argued that the new split area contract was not the same economic entity as the contract previously operated for the whole borough. Therefore, there could not have been a transfer of the same economic entity and, consequently, no TUPE transfer. The second contractor also submitted that the transfer of a part would only come within TUPE if that part was a discrete and identifiable economic entity before the transfer that retained its identify post transfer. DECISION OF THE EAT

The EAT indicated that if a TUPE transfer could be avoided by merely dividing up a previously carried on contract into various parts this could be used as a “simple ruse” for avoiding TUPE. Therefore, the EAT indicated that it took the view that the Directive and TUPE do not require that, where a part of an undertaking transfers, that part be a separate economic entity before transfer.

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The EAT held that the Directive and TUPE grant protection where, in the hands of the new employer, the entity is structured differently and forms only part of the entity controlled by the old employer. The suggestion that the part transferred needed to be a separate economic entity before transfer was neither logical nor practical. It was illogical because, if a part was an individual entity in its own right, there would be no need to consider it a part. It was impracticable as it was common, when contracting out for activities previously forming part of a whole, for those activities to be operated separately in the hands of different contractors. The EAT did, however, indicate that in certain circumstances where an entity was split on transfer, it would not come within TUPE on the basis that following the split, what emerged would not be the same entity at all.

Abler v Sodexho [2004] IRLR 168 FACTS

Austrian case relating to change of contractors. The contract related to the management of catering services within a hospital. The second contractor argued that there was no transfer as it refused to take over any of the first contractor’s employees on the basis that there was no contractual relationship between it and the first contractor. The second contractor based arguments on previous ECJ cases where it had been held that, in certain sectors where activities were based essentially on manpower, staff had to transfer in order for the Directive to apply. DECISION OF THE ECJ

“Catering cannot be regarded as an activity based essentially on manpower since it requires a significant amount of equipment. [In the case]… the tangible assets needed for the activity in question – namely, the premises, water and energy and small and large equipment… – were taken over by [second contractor]. Moreover, a defining feature of the situation… is the express and fundamental obligation to prepare the meals in the hospital kitchen and thus to take over those tangible assets. The transfer of the premises and the equipment provided by the hospital, which is indispensable for the preparation and distribution of meals to the hospital patients and staff is sufficient… to make this a transfer of an economic entity. It is moreover clear that, given their captive status, the new contractor necessarily took on most of the customers of its predecessor.


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It follows that the failure of the new contractor to take over, in terms of number and skills, an essential part of the staff, which its predecessor employed to perform the same activity is not sufficient to preclude the existence of a transfer of an entity which retained its identity… where the activity is based essentially on equipment.” Moreover, there was no need for a direct contractual relationship. It was also not significant that the tangible assets taken over by the second contractor did not belong to the first contractor but were provided by the hospital.

Astle & Others v Cheshire CC [2005] IRLR 12 FACTS

The Council outsourced architectural services to the first contractor, all relevant Council staff transferring. The Council then subsequently awarded the contract to a second contractor involving a TUPE transfer from the first to the second contractor, with large numbers of original Council staff transferring to the second contractor. The Council was concerned that the performance of the second contractor was being affected by the poor performance of some of the original Council staff transferred to it. The Council therefore decided that, rather than tendering once again and engaging a further single contractor to provide the services, it would instead use a large panel of consultants; a “market economy” approach. The Tribunal considered whether the reason or principal reason that the Council selected the market economy was with a view to thwarting TUPE. It concluded that the Council did not want a significant number of staff who were employed by the contractor to continue to be responsible for carrying out the service so that it was concerned to avoid a TUPE transfer. The Tribunal, however, accepted the argument on behalf of the Council that it had genuinely decided that the market economy was the best method of delivering the services. Therefore, the Tribunal found that the reason the Council did not accept the workforce back from the second contractor was because it had given the responsibility of carrying out the services to a panel of consultants and, therefore, did not require its own workforce to carry out the service. On appeal it was argued that the Tribunal had erred in failing to find the purpose of what occurred was to thwart the application of TUPE and, therefore, in light of ECM, there should have been found to be a TUPE transfer.

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DECISION OF THE EAT (MR J BURTON)

The EAT found that the Tribunal had not erred in finding that there was no transfer. The Tribunal was entitled to find there was no transfer because the provision of services following the transfer did not retain its identity since it was carried out in a substantially different way so that the employees of the second contractor were not employed by the Council following termination of the contractor’s contract because the Council had no work for them to do. This was notwithstanding that the Council also wished to avoid a TUPE transfer. Regarding the ECM point and the approach to be taken, if the reason, or principal reason, that a potential transferee did not take on a workforce was to avoid the application of TUPE (“an ECM reason”) then this was a relevant factor to take into account when applying the Spijkers factors. As to how an ECM reason is to be taken into account, Burton J indicated that: •

May LJ’s test from ADI may be relevant in many circumstances; ie assume that the workforce or part which was deliberately not taken on for an ECM reason is transferred and then ask on that assumption is there a transfer (ie would there be a transfer if they transferred);

•

alternatively this may not be an appropriate test in all circumstances, particularly if the structure is so different that the assumed taking on of the workforce makes no sense. In which case the alternative may be to consider what would have happened but for the policy of pursuing the ECM reason.

In this case the Tribunal had correctly approached the issues firstly by deciding whether there was an ECM reason; ie whether the reason or principal reason for the transferee not taking on the workforce was to avoid TUPE. The Tribunal was entitled to find that the principal reason for entering into a new structure which had no need for a workforce was not to thwart TUPE but to implement a market economy in circumstances where the structure which was put in place had commercial/economic justification. Once the Tribunal decided that there was no ECM reason it was entitled to apply the Spijkers test without it and to therefore find no transfer.


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Balfour Beatty Power Networks Ltd v Wilcox [2006] IRLR 258 FACTS

BB was awarded a street lighting contract in place of previous contractor. ET found that TUPE applied. BB appealed arguing that there could not be a transfer as no transfer of materials or plant significant to contract. DECISION OF THE EAT

The EAT held the fact that materials/plant not transferred didn’t preclude transfer. On facts both previous contractor and BB leased the materials/plant.

Guney-Gorres v Securicor Aviation [2006] IRLR 305 FACTS

SA had the contract for security at an Airport using security equipment (metal detectors etc) provided by the German Government. The contract was awarded to a new contractor. The issue arose as to whether the Directive applied. DECISION OF THE ECJ

Issue referred to ECJ as to whether the fact that key assets (here the security equipment) were not transferred to the new contractor for “independent commercial use” precluded there being a transfer. ECJ held it that did not.

Balfour Beatty Power Networks v Wilcox [2007] IRLR 63 FACTS

Same as in relation to the case before the EAT (see above). Two particular points of note were argued. Firstly that the employment tribunal had erred in that the economic entity involved was not a “stable” economic entity. In particular because there was no guarantee that the contract would continue and it was, in fact, lost shortly after the transfer. The second point related to the need to classify a particular undertaking as “labour intensive” or “assist dependent” following on from the decision in Oy Liikenne and subsequent cases, and the significance here of the non-transfer of leased assets.

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Decision of the Court of Appeal In relation to the first argument: “the enterprise may be stable as a matter of practical and industrial reality, even though its long term future is not assured.” The Court of Appeal also indicated that it was influenced by the concerns raised by the lay members of the EAT that, if this argument were accepted, it would simply encourage would be employers who wished to avoid TUPE to ensure that contracts were “defeasible” even if in reality the expectation of the parties was that the contracts would in practice be honoured. In relation to the second point, L J Buxton, in giving leading judgement, indicated that he had considerable doubts whether the ECJ intended to lay down a rule that as a matter of law it was always necessary to distinguish between “labour intensive” and “asset dependent” operations and that when the latter, a failure to transfer assets would mean there was no TUPE transfer. In any event he went on to indicate that, on the facts of the case, where the assets used were leased they could be better characterised as “tools and equipment”, rather than assets in the technical sense and, therefore, it was difficult to see them as an integral part of the former business. The Court of Appeal therefore upheld the ET and the EAT decisions that there was a transfer.

The Print Factory (London) 1991 Ltd v Millam [2007] EWCA 322 FACTS

An employee worked in company 1 which was sold via share sale to company 2, following which company 2 made management decisions regarding company 1. Following the administration of company 1 and his dismissal, the employee tried to argue that there had been a transfer on the share sale of company 1 to company 2. The Employment Tribunal found that Company 2 had taken over the day to day management and there was also, therefore, a TUPE transfer from Company 1 to 2 on the same date as the share sale. The EAT held TUPE did not apply to share sales and there was no transfer of assets or staff to company 2 following share sale. It was not appropriate therefore to “lift the corporate veil”.


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The Court of Appeal however, disagreed with the decision of the EAT. In particular the Court of Appeal held that the issue of “piercing the corporate veil” did not arise. This was because piercing the corporate veil only arises when it is established that an activity X is the responsibility of Company A but in reality the activity is the responsibility of Company B (the owner of Company A). Here the Employment Tribunal had not found that the activity was carried out by Company 1 and then pierced the corporate veil to attribute it to Company 2. Rather, the Tribunal found as a matter of fact that the business was carried out by Company 2 and that therefore, there had been a transfer from Company 1 to Company 2. The Court of Appeal indicated that the issue of whether there was a transfer following a transfer of shares was an issue for the Employment Tribunal to decide as the fact finding body and, whilst there was evidence from which the Tribunal could have reached a decision that there was or was not a transfer, on the basis of the decision of fact being made, there was no basis for overturning the Employment Tribunal’s decision.

Compass Group v Burke [2007] UK EAT 0623-06-1505 FACTS

The claimants had worked for the first contractor in a kitchen in an infant school. The kitchen served not only the school itself but also five other local schools. Following a gas leak the kitchen was closed and effectively the service provided by the first contractor was varied. The claimant remained at the first school providing cold lunches. At the end of the summer term the claimants were informed by the first contractor that their contracts were not renewed and that they would transfer to the second contractor. In fact the second contractor did not take them on. In September and at the start of the new term, a fully refurbished and functioning kitchen was in place at the school. The Tribunal found that there was no transfer on the basis that the necessary stable economic entity did not exist. DECISION EAT (JUDGE MCMULLEN)

The EAT held that the decision of the Tribunal to the effect that there was no stable economic entity following the gas leak was a misdirection.

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It referred to a summary of the legal authorities regarding what is required in order for there to be a stable economic entity provided in the EAT judgment in the case of Cheeseman v R Brewer Contracts Limited [2001] IRLR 144 as follows: “(i) as to whether there is an undertaking, there needs to be found a stable economic entity whose activity is not limited to performing one specific works contract, an organised grouping of persons and of assets enabling (or facilitating) the exercise of an economic activity which pursues a specific objective… It has been held that the reference to “one specific works contract” is to be restricted to a contract for building works; (ii)

in order to be such an undertaking it must be sufficiently structured and autonomous but will not necessarily have significant assets, tangible or intangible;

(iii) in certain sectors such as cleaning and surveillance the assets are often reduced to their most basic and the activity is essentially based on manpower; (iv) an organised grouping of wage earners who are specifically and permanently assigned to a common task may in the absence of other factors of production, amount to an economic entity; (v)

an activity of itself is not an entity; the identity of an entity emerges from other factors such as its workforce, management of staff, the way in which it is organised, its operating methods and, where appropriate, the operational resources available to it.”

(This effectively amounts to a distillation of the leading ECJ authorities.) Applying these the EAT found as follows: •

It was clear that the first contractor was engaged in the exercise of an economic activity pursuing a specific objective. It was supplying meals, albeit cold, and serving them to the children at the school. It was sufficiently structured and autonomous insofar as it had a unit manager, one of the claimants, and an assistant and it had use of the kitchen, albeit not for cooking hot food, and it had the wherewithal to provide the service to the children of the school.

•

In order to make a value/judgment as to stability it will often be useful to look at the matters raised in the Spikers test/multifactorial approach as to whether there has been a transfer.


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•

Applying this exercise it was plain that the customers remained the same; the school itself, the children and the staff, the nature of the business remained the same, preparation of meals albeit in a different form, the premises were the same and the equipment provided by the school remained the same, nor was there any gap in activities. There was, therefore, a stable economic entity.

•

The EAT also indicated that it could not be right that when a business undergoes a refurbishment by replacing old plant with new it creates an unstable economic entity.

SIGNIFICANCE OF DECISION

The decision is helpful insofar as it reinforces the point that it will be a rare case where there is not found to be the necessary stable economic entity and refers to the Cheeseman case distilling the ECJ authorities regarding what is required for this. It is interesting insofar as it refers to using the second part of the test, the Spikers/multifactorial test as a way of ascertaining the first part of the test whether or not the necessary stable economic entity is in existence.

Summary following the latest decisions As a result of recent case law the current position on the issue of what is necessary in order for there to be a Relevant Transfer can be summarised as follows. •

It is first necessary to identify a “stable economic entity” – that being an organised grouping of persons and/or assets enabling an economic activity which pursues a specific objective to be exercised.

•

The test is then whether there is a “retention of business identity”.

•

In order to determine whether or not there is a retention of business identity it is necessary to apply the shopping list of factors (referred to in some recent cases as “the multifactorial approach”).

•

Mere similarity in the business being carried on or service being provided (one of the factors from the shopping list) will not in itself suffice.

•

If there is mere similarity there must be something more. This something more may either be the transfer of significant tangible or intangible assets or the taking over of a major part of the workforce (in terms of numbers or skills).

•

There is, following Süzen, no absolute requirement of a transfer of significant assets or employees other than possibly where there is a loss of

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a contract on its own, or merely a similarity in activities pre and post the potential transfer. •

Where a contractor deliberately fails to take on employees with a view to avoiding the applicability of TUPE, and avoiding TUPE is the reason or principal reason for not taking on the staff, a Tribunal is required to take this into account when carrying out its overall assessment of whether TUPE applies.

•

It seems that a contractor may be able to avoid the applicability of TUPE at least in relation to a labour intensive activity by not taking on staff if avoiding a transfer is not the reason or principal reason for not taking on staff (e.g. MOD v Carvey – bona fide reasons for not taking on, RCO – consider context for not taking on, Astle – genuinely decided market economy was the best way of delivering services).

•

Where the transfer involves a transfer of a part, there is no requirement that the pre-transfer part was a separate economic entity.

•

Following Oy Liikenne, if the business or service is particularly asset reliant it appears it may not be possible for there to be a TUPE transfer unless there is a significant transfer of assets. Note, however, the EAT decision in P&O v Initial which indicates that the absence of a transfer of assets is only “a circumstance” and the Court of Appeal decision in Balfour Beatty Power in which the leading Judge doubted whether the ECJ intended to lay down a rule that it was always necessary to distinguish between “labour intensive” and “asset dependent” operations and where it was held in any event that leased assets were of less importance.

Ongoing significance of Type A Transfers An interesting issue going forward is the extent to which in a service provision change scenario whether or not there is a Type A business transfer as a result of the above tests and case law will effectively become obsolete because of there being a clear Type B Transfer in any event.


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Type B – service provision change transfer Rationale for new Type B Transfer The background to this change was a perception of uncertainty as to whether TUPE applied on a change of contractors in an outsourcing scenario. This became a particular issue following the ECJ decision in the case of Ayze Süzen v Zehnacker [1997] IRLR 255 which introduced significant uncertainty, particularly regarding the issue of whether a potential transferee could avoid TUPE simply by refusing to take on staff if no assets transferred. The DTI Consultation Paper regarding new TUPE therefore, made clear that the rationale for the new Type B Transfer is as follows: •

“to reduce uncertainty by establishing a position in which, in the UK, service provision changes will – subject to certain specified exceptions – be comprehensively covered by [TUPE]”;

•

to ensure that, as a result, businesses and employees will know, “where they stand”;

•

to “insulate” businesses and employees from further development in ECJ case law;

•

to ensure a “level playing field” for those bidding for service contracts, thereby ensuring decisions are made on the basis of commercial merit rather than different views as to the applicability, or otherwise, of TUPE and that transaction costs are reduced.

Is there a real requirement for a new Type B Transfer? It can be argued that the new Type B Transfer will not have any significant impact because existing case law as to when TUPE will apply, is such that the vast majority of service provision changes would already be covered, as they already amount to Type A Transfers. To a degree this was acknowledged within the Consultation Paper. At paragraph 18 it is stated that: “in most cases, service provision changes fall within the scope of the Directive and, of the existing Regulations in any event.” A review of case law regarding the circumstances where there will be a “relevant transfer” where there is a service provision change reveals that, there have been periods of relative certainty, where there has been an orthodox view that TUPE

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was likely to apply except in exceptional circumstances, punctuated by periods of greater uncertainty, usually following significant ECJ decisions; for example the decisions in the cases of Ayse Süzen and Oy Liikenne. It is probably true to say that in the period immediately prior to the coming into force of the 2006 Regulations we had been in a period of relative certainty and, therefore, on the basis of the case law, the orthodox view was that except in unusual circumstances, TUPE was already overwhelmingly likely to apply in the majority of cases where there was a service provision change. It is clear, however, that, particularly on a second stage contracting out, many potential transferees have sought to raise arguments to the effect that TUPE would not apply and clearly further case law developments, whether from the ECJ or otherwise, could once again have increased uncertainty. Although it can be argued, therefore, that there had not been an overwhelming need for a new Type B Transfer there would seem to be an advantage to providing it from the point of view of reducing uncertainty for contractors going forward and effectively insulating contractors in the UK from the repercussions of the next Ayse Süzen/Oy Liikenne.

What is a “service provision change”? Service provision change is defined within Regulation 3(1)(b) to cover circumstances where: •

activities cease to be carried out by a client on its own behalf and are carried out instead by a contractor on it’s behalf (stage 1 contracting out);

•

activities cease to be carried out by a contractor on a client’s behalf (whether or not those activities had previously been carried out by the client on its own behalf) and are instead carried out by a subsequent contractor on the client’s behalf (stage 2 contracting out); or

•

activities cease to be carried out by a contractor/subsequent contractor and are instead carried out by the client on its own behalf (the taking of a service back in-house).


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What are the requirements for a Type B Transfer? These are provided for in Regulation 3(3). The requirements are as follows. Before the service provision change: •

there must be “an organised grouping of employees situated in Great Britain which has as its principal purpose the carrying out of the activities concerned on behalf of the client”;

•

“the client intends that the activities will, following the service provision change, be carried out by the transferee other than in connection with a single specific event or task of short-term duration”; and

•

“the activities concerned do not consist wholly or mainly of the procurement or supply of goods for the client’s use.”

The Consultation Paper made clear that the intent of these requirements is to limit the extended scope of TUPE to circumstances where the incumbent service provider has in place an identifiable team carrying out services dedicated to one particular client’s needs. The Consultation Paper also contains useful examples to illustrate this.

Identifiable team The Consultation Paper indicates that where a client engages a courier firm but various different couriers are used to provide the service there would not be the necessary organised grouping and, therefore, a change in courier firm would not be caught. This example, therefore, illustrates the need for an identifiable team.

Principal purpose carrying out of activities on behalf of particular client A second example that is given relates to a travel agency which has in place a team of employees but that team covers the needs of 5 clients rather than 1. On a change this scenario would again not be caught. Here, because the team would not have as its principle purpose the carrying out of the activities concerned on behalf of a particular client.

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Not wholly or mainly procurement or supply of goods The third requirement is also illustrated within the Consultation Paper by an example. A distinction is drawn between a circumstance where a client is provided with sandwiches to sell on to its staff, the sale of goods and not, therefore, caught, and a circumstance where a contractor runs a client staff canteen, caught as activities are principally provision of a service not the supply of goods.

No exclusion for “innovative bids” The Consultation Paper points out that the suggestion from the previous September 2001 consultation document of an exception in relation to “innovative bids” has not been provided for. This would seem to fit with the stated aim of ensuring certainty as no doubt, if an innovative bid exception had been included, incoming contractors on second stage contracting out would have sought to use the exception with a view to avoiding TUPE. The Consultation Paper also refers to an argument in support of this coming out of the 2001 consultation exercise. This is that arguably not having an innovative bid exception sits better with the purpose of the Directive; i.e. protecting employee rights. In particular, on the basis that, if TUPE does apply and, therefore, employees transfer in an innovative bid scenario, there is more of a likelihood of employees remaining in work as, in order for any redundancies to be fair, the transferee would have to consider retraining etc. If an innovative bid exception had been included then, as a result of TUPE not applying, the employees would no doubt have been made redundant on the first contractor losing the contract. This particular argument was set out in the Employment Lawyers’ Association response to the September 2001 Consultation Paper and this may, therefore, provide a rare example where current rather than former employment lawyers have had substantive input into the development of employment legislation.

Professional business services exception This was the one policy issue on which comments were sought during the final consultation process, prior to the 2006 Regulations coming in to force. In the event, a professional business exemption was not included within new TUPE.


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The practical impact of Type B service provision change transfers on general outsourcing In ordinary circumstances on a traditional outsourcing, for example in relation to catering, IT or security services, provided the incumbent service provider has had in place a dedicated client team, TUPE will apply. In these circumstances, assuming that the service will be required by the client on an ongoing basis, the only possible argument that TUPE does not apply would seem to be that the activities to be carried out by the new service provider will be so different as to not to amount to the same “activities”, so that there will not be a service provision change. In practice it is likely that an argument to this effect would be very difficult to sustain save in very unusual circumstances. This is because: •

it seems likely that Tribunals will have regard to the purpose of the introduction of the new Type B Transfer; i.e. to ensure that TUPE applies comprehensively. Allowing the above argument to succeed other than in very extreme circumstances would detract from this purpose;

•

Tribunals may also have regard to the fact that the DTI deliberately decided not to allow an “innovative bid exclusion”. The above argument could be said to be an attempt to bring in an innovative bid exclusion through the backdoor;

•

Tribunals have to interpret TUPE purposively to protect employee rights where possible. Although strictly it could be said that it would not be appropriate to apply a purposive approach by reference to the Directive, given that Type B Transfers do not derive from the Directive, it is probably also significant that allowing the argument to succeed would not seem consistent with the tribunals traditional approach to TUPE.

The practical impact of Type B service provision change transfers on professional business services In practice, the circumstances where there will be a service provision change transfer on a change of provider for many types of professional business services may be limited. This is because there will only be a transfer where: •

the client changes its ongoing arrangements (rather than a one off provision) for professional business services; and

•

prior to the change, there was an organised group of employees with the principle purpose of providing that service for the particular client.

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In the case of legal services for example, if a client, following tender, appointed a new firm to advise going forward then there would be service provision change and the first requirement in order for there to be a service provision change transfer would be met. In the majority of circumstances, however, it is unlikely that the second requirement would be met. This is because even though many law firms will put in place client teams made up of individual lawyers allocated to supporting a particular client, in the majority of circumstances, individual lawyers will service large numbers of clients, such that it will not be possible to say that there is an organised grouping of employees who have as their principal purpose supporting the particular client. As a result, the second requirement would not be met. The new Type B service provision change transfer will have a significant impact, however, in relation to certain types of professional business service where, up to now at least, service providers have resourced clients using teams solely or principally dedicated to the client. Obvious examples are the advertising and PR industries. In relation to the former, there was a major wake up call for advertising agencies following a much reported dispute between two agencies in August 2006. In brief one agency lost the account for a major client, the other won the account. The agency losing the account then informed the winning agency that TUPE applied so that the winning agency would be inheriting its staff. This no doubt was a significant shock to the winning agency and of course to the client which, having gone through an extensive tender exercise, presumably intended to introduce “new blood” to its account. As a result of this, it is reported that the advertising agency and advertiser trade bodies (the IPA and ISBA respectively) have sought to put in place a voluntary protocol regarding TUPE. See also the first case regarding service provision change transfers Hunt v Storm (discussed below).

The practical impact of Type B service provision change transfers – the missing transferee problem It seems that the new service provision transfer is also giving rise to a new set of TUPE problems. One situation which arises is where an incumbent service provider has provided a service. The client going forward rather than appointing one replacement service provider, or even appointing a number of replacement service providers covering discrete geographical areas, instead appoints a number of replacement service providers to receive work on an “as and when basis”.


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In this scenario the definition for a service provision change transfer would certainly be met. There would be a service provision change, the incumbent service provider would have a dedicated team providing the service and the client requires the service on an ongoing basis. It seems clear, therefore, that there is a service provision change transfer. The difficult issue, however, relates to identifying the transferee in these circumstances. To which of the replacement service providers do the employees transfer? The following possibilities would seem to arise: •

in due course it becomes clear which of the replacement service providers is the transferee on the basis that de facto one of the replacement service providers takes on the work, or takes on the work in a particular geographical area;

•

there may be scope for an argument that responsibility for the provision of the service effectively moves from the incumbent service provider to the client which then allocates work so that the transferee is the client.

In any event, clearly in circumstances where there would seem to be a transfer, it seems likely that employment tribunals will be looking to identify a transferee.

First case law on Type B service provision transfer Ms K A Hunt v Storm UK Communications Limited & Others (Case No. 2702546/ 2006) FACTS

Ms Hunt worked for Storm, a PR agency, as an account manager. One of Storm’s clients was Brown Brothers (“BB”). Ms Hunt’s job description, as an account manager, made no specific reference to providing services to any particular client. In practice, however, she started working on the BB account on the first day of her employment and continued working on the account until the termination of her employment. Her job involved the day to day management of the BB account. The structure put in place by Storm for servicing clients was for each client to have an account director, an account manager and an account executive. The Employment Tribunal was satisfied that the amount of time spent by Ms Hunt working for BB was some 70% of her working time in the course of a year.

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BB gave notice to Storm that it was retendering and that Storm was, therefore, to stop work on the account on 28 July 2006. Storm was unsuccessful in the tender process and the account was won by another PR agency, Wild Card. Wild Card did not start work on the account until 2 October, however, the Employment Tribunal Chair was satisfied that the reason for the contract not taking effect until October was because BB was concerned over the application of TUPE. Therefore, the Chairman was satisfied that BB took in-house the work that had previously been carried out by Storm from 28 July 2006 and dealt with the work on a “caretaker basis” pending Wild Card taking on the work from October 2006. Following a dispute between Storm and Wild Card as to whether or not TUPE applied, Ms Hunt pursued a claim that she had transferred to Wild Card.

Decision Employment Tribunal The Employment Tribunal Chair indicated that in his view Regulations 3(1)(a) and (b) are not mutually exclusive and, therefore, he needed to consider the possibility that there might be both a Type A case law transfer and a Type B service provision change transfer. In relation to whether or not there was a Type B service provision change transfer the Employment Tribunal Chair found there was, this being on the basis that: •

there was a service provision change on specialist PR services which had been carried out by Storm being taken on by Wild Card;

•

although BB had covered the PR activities on a caretaker basis, until Wild Card took over there was no service provision change transfer from Storm to BB on the basis that the PR services which had been carried out by Storm were specialist activities which could not have been carried out by BB itself;

•

the necessary “organised grouping of employees” amounted to Ms Hunt herself;

•

Ms Hunt’s principal purpose throughout her employment was the carrying out of the specialist PR services concerned on behalf of BB;

•

the date of the transfer was the date on which BB terminated its contract with Storm; ie 28 July 2006.


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Blank


Chapter 4 TUPE and offshoring Geographical requirements Position before the 2006 Regulations The significance of the 2006 Regulations Position regarding dismissals Possible future amendment of the Directive re cross border transfers


Chapter 4 TUPE and offshoring

Geographical requirements TUPE contains a geographical requirement both for a Type A case law and a Type B service provision change transfer. In relation to a Type A Transfer, Regulation 3(1) TUPE makes clear that it applies to: “a transfer of an undertaking business or part of an undertaking or business situated immediately before the transfer in the United Kingdom.” In relation to a Type B Transfer, Regulation 3(3)(a)(i) refers to a requirement for there to be: “an organised grouping of employees situated in Great Britain,” Therefore a different test applies in relation to Type A/Type B Transfers. In relation to Type A the issue is where the undertaking is based prior to transfer. In relation to Type B the issue is where the organised grouping of employees is based prior to the service provision change.

Position before the 2006 Regulations It has always been clear that subject to the tests, (see Chapter 3, Type A – case law transfer), TUPE applies where an undertaking is transferred from one employer in the UK to another employer in the UK. What has been less clear, however, is what happens when an undertaking situated in the United Kingdom is transferred outside of the United Kingdom. Frustratingly there is no legal authority (ECJ or UK), on this issue. On the basis of the drafting of Regulation 3(1), and the previous drafting in Regulation 3(1) of the 1981 Regulations (which referred to “a transfer of an undertaking situated

40


4 TUPE AND OFFSHORING

immediately before the transfer in the UK”), however, the position seems to be as follows. The key issue is whether the undertaking is situated immediately before the transfer in the United Kingdom. If the undertaking is situated immediately before the transfer in the United Kingdom then, subject to the tests (see Chapter 3, Type A – case law transfer), TUPE will apply regardless of where the undertaking is situated following the transfer. Whilst there has been no case law authority, the orthodox view, therefore, has been that TUPE would apply or at least was capable of applying. In the absence of authority it has always been possible to argue that TUPE cannot apply or would not apply in particular circumstances applying the Spijkers/multifactorial test referred to in Chapter 3, Type A – case law transfer. In particular, arguments that could be used included that, applying the Spijkers/multifactorial test, the following might point against a transfer: •

ordinarily there would be no transfer of tangible assets on an offshoring;

•

few, if any, employees will transfer;

•

the very fact of offshoring may mean that the necessary degree of similarity between the activities carried on pre and post the potential transfer is not present.

Against these arguments, and pointing towards a transfer, there would often be a transfer of intangible assets (in particular IP rights), the customers of the service would be the same, ordinarily fundamentally the same service would be provided and it could be argued that a purposive approach should require a finding of a transfer in order to protect employee rights particularly in relation to information and consultation. Interestingly, some insight into the European Commission’s view as to whether the requirements for a transfer under the Spijkers test will be met in a cross border transfer scenario is given in the European Commission’s Consultation Paper, produced for the first stage of the consultation process with the social partners exploring the possibility of amending the Directive to increase legal certainty regarding cross border transfers.


41


In relation to transfers between member states within the EU/EEA the Commission indicates: “it can be assumed that, other things being equal, the advanced stage of the internal market would allow the transferred economic entity to maintain its identity.” In relation to a transfer outside of the EU/EEA the Commission indicates that: “given that the differences in the legal, economic and social environment are likely to be substantial, it could be argued that a transfer outside the EU or the EEA would not maintain the identity of the economic entity.” The Commission refers to the ECJ case of Didier Mayeur v APIM as possible authority that an alteration of these types of factors could lead to an economic entity not retaining its identity as required. An earlier study produced for the European Commission by CMS on the application of the Directive to cross border transfers also makes reference to a French case where the French Supreme Court found that, in the context of a relocation to Brazil, employment contracts would not be transferred because of the transfer being “to a different environment”. This case is not authority, however, for the position under the Directive or under TUPE. What has happened in practice? In practice it is of course unlikely that employees would wish to relocate to another country. It would also be unusual for the party taking on the service outside of the UK to want to take on such employees. No doubt terms and conditions for such employees greatly exceed those paid in the local market. In practice it is, therefore, likely that the UK employer on a stage one offshoring has effected place of work redundancies. Often, no doubt, redundancy payments have been enhanced for ongoing industrial relations reasons and claims, or at least reported claims, have not followed.

The significance of the 2006 Regulations No specific provision for offshoring The first point to make is that the 2006 Regulations do not contain any express provision regarding offshoring, the only provision being the geographical requirements referred to above.

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Take away the absence of the necessary similarity in service/retention of identity argument As discussed above, one of the arguments which could be used in support of TUPE not applying on an offshoring was the argument that the very fact of offshoring meant the service was necessarily being provided in a very different way. Therefore, applying the necessary Spijkers/multifactorial test, the necessary similarity in the way the service is provided in order for there to be a retention in business identity would not be present. Alternatively, following the line used in the French case referred to above, there would not because of the change of environment be the necessary retention of business identity. Whilst this argument can still be used to support there not being a Type A Transfer, in relation to which the Spijkers/multifactorial test is still the appropriate test, it is not relevant in relation to Type B service provision change transfers. Here there is no requirement for similarity in the way the service will be provided. Provided there is a service provision change (see Chapter 3, The practical impact of Type B service provision change transfers on general outsourcing). Indeed, the DTI expressly considered during the consultation process whether there should be an innovative bid exception where TUPE would not apply, and decided against it.

Liability for failure to inform and consult Prior to the 2006 Regulations, as a result of the EAT decision in Alamo v Tucker [2003] IRLR 266, it was clear that liability for a failure to inform and consult in relation to transferring employees transferred to the transferee. The practical effect of this in an offshoring scenario was that employees or their representatives looking to pursue a claim for a failure to inform and consult could not pursue a claim against the UK based transferor. If they wished to pursue a complaint they would have to do so against the offshore transferee raising difficult issues of jurisdiction. As discussed in Chapter 10, Will liability for failure to inform and consult transfer across to the transferee?, however, following the coming into force of the 2006 Regulations, the transferor is jointly and severally liable for a failure to inform and consult with transferring employees (unless the failure is as a result of the transferee failing to provide details of measures and the transferor has served notice to make the transferee a party). This is significant as the effect is that, going forward, there will always be a UK based entity to sue for a failure to inform and consult on a stage one offshoring. This increases the importance of complying with information and consultation obligations and the risk of TUPE claims following a transfer.


43


Position regarding dismissals As flagged above, on a stage one offshoring it is likely that the transferor will in practice make redundancies. Often it may also be paying enhanced redundancy payments in excess of the statutory minimum. One difficult issue is the extent to which there is potential liability for unfair dismissal as a result of Regulation 7. In short, on the assumption that TUPE does apply, then: •

as a result of Regulation 7(1)(a) dismissals are automatically unfair if the sole or principal reason for the dismissal is the transfer itself;

•

as a result of Regulation 7(1)(b) dismissals are automatically unfair if the sole or principal reason for dismissal is a reason connected with the transfer that is not an ETO reason.

As discussed in Chapter 3 (Can the transferor rely on the transferee’s ETO reason? and Can a place of work redundancy provide an ETO defence?), it is not clear that a place of work redundancy will provide an ETO reason or that an ETO reason, which might be available to the transferee if dismissals were carried out post transfer by the transferee, will be available where dismissals are carried out pre transfer by the transferor. As a result of these uncertainties it will be prudent for a transferor to require employees to sign a compromise agreement in return for any enhanced redundancy payment. Exactly what form such compromise agreements would take and how dismissals would be effected would need to be subject to detailed advice. It may be that a mechanism could be used whereby employees are seen to object to a transfer and then to enter into compromise agreements. Alternatively, in a given set of circumstances, an employer may prefer to take the position that TUPE does not apply if it perceives a real risk that, if they were not to take this position, then employees may indeed seek relocation or seek significant financial payments for entering into compromise agreements.

Possible future amendment of the Directive re cross border transfers The issue of the application of the Directive to cross-border transfers has also been considered by the European Commission. In a report on the effects of the Directive, published on 18 June 2007, the Commission indicates that it believes the absence of explicit treatment of cross-border transfers in the Directive can

44



cause uncertainty for employers and employees and that the enlargement of the EU and other factors, such as globalisation, mean that cross-border mergers are likely to increase. It, therefore, believes it is worth exploring the possibility of amending the Directive to clarify the position. As the first phase of consultation of social partners necessary, prior to putting forward a legislative proposal, the EU has published a consultation document regarding this issue.


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Blank


Chapter 5 Summary of the legal implications of TUPE Transfer of employees on existing terms and conditions TUPE dismissals are automatically unfair unless they are for an ETO reason Information and consultation obligations Obligation on transferor to provide employee liability information Transfer of collective agreements and Trade Union recognition


Chapter 5 Summary of the legal implications of TUPE The detailed legal implications of TUPE are set out in the following chapters. In summary, however, the legal implications of there being a Relevant Transfer are as follows.

Transfer of employees on existing terms and conditions (See Chapter 7 for further detail)

Contracts and accrued rights transfer Under Regulation 4, the contracts of employment and accrued employment rights of all staff assigned to the transferring business/service immediately prior to the transfer, automatically transfer over to the transferee, so that the contracts take effect as if they had been made between the staff and the transferee.

Right to object As a result of Regulation 4(7), staff assigned to the business who are unwilling to become employees of the transferee are entitled to object to the transfer. The effect of such a refusal would be that their contracts would be terminated without a dismissal and without the need for notice (Regulation 4(8)). As there would be no dismissal the employees would not be entitled to any redundancy pay, pay in lieu of notice or other compensation.

Contractual variations may be ineffective Regulation 4(4) limits both a transferor’s and a transferee’s ability to vary transferring/transferred employees’ contracts of employment. Variations are void if the reason for them is soley or principally the transfer itself or a reason connected with the transfer which is not an ETO reason. This is a particular problem for transferees seeking to harmonise the terms and conditions of transferring staff with their existing staff.

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5 S U M M A RY O F T H E L E G A L I M P L I C AT I O N S O F T U P E

TUPE dismissals are automatically unfair unless they are for an ETO reason (See Chapter 13 for further detail) Under Regulation 7, any dismissal the sole or principal reason for which is the transfer itself, or a reason connected with a TUPE transfer that is not an ETO reason, is automatically unfair. In practice, a transfer connected dismissal is only likely to be for an ETO reason where the employer can demonstrate a genuine redundancy other than a place of work redundancy. Any dismissal would in addition have to be fair within the existing test set out within section 98 of the Employment Rights Act 1996. The right not to be unfairly dismissed applies to all employees with one year or more service. This is significant as the potential cost of unfair dismissal has increased markedly over recent years; the maximum compensatory award for unfair dismissal is currently £60,600.

Information and consultation obligations (See Chapter 10 for further detail) The obligations on an employer with regard to information and consultation of employee representatives are contained in Regulation 13. This effectively imposes two obligations as follows.

Obligation to provide specified categories of information An employer is required to provide “appropriate representatives” of “affected employees” with specified information. The obligation is to provide this information, “long enough before a relevant transfer to enable consultation to take place”.

Obligation to consult This obligation only arises under TUPE where an employer of affected employees envisages taking measures in connection with those employees.


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Sanction for non-compliance with information and consultation obligations imposed by TUPE In the event of a failure to comply with the obligations imposed by Regulation 13, employees or employee representatives can bring claims and, if successful, can be awarded up to 13 weeks pay (without limit on the amount of a weeks pay) in respect of each employee.

Obligation on transferor to provide employee liability information (See Chapter 10 for further detail) This is a new obligation introduced by the 2006 Regulations. In short, a transferor is required to provide specified “employee liability information” to the transferee shortly in advance of a transfer. In the event of a failure, a transferee may pursue an Employment Tribunal complaint seeking compensation from the transferor of not less than £500 per employee in relation to whom there has been a failure.

Transfer of collective agreements and Trade Union recognition (See Chapter 11 for further detail) As a result of Regulation 5, on transfer, any collective agreements made by the transferor with a trade union recognised by the transferor in respect of any transferring employee have effect as if it is made by or on behalf of the transferee with that recognised union. Under Regulation 6, trade union recognition also passes.

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Chapter 6 Impact of TUPE – who transfers? Regulation 4(1) TUPE Who will transfer? Temporary assignments Absent employees Dismissed employees The right to object to transfer


Chapter 6 Impact of TUPE – who transfers?

Regulation 4(1) TUPE Regulation 4(1) provides that a relevant transfer: “shall not operate so as to terminate the contract of any person employed by the transferor and assigned to the organised grouping of resources or employees that is subject to the relevant transfer, which would otherwise be terminated by the transfer, but any such contract shall have effect after the transfer as if originally made between the person so employed and the transferee.”

Who will transfer? One issue which often arises in practice is how to determine which employees will transfer across to the transferee as a result of TUPE.

Mixed duties Clearly, where employees are 100% assigned to the business being acquired or service being contracted out, or indeed spend the vast majority of their time carrying out duties for the transferring parts and only carrying out duties for other parts to a minimal extent, they will transfer. The more difficult issue concerns staff in support functions who may only spend a portion of their time supporting the transferring business or service. The legal test for determining whether an employee will in fact transfer is not particularly helpful. The test was first set out in Arie Botzen v Rotterdamsche [1986] 2 CMLR 50 an ECJ decision, which is still the leading authority on this issue. This states that the test is whether or not particular employees are “assigned” to the relevant business. The 2006 Regulations have adopted this language. This of course, seems to raise more questions than it answers. Some further guidance has been given by UK Tribunals. In the case of Gale v Northern General Hospital [1994] IRLR 292 it was stated that the test is whether

52


6 I M PA C T O F T U P E – W H O T R A N S F E R S ?

an individual forms part of “the human stock of the business”. In the case of Duncan Webb Offet (Maidstone) Limited v Cooper [1995] IRLR 633 the Employment Appeal Tribunal gave additional guidance on this issue and stated that the following factors are likely to be relevant: •

the amount of time spent on one part of the business or the other;

•

the amount of value given to each part by the employee;

•

the terms of the individual’s contract of employment (or job description – see Mowlem Technical Services (Scotland) Limited v King [2005] CSIH 46) showing what the employee can be required to do; and

•

how the cost of the employee’s service has been allocated between the different parts of the business.

Mowlem, referred to above, is also an interesting decision as it provides authority that a branch manager may not be assigned to a particular service contract even if 80% of the branch’s turnover relates to that service contract. On the facts of the case this was because the branch manager’s job description made clear that he had responsibility for management of the branch rather than running the particular contract. In practice, one way of tackling this issue is to ensure that, prior to transfer, employees are assigned to the transferring part of the business service on a fulltime basis. This should be effective as the test is whether or not employees are assigned to the business immediately prior to the transfer. This of course allows a transferor to exercise some control as to which employees will transfer. A transferor may also wish to retain various employees in which case it will either need to assign them elsewhere prior to transfer, or obtain written confirmation of their wish to remain (in which case specific advice would need to be obtained). Note, however, the decision of the EAT in the case of Carisway Cleaning v Cooper (EAT 629/97). In this case Carisway, which had a contract for cleaning a particular Sainsbury’s store, took the opportunity to transfer a particular employee with a disciplinary problem to another store shortly prior to losing the contract for cleaning that store. Very shortly after the transfer the employee left and claimed unfair dismissal against both Carisway and the new contractor. The EAT found that the employee had not transferred to the new contractor because he was effectively persuaded to go to the new store on fraudulent grounds.


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Temporary assignments Securiplan v Bademosi IRLB 727 FACTS

B worked as a security officer for 21 years at one site. After an accident at work in July 2000 he returned to work in November 2000 by which time there was no longer a vacancy for him at this site. He was moved to another site but was unhappy and told on 3 December 2001 that he could return to the original site in January 2002. On 6 December 2001 the contract to provide security services at the second site was abruptly terminated and awarded to C Ltd. DECISION OF THE EAT

The EAT held that, although there was no doubt that B was working on the second site immediately before the transfer, he had been assigned to his original site since 1978 and was only on the second site on a temporary basis. Therefore, the EAT concluded that he was not assigned to the second site at the time of the transfer to C Ltd. On the face of it this decision seems rather strange. However, it was clearly taken in an effort to prevent “unsavoury” employers deliberately transferring staff from one contract or undertaking to another immediately before a transfer in order to retain/rid themselves of particular members of their workforce. CODIFICATION

The Bademosi decision has effectively now been codified within the 2006 Regulations. Regulations 2(1) defines “assigned” as: “means assigned other than on a temporary basis.”

Secondments Celtec v Astley [2006] IRLR 635 FACTS

The claimants were civil servants who in 1990 were seconded to a Training and Enterprise Council (TEC). In 1993 they opted to take up direct employment with the TEC and resigned their civil service positions. In 1998 a redundancy situation arose and the claimants sought a declaration that they had continuous service from the date they started with the Civil Service. The TEC argued they did not, continuity having been broken by their resignation.

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The case came before the House of Lords who obtained a ruling from the ECJ that the Directive must be interpreted as meaning that the date of transfer is the date on which responsibility for carrying on a business moves from transferor to transferee, that being a particular point in time which cannot be postponed to another date at the will of the transferor or transferee. DECISION OF THE HOUSE OF LORDS

Continuity was preserved even though the claimants did not transfer until 3 years after the date of transfer. This was because, notwithstanding the secondment arrangements, the claimants were deemed to have transferred at the date of transfer. Employees automatically transfer if assigned unless they object to transfer. Here there was no objection to transfer as the claimants did not choose not to work for the transferee. In practice they did work for the transferer. They, therefore, transferred notwithstanding the attempted secondment arrangements. IMPACT OF THE DECISION

The Celtec decision is highly significant. It calls into question the ability of transferor and transferee to agree to employees remaining employed by the transferor but being seconded to the transferee. This has been a frequent practice, particularly in the public sector, where this mechanism has been used to seek to allow staff to continue as active members of public sector occupational pension schemes.

Absent employees Fairhurst Ward Abbotts v Botes Building Limited [2004] IRLR 304 FACTS

This case dealt primarily with the issue of whether or not the economic entity in question amounted to an undertaking for the purpose of the TUPE regulations. However, the Court of Appeal also considered the question of whether or not employees absent due to long-term sick leave could properly be considered to be assigned to the undertaking in question. DECISION OF THE COURT OF APPEAL

The Court of Appeal held that if in fact an employee was employed in the part of the undertaking that was transferring, the fact that he was away from work


55


because he was sick would not in itself prevent him from transferring. A person on sick leave, like a person on holiday, or on maternity leave, remains a person employed in the undertaking, even though they are not actually at their place of work. The question is simply whether they were employed in the part that transferred.

Dismissed employees G4S Justice Services Ltd v Anstey [2006] IRLR 588 FACTS

The outgoing contractor dismissed two employees for gross misconduct 3 weeks before its contract was due to end. The dismissals were not connected with the transfer in any way. The employees appealed against their dismissals before the transfer took place. The new contractor initially agreed to hear the appeals but then changed its mind. The outgoing contractor heard the appeals instead, but not until two months after the transfer. The appeals were upheld and the outgoing contractor decided that the employees should be reinstated to the jobs they held previously, which were now with the new contractor. The new contractor refused to take them on and they claimed unfair dismissal against both contractors. DECISION OF THE EAT

The EAT held that the effect of the employees’ reinstatement following their appeals was that their original dismissals “vanished”, so that they were retrospectively deemed to have been employed at the time of the transfer. Their employment and all liabilities relating to it therefore transferred to the new contractor, including the claim for unfair dismissal. Had the employees not been reinstated, the EAT said that liability for the dismissal would have remained with the outgoing contractor. This case provides a salutary lesson regarding the need for proper due diligence prior to transfer by a transferee (see Chapter 16).

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The right to object to transfer BACKGROUND

The right to object to transfer was not initially contained within the 1981 Regulations. In the case of Katsikas v Konstantinidis [1993] IRLR 179, however, the ECJ held that the Acquired Rights Directive did not prevent an employee employed by the transferor at the date of transfer from objecting to transfer to the transferee and also held that it was for Member States to decide the fate of the contract of employment in these circumstances. Following on from the decision in Katsikas, TUPE was amended by the addition of new Regulations 5(4A) and 5(4B).

Current provision Provision is now found at Regulations 4(7) and 4(8). These provide as follows. Regulation 4(1) and (2) (providing for the transfer of employees and liabilities): “shall not operate to transfer the contract of employment and the rights, powers, duties and liabilities under or in connection with it if an employee informs the transferor or the transferee that he objects to becoming employed by the transferee (Regulation 4(7)).” Further, subject to Regulations 4(9) and 4(11) (see Chapter 14 – rights to claim dismissal as a result of substantial change in working conditions to material detriment and in circumstances of repudiatory breach): “where an employee so objects, the relevant transfer shall operate so as to terminate his contract of employment with the transferor but he shall not be treated, for any purpose, as having been dismissed by the transferor (Regulation 4(8)).” In short, therefore, the consequence of an employee objecting to transfer is that they do not transfer and also that their employment comes to an end without there having been a dismissal and without, therefore, the employee having any rights. In normal circumstances, as a result, it will not be in an employee’s interests to object to transfer. There are however, certain circumstances where an employee may wish to do this. In particular: •

where an employee wishes to join a competitor and effectively walk free from a notice period;


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•

in circumstances where an attempt is being made to avoid the transfer to the transferee with a view to continuing the employment relationship with the transferor. For example, to allow employees to continue to benefit from membership of an occupational pension scheme (see Chapter 17, Retention of Employment Model (“REM”));

•

where the employee is not merely objecting to transfer but is also claiming to have been dismissed under Regulations 4(9) and/or 4(11) such that they will, notwithstanding Regulation 4(8), have rights against the transferor or transferee (see Chapter 14).

CASE LAW

The following points come out of the existing case law regarding the right to object: •

An objection will not be effective until made known to either the transferor or transferee prior to the date of transfer (Hay v George Hanson ETA 821/95). The case also indicated that an objection could be imparted by words or deeds. In the case the EAT indicated as follows: “We construe the word “object” as effectively meaning a refusal to accept the transfer, and it is equally clear… that the state of mind must be conveyed to either the transferor or transferee. But we do not consider it necessary to lay down any particular method whereby such a conveyance could be effected… it could be by either word or deed, or both, and each case must be looked at on its own facts to determine whether there was a sufficient state of mind to amount to a refusal on the part of the employee to consent to the transfer, and that that state of mind was in fact bought to the attention of either the transferor or the transferee.” Also considered was the issue of distinguishing between expressing concerns and objecting to transfer as follows: “it should not be difficult in most cases to distinguish between such withholding of consent and mere expressions of concern or unwillingness, which may still be consistent with accepting the inevitable. Thus, to protest in advance of a transfer, which could be construed to be objecting, would not amount to an objection… unless it is translated into an actual refusal to consent to the transfer which, in turn, is communicated to the relevant person or persons before a transfer takes place.”

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It is probably unwise to place too much reliance on the indication that an objection can be inferred by deeds, however, as, giving a purposive approach to TUPE, particularly taking into account the draconian effect of objecting to transfer, it seems likely that an Employment Tribunal would be reluctant to hold that an employee had objected to transfer unless there was clear evidence that this is what the employee intended and that the employee had deliberately communicated this. •

If an employee is not made aware that a transfer is taking place and does not become aware until after the transfer it seems an employee will still be able to exercise a right to object (Secretary of State for Trade and Industry v Cook [1997] IRLR 150). The EAT indicated as follows: “the moment he discovered what had happened and that his employer was not the transferor but the transferee, he could leave his employment without liability; at the least, the parties to the transfer would be estopped from denying that the employee had exercised his right to object timeously.” Note: in this case the EAT disagreed with an earlier decision in the case of Photostatic Copiers Ltd v Okuda [1995] IRLR 11 that an employee cannot transfer unless and until given notice of the fact of transfer and the identity of the transferee. This being on the basis that the decision in Okuda was inconsistent with the purpose of the Directive as it would allow unscrupulous employers to avoid inheriting staff simply by failing to disclose the transfer.

•

Signing up to wording indicating an objection to transfer will not be effective if, prior to the transfer taking place, the employees have in practice entered into contracts with the transferee. The case of Senior Heat Treatment Limited v Bell [1997] IRLR 614 involved employees electing to take an option to opt-out of transfer and receive a severance payment. Before their employment was terminated and they received redundancy payments, however, they had entered into contracts with the transferee. The issue which arose in due course was whether or not they had continuity of employment on the basis of having transferred. It was found they did.

•

If the contract of employment proposed by the transferee involves a substantial change in working conditions to the detriment of the employee then the Directive requires Member States to provide that


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the employer is to be considered responsible for termination (Euro Pieces SA v Sanders ECJ (Case C-399/96)) (And see Chapter 14). •

Where an employee objects to transfer and the transfer would involve a substantial and detrimental change to the employee’s change and conditions of employment, the employee is entitled to regard themselves as having been dismissed by serving notice of objection to transfer and also to seek compensation for dismissal against the transferor (Humphreys v Oxford University. (See Chapter 14 for a detailed discussion of this case and its implications.)

•

If an employee objects to transfer but in practice is kept on for a period of time after the transfer by the transferor, the transferor may effectively lose the right to argue that the employee’s employment terminated without a dismissal and be at risk of the subsequent dismissal being found to be automatically unfair (Dunkinson v Meridian Technologies EAT 0266/01). This was a decision in a preliminary hearing and the judgement therefore was merely that this was arguable. The decision instinctively seems correct however. It may even be that a transferor which expressly terminates following a transfer could be found to estopped from arguing that the employment terminated earlier on transfer without a dismissal.

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Chapter 7 Impact of TUPE on employment contracts – what will transfer? Provision within the Directive Provision within TUPE Particular rights that will transfer Case law on what transfers


Chapter 7 Impact of TUPE on employment contracts – what will transfer?

Provision within the Directive Article 3(1) provides as follows: “The transferor’s rights and obligations arising from a contract of employment or from an employment relationship existing on the date of a transfer shall, by reason of such transfer, be transferred to the transferee.”

Provision within TUPE Regulation 4(2) refers to: “all the transferor’s rights, powers, duties and liabilities under or in connection with [the contract of a transferring employee]” transferring to the transferee (Regulation 4(2)(a)); and “any act or omission before the transfer is completed, of or in relation to the transferor in respect of [the contract of a transferring employee] or a person assigned to that organised grouping of resources or employees” being deemed to have been “an act or omission of or in relation to the transferee (Regulation 4(2)(b)).”

Particular rights that will transfer As a result of the above rights under the contract of employment, and continuity of employment will transfer. Particular rights transferring will include the following:

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•

unfair dismissal and redundancy claims;

•

discrimination claims;


7 I M PA C T O F T U P E O N E M P L O Y M E N T C O N T R A C T S – W H AT W I L L T R A N S F E R ?

•

unpaid salaries, unpaid accrued holiday and unlawful deduction from wages;

•

payments due under contractual bonus schemes;

•

continuity of employment;

•

restrictive covenants;

•

liability for employees unfairly dismissed prior to the transfer for a transfer related reason;

•

personal injury claims; and

•

recognition agreements with trade unions.

The following will not transfer: •

criminal liabilities; and

•

rights and liabilities relating to the provisions of occupational pension schemes which relate to benefits for old age, invalidity or survivors (see Chapter 8).

Case law on what transfers Discrimination DJM International v Nicholas [1996] IRLR 96 This case involved an employee who was required to retire at age 60 because she was a woman. She was dismissed and re-employed under a new contract and then transferred to a new employer under a TUPE transfer. She pursued a sex discrimination claim arising out of her original dismissal. The major issue concerned the interpretation of Regulation 5(2)(b) of the 1981 Regulations (which was in the same form as what is now 4 (2) (6)). The EAT held that this: “applies not only to things done before the transfer in respect of the employment contract. It also applies to anything done before the transfer in respect of a person employed in that undertaking. Anything done in respect of such a person is deemed to have been done by the transferee.” Therefore, the transferee was liable for the sex discrimination of the transferor.


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Tortious liability Following a number of contradictory decisions the current position is that tortious liability transfers.

Taylor v Serviceteam Limited (RM 602374) In this case it was found that tortious liability did transfer.

Martin v Lancashire CC LTL 21/7/99 In this case it was held that liability did not transfer.

Bernadone v Pall Mall Services [1999] IRLR 617 In this case it was held that TUPE was wide enough to transfer tortious liability. It was also held that the right to an indemnity under the transferor’s employer’s liability insurance transferred. In particular, it was held that there was an implied term that the employee will be protected by the employer’s liability insurance so that where an accident occurs they will be protected by that policy. The right to the indemnity, therefore, transfers.

Pay increases under collective agreements – the UK approach There have been a number of cases which have considered the extent to which a transferee may be liable for pay increases agreed via a collective bargaining arrangement in relation to employees who have transferred to it, notwithstanding that the transferee has had no input into the collective bargaining process. The approach of the UK courts has been as set out below.

BET v Ball EAT 637/96 This case concerned dinner ladies who had contracts with the London Borough of Richmond which referred to NJC terms and conditions. Richmond contracted out the provision of schools meals to BET. Following the transfer to BET the NJC agreed to pay increases on a national basis. BET did not implement these increases in respect of the staff that had transferred to it and so these employees pursued wages act claims. DECISION OF THE EAT

The EAT held that Regulation 5(1) of the 1981 Regulations (now 4 (1) TUPE) obliged BET to pay applicable NJC rates as agreed from time to time.

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Whent v T Cartledge [1997] IRLR 153 The facts in Whent were effectively the same as in BET; i.e. employees transferred under contracts incorporating NJC rates. The material difference in the case, however, was that following transfer TC wrote to the union withdrawing recognition and stating that any collective agreements no longer had an effect and also wrote to employees confirming the same. DECISION OF THE EAT

The EAT held as follows: “if the individual contract of employment remains unaffected by the [employers] withdrawal from the agreement, and the agreement remains in existence and in operation, the contract term referring to it can and should continue to have an effect.” Therefore, although TC was entitled to and did opt out of a collective agreement, the outcome of annual negotiations still impacted on an individual employee’s rights. In practice, therefore, in order to make any change it would be necessary to vary employees’ contracts to remove any clauses which stated that the outcome of collectively agreed negotiations impacted on their salary entitlements.

Akinclose and Others v Gateshead Metropolitan Borough Council [2005] IRLR 79 FACTS

Mrs A was employed as a part-time worker by the local authority’s school meals service. Her contract provided that her terms and conditions would be in accordance with the local authorities NJC agreement for manual workers known as the “White Book”. In 1995 she transferred to Castle View Services. In 1997 national agreements for both manual and white collar workers were combined in a new single status agreement known as the “Green Book”. The Green Book introduced with effect from 1 April 1999 certain changes to working hours and rates of pay that were not implemented by Castle View Services. Mrs A transferred back to the authority on 1 January 2000 whereupon changes introduced by the Green Book were applied to her. She then brought a claim in respect of the failure to change her terms and conditions for the period 1 April 1999 to 31 December 1999. DECISION OF THE EAT

The terms of Mrs A’s employment provided for her terms and conditions to be in accordance with the White Book but did not allow for her pay to be governed by the terms of any subsequent collective agreement which might be adopted


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by the successor body to the NJC for manual workers. The contract only referred to the NJC for manual workers and the White Book. Without any further reference or incorporation, no successor body or successor agreement could be held to be part of the contract of employment.

Pay increases under collective agreements – the ECJ approach Werhof v Freeway Traffic Systems GmbH [2006] IRLR 400 This was a case referred to the ECJ by the German courts. In short, an individual was initially employed under a contract of employment governed by a collective agreement entered into between a German employers federation and the relevant trade union. The employee was subsequently transferred and the transferee was not a member of any employers’ association which concludes collective agreements. Following the employers federation of his former employer and the trade union concluding a new collective agreement providing for a salary increase, the employee pursued an action against the transferee seeking the differential between the sums paid by the transferee and the sums payable under the new collective agreement. DECISION ECJ

Indicated that by virtue of Article 3(1) of the Directive: “the rights and obligations arising from a collective agreement to which the contract of employment refers are automatically transferred to [the transferee], even if… the latter is not a party to any collective agreement. Accordingly, the rights and obligations arising out of a collective agreement continue to bind the [transferee] after the transfer of the business.” However, given the further provision of the Directive (that contained in Article 3(3)): “the terms and conditions under that collective agreement are to continue to be observed only until the date of its termination or expiry, or the entry into force or application of another collective agreement. Thus the wording of the Directive does not in any way indicate that the community legislature intended that the transferee be bound by collective agreements other than the one in force at the time of the transfer and, consequently, that the terms and conditions be subsequently amended through the application of a new collective agreement concluded after the transfer.”

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This also being consistent with the objective of the Directive that being to merely safeguard rights and obligations in force on the day of transfer. “On the other hand, the Directive was not intended to protect mere expectations to rights and, therefore, hypothetical advantages flowing from future changes to collective agreements.” The court also considered arguments which had been put to it as to whether a clause in an employment contract referring to a collective agreement must be considered “dynamically”; ie to cover collective agreements concluded after transfer or “statically” by reference only to the collective agreement in force at the time of the transfer. It also considered the transferee’s right of freedom of association including the right not to join an association or union. The court indicated: “If the ‘dynamic’ interpretation… were applied, that would mean that future collective agreements apply to a transferee who is not party to a collective agreement and that his fundamental right not to join an association could be affected. On the other hand, the static interpretation… makes it possible to avoid a situation in which the transferee of a business who is not a party to a collective agreement is bound by future changes to that agreement. His right not to join an association is thus fully safeguarded.” The ECJ preferred the static interpretation and, therefore, concluded that a transferee is not bound by a collective agreement subsequent to the one which was in force at the time of the transfer of the business.

Pay increases under collective agreements – position in the UK following Werhof The issue following on from Werhof is the impact it has on the previous UK case law. Whilst it is certainly now clear, following on from Werhof, that a UK transferee cannot be bound by any collective agreement which the transferor chooses to enter into following transfer, what is less clear is the impact of the application of an existing collective agreement following on from transfer. In particular, if under a collective agreement, which the transferee is not party to, following transfer an increase in salary is negotiated is the transferee bound to implement the salary increase? Whilst BET and Whent prior to Werhof indicated that a transferee was so bound the position is less clear now following Werhof.


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On the one hand pointing towards the transferee still being bound, as indicated above, the ECJ referred to the transferee continuing to be bound by the rights and obligations arising out of the collective agreement in force at the time of the transfer. On the other hand, pointing against the transferee being bound, within its judgment the ECJ referred to the static interpretation as “avoiding a situation in which the transferee of a business who is not a party to a collective agreement is bound by future changes to that agreement”. It could, however, of course, be argued that the introduction of a salary increase as a result of the application of the machinery provided for within the collective agreement does not amount to a change to the agreement. In short, therefore, it is not clear going forward whether or not the transferee will, following Werhof, be caught by future salary increases negotiated through a collective agreement which was in place at the time of transfer. In support of the transferee being bound following Werhof is the fact that the salary increase would not result from a new agreement, or arguably even a change to the existing agreement, rather it would result from the application of the agreement. Against the transferee being bound it could be argued that the freedom of association point and the static interpretation point should mean that the transferee is not bound by the results of negotiations to which it is not a party.

Benefits tying to identity of employer Unicorn Consultancy Services Limited v Westbrook [2000] IRLR 80 The remuneration packages of WF Atkins employees included membership of the Group PRP scheme. Employees transferred under TUPE to a new employer the day after the annual profit period for the purposes of the scheme ended. DECISION OF THE EAT

The EAT held that the new contractor was required to pay PRP at the date of transfer. It also indicated that if a profit was earned during the period prior to transfer then it “could transfer”.

Mitie Manage Services Limited v French [2002] IRLR 512 FACTS

Mrs F was employed by Sainsburys. Sainsburys ran an Inland Revenue approved “profit sharing scheme” under which an eligible employee received either a cash payment or an award of shares. The scheme was said to be discretionary although

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Sainsburys’ Directors had exercised a discretion to make awards positively for the last 19 years. Sainsburys transferred part of their undertaking through to PBMS who subsequently transferred their undertaking to Mitie. PBMS also operated a profit sharing scheme but it was not Inland Revenue approved and it took the form of a cash bonus with no share component. Mrs F and others argued that they remained contractually entitled to participate in the Sainsburys’ scheme. A Tribunal had held that, following transfer, employees’ contracts contained a profit sharing clause in exactly the form set out in the original contract. DECISION OF THE EAT

“The entitlement of the transferred employees… is to participation in a scheme of substantial equivalence but one which is free from unjust, absurd or impossible features. In most cases we would expect the transferee company to be able to negotiate a scheme of such equivalence with the transferred employees or their unions. If a negotiated conclusion is impossible then it is appropriate for an application to be made to an Employment Tribunal, probably under Section 11 of the Employment Rights Act, for determination of the relevant particulars of employment.” In its decision the EAT considered the decision in Unicorn Consultancy Services where the EAT had held that, on the facts of that case, the transferee company was bound to pay profit related pay under the scheme of the transferor company. It noted however, that in Unicorn the Judge had made clear that the decision was on the narrow facts before it and had stated that: “the correct approach to the application of TUPE in respect of transferred contracts of employment is to construe and apply the relevant package of rights and obligations of the employees and employer… in the circumstances that exist and the result is not simply a matter of construction of the original contract and related documents… it follows that we should concentrate on the facts of this case… in a different factual situation which gives rise to practical problems… the alternative argument of the employees that the [transferee] company was under an obligation to provide a replacement scheme or make payments equivalent to those “earned” under the [transferor company’s] scheme could be relevant and provide a solution that accords with the underlying purpose of TUPE.”


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The EAT indicated that the comments of the Judge in the Unicorn case “opened a door through which we consider it appropriate to pass.” It also went on to indicate that it believed: “this approach is consistent with the agreed purpose of the Directive and the Regulations… it is no part of that purpose to provide obstacles to industrial reorganisation, provided that workers are properly protected and their rights appropriately safeguarded.” The case therefore had to be remitted to a Tribunal to make appropriate findings as to what amounted to substantial equivalence.

Normal Retirement Age Cross v British Airways Plc [2006] IRLR 804 FACTS

The employees had been employed by British Caledonian who had had a contractual retirement age of 60. They were subsequently transferred to BA which had had a rule for over 30 years whereby flying crew could be retired at 55. Both Claimants entered into a new contract with BA on or shortly after transfer providing for a compulsory retirement age of 55. In due course, many years after transfer, BA required both claimants to retire at 55 in accordance with the rule. The Claimants pursued unfair dismissal proceedings maintaining that they were entitled to continue working until 60. They also claimed that the acceptance of the new term was negated by TUPE. The issue of the Claimant’s normal retirement age was crucial as to whether, on being retired at 55, the Claimants could claim unfair dismissal. Up until 1 October 2006 and the coming into force of the Employment Equality (Age) Regulations 2006 the Employment Rights Act contained provision at S109 excluding the entitlement of an employee to claim unfair dismissal where they have reached “normal retirement age”. The case therefore raised two issues: •

firstly, whether the statutory normal retirement age set by S109 is transferable under TUPE;

•

secondly, assuming normal retirement age was transferable, the extent to which post transfer conduct could lead to a variation of normal retirement age.

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DECISION OF THE COURT OF APPEAL

“an employee’s contractual rights under his pre-transfer contract of employment cannot define or ‘freeze’ his pre-transfer normal retiring age so as to transfer it along with his pre-transfer contractual rights… the normal retiring age at any given time, although often heavily influenced by the contractual provision for retirement in force at that time is, like the contractual term itself, subject to change, pre and post transfer. It is not something that is capable in terms of our national legislation – section 109 of the Act – of being frozen in perpetuity as at the moment of transfer. It is the normal retirement age for those in the position ‘of the employee in question at the time of the dismissal that matters’ for it is that which, by section 109 of the Act, determines whether, at that time, he has a right… not to be unfairly dismissed. Accordingly, however well disposed our court should be to preserving pre-transfer contractual rights for employees corresponding… to the ‘powers, duties and liabilities’ of the transferring employer ‘under or in connection with any such contract,’ if the concept of normal retiring age may vary and, for this purpose is that applicable at the time of dismissal, there is nothing there to transfer or to preserve at the time of transfer.” In short, therefore, normal retirement age, as a statutory concept to be determined on the facts relating to a group of employees, does not transfer under TUPE. RESTRICTIVE COVENANTS

One often very important issue on a TUPE transfer will be the impact of TUPE on restrictive covenants. A number of difficult issues may arise, including: •

a risk of employees seeing a transfer as an opportunity to object to transfer allowing them to walk away from any requirement to provide notice possibly in circumstances where covenants will be difficult to enforce;

•

the extent to which covenants will remain enforceable following transfer by the transferor;

•

how the covenants will apply and be interpreted following transfer, i.e. will they only apply to the business as transferred or may they also, dependent on drafting, apply to the transferee’s pre-existing business?

•

how will a transfer impact on the reasonableness and, therefore, in line with restraint of trade principles, enforceability of covenants?


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•

to what extent can new covenants be agreed to take account of the transfer?

The leading case regarding the impact of TUPE on restrictive covenants is the Court of Appeal decision in the case of Morris Angel v Hollande [1993] IRLR 169. In this case, the Court of Appeal had to consider how, what was Regulation 5 TUPE and is now Regulation 4, applied to a restrictive covenant. The covenant in question was a non-dealing covenant precluding the senior employee from doing business for a period of a year with any client which had done business with the group (defined as the company and its subsidiaries) in the one year prior to termination of the executive’s employment. The transfer was by way of a sale of a business and the senior employee concerned was dismissed immediately following the transfer. At an earlier stage in the litigation, a High Court judge had held that the wording in what was Regulation 5(1) (now 4(1)), regarding the contract having effect “after the transfer as if originally made between the person so employed and the transferee”, was that the service agreement was effectively to be read as if made from the start between the transferee and the employee, rather than the transferor and the employee. Therefore, the covenant was to be read as an agreement by the employee, not during the restricted period of a year to deal with clients who had done business with the transferee over the 12 months prior to termination, rather than a restriction not to do business with clients who had in the 12 months prior to termination done business with the transferor. The Court of Appeal did not agree however. Lord Justice Dillon in giving the leading judgement indicated that: “The more reasonable construction is… that the words “the transfer shall have effect…” are to be read as referring to the transferee as the owner of the undertaking transferred or in respect of the undertaking transferred. The effect therefore is that [the clause] can be enforced by [the transferee] if [the employee] within the year after [termination] does business with persons who in the previous year had done business with the undertaking transferred, of which the plaintiffs are deemed as a result of the transfer retrospectively to have been the owner.” Morris Angel provides authority, therefore, that where, as is often the case, there is provision within particular restrictive covenants whereby clients not to be solicited/dealt with or employees not to be poached, are defined as clients/

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employees with whom an entity has dealt or with whom the particular restrained employee has dealt over a previous period and, on the facts, that previous period includes time pre-transfer then, in relation to that time pre-transfer, the covenant refers to clients/employees of the pre transfer business. Morris Angel does not provide any assistance, however, as to how this type of provision within a covenant will apply in relation to a period post transfer. In particular, if there has been a business transfer and the transferred business is now part of the transferee’s much larger business, possibly in circumstances where the transferee is also involved in a much wider range of business activities, and the particular restriction refers to the individual being restrained in relation to clients of the company, rather than, for example, clients of the company with whom the particular employee has dealt, is the covenant only to be interpreted to cover clients of the transferee who are clients of the narrow part of the transferee’s business equating to what was transferred, or all clients of the transferee’s larger/wider business? Whilst Morris Angel is, therefore, helpful to transferee employers insofar as it does seem to provide clear authority to the effect that covenants and, therefore, obligations on employees imposed by covenants, will transfer under TUPE, in the absence of further reported decisions post Morris Angel, considerable uncertainty remains as to exactly how covenants are to be interpreted following transfer. As a result of these uncertainties, a transferee may understandably wish to amend existing covenants or introduce entirely new covenants. Unfortunately, however, the effectiveness of amending covenants or introducing new covenants as a solution to these problems is likely to be limited. This is because of the difficulties of effecting TUPE connected contractual variations as discussed in Chapter 12 below. In particular, the provision within Regulation 4(4) TUPE that contractual variations will be void if the sole or principal reason for the variation is the transfer itself or a reason connected with the transfer that is not an ETO reason. Whilst there is not as yet any case law authority regarding the application of Regulation 4(4) to the circumstance of a transferring employer seeking to introduce new covenants in this type of scenario, there would firstly seem to be a significant risk that any variation would be regarded as solely or principally by reason of the transfer itself and, therefore, void. Even if not, however, it seems unlikely in the majority of circumstances that an ETO reason would be available given the case law regarding the need for a change in numbers or functions to satisfy the “entailing changes in the workforce” requirement.


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Although Regulation 4(4) TUPE is new, having been introduced within the 2006 Regulations, as discussed in Chapter 12, the issue of employers facing difficulty when seeking to make transfer connected changes is not new. It derives from the European Court of Justice decision in the case of Daddy’s Dancehall as interpreted in a number of UK decisions. In the context of restrictive covenants the practical problems caused as a result of these authorities have been highlighted in two cases. The first case Credit Suisse First Boston v Padiachy [1988] IRLR 504 and the second, Credit Suisse First Boston v Litster [1998] IRLR 700. In Padiachy, prior to Credit Suisse acquiring the UK equities division of Barclays De Zoete Wedd (“BZW”), employees agreed to new service agreements to take affect with Credit Suisse which provided for an improvement in terms and conditions, and also included a non-compete covenant, something the employees had not previously been subject to. When Credit Suisse sought to enforce that covenant through seeking injunctive relief, the High Court refused to provide any relief on the basis that the change in terms and conditions negotiated with the employees was void in line with the Daddy’s Dancehall case, since it occurred by reason of the transfer. In Litster, on very similar facts, the Court of Appeal came to the same result and held that a non-compete restriction in a contract which Credit Suisse agreed with a further senior employee and agreed in the same circumstances was once again unenforceable. This being the case, notwithstanding that the new contract entered into with Credit Suisse was overall more favourable to the employee.

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Chapter 8 Pensions – TUPE Regulation 10(1) – no transfer rights under occupational pension schemes Regulation 10(2) – rights not relating to benefits for old age, invalidity or survivors transfer Provision within the Directive Regulation 10(3) – no constructive dismissal claim as a result of loss/reduction rights under OPS Case law previous provision What pension rights can transfer under TUPE?


Chapter 8 Pensions – TUPE

Regulation 10(1) – no transfer rights under occupational pension schemes Regulation 10 of TUPE contains a caveat to Regulation 4. Regulation 4 provides for the transfer of employment contracts and rights under or in connection with employment contracts on a relevant transfer. Regulation 10 provides that Regulation 4 (and Regulation 5 which relates to the transfer of collective agreements) shall not apply: “to so much of a contract of employment or collective agreement as relates to an occupational pension scheme within the meaning of the Pension Schemes Act 1993” (Regulation 10(1)(a)). Regulation 10 also goes on to provide that Regulations 4 and 5 shall not apply to: “any rights, powers, duties or liabilities under or in connection with any such contract or subsisting by virtue of any such agreement and relating to such a scheme or otherwise arising in connection with that person’s employment and relating to such a scheme” (Regulation 10(1)(b)).

Regulation 10(2) – rights not relating to benefits for old age, invalidity or survivors transfer There is also a caveat to Regulation 10 itself, that being that: “any provisions of an occupational pension scheme which do not relate to benefits for old age, invalidity or survivors” (Regulation 10(2)) are not to be treated as part of an occupational pension scheme for the purposes of Regulation 10(1).

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8 PENSIONS – TUPE

Provision within the Directive The provision within Regulation 10 implements the provision contained within the Directive which provides that: “Paragraphs 1 and 3 [providing for transfer of contracts and rights] shall not apply in relation to employees’ rights to old-age, invalidity or survivors’ benefits under supplementary company or inter-company pension schemes outside the statutory social security schemes in Member States” (Article 3 paragraph 4(a)).

Regulation 10(3) – no constructive dismissal claim as a result of loss/reduction rights under OPS The provisions in Regulations 10(1) and (2) are identical to the provisions which were contained within Regulation 7(1) and 7(2) of the 1981 Regulations. Regulation 10 also contains however, an entirely new provision at Regulation 10(3). Regulation 10(3) now makes express provision that an employee whose contract has transferred is not entitled to pursue a claim against the transferor for breach of contract, or constructive unfair dismissal, arising out of any loss of pension rights following on from the transfer. The principal concern for a transferor in relation to the transferee’s provision for pension going forward has been the possibility that, prior to transfer, an employee might be able to pursue a claim against the transferor on the basis that, because their pension rights will reduce on transfer, they are entitled to resign and regard themselves as constructively dismissed by the transferor. In particular, either on the basis that, in agreeing to a transfer without ensuring that employees will receive appropriate pension provision, the transferor has breached the implied term of trust and confidence or, alternatively, that in some way employees are entitled to rely on the “anticipatory breach” of the transferee. Regulation 10(3) however refers to “an employee whose contract of employment is transferred,” and to a claim being pursued as a result of a loss or reduction in rights “in consequence of the transfer”. It is clear, therefore, that Regulation 10(3) only precludes claims against the transferor pursued following transfer and not claims in advance of transfer. In relation to the possibility of claims following transfer, arguably there was little risk of a claim in any event prior to New TUPE, following on from the


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decision of the High Court in Adams, as referred to above. Arguably, therefore, Regulation 10(3) does not achieve a lot. In the Consultation Paper, when referring to the then proposed Regulation 10(3), there was reference to a long standing difference of views between public sector and private sector lawyers. In short, the view of private sector lawyers has been that the risk of claims post transfer, certainly following Adams, was very limited. Nonetheless, insofar as there was any risk of such claims prior to New TUPE, post transfer there no longer is. In relation to pre-transfer claims, Regulation 10(3) would not preclude these although it is notable that, as matters stand, there is no authority that such claims can be successfully pursued and, arguably, it should be more difficult to succeed in such claims given the introduction through the Pensions Act 2004 of minimum occupational pension entitlement following transfer (see Chapter 9). In short, following this legislation, a transferee will need to make minimum provision post transfer. It would seem difficult to argue a breach where the transferee will be making such provision in line with statute.

Case law previous provision The exclusion of occupational pension rights as provided for in Regulation 10 and previously Regulation 7 of the 1981 Regulations, clearly amounts to a major gap in the protection of transferring employees on a relevant transfer. Unsurprisingly, therefore, there were a number of UK cases where employees/their representatives sought to argue either that the provisions of Regulation 7 were inconsistent with the Directive (in particular its purpose of protecting employee rights) and/or that some continuing obligation regarding pension rights must, nonetheless, transfer on a relevant transfer. This gap was, moreover, much more significant prior to the Pensions Act 2004 (as discussed in Chapter 9). The leading cases are as follows.

Warrener v Walden (June 1993) DECISION OF THE EAT

The EAT held that occupational pension schemes are excluded from transfer both by the wording of the Directive and by TUPE. On this basis the earlier Tribunal decisions in the case of Warrener and also in the case of Perry v Intec were effectively overturned.

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8 PENSIONS – TUPE

Note: with regard to consultation, the EAT stated: “We would like to... stress that pension rights under an occupational pension scheme, whether arising from the contract of employment or the employment relationship will often form a valuable part of the employee’s remuneration. In consequence, where a transfer takes place, good industrial relations require that both transferor and transferee, when consulting and informing employees, should ensure that the pension position is clearly explained to each employee. This should cover both the existing situation and any proposed future pension arrangements.”

Adams v Lancashire County Council [1996] IRLR 104 In this case it was argued that TUPE does not correctly implement Article 3 of the Directive and that transferring employees should be entitled to comparable pensions with the transferee. DECISION HIGH COURT

The High Court looked in detail at the wording of Article 3 of the Directive. It held as follows: i)

Limb A of Article 3 (3) of the Directive (now article 3 (4) (a))excepts all pension rights from the operation of Article 3 (1). Limb B requires Member States to protect only accrued pension rights. This does create a gap in full protection of all rights to deferred pay, but the Council must have intended this.

ii)

Regulation 7 of TUPE (now regulation 10) excepts all pension rights. In doing so it correctly implements the Directive.

iii)

The meaning of the Directive was sufficiently clear to make it inappropriate to request a preliminary ruling from the ECJ.

Note that it had also been argued in the case that if there was no transfer to the transferee of the employer’s obligations in respect of pension rights to accrue during future service, then that obligation must remain with the transferor. The judge indicated that: “That cannot in my judgment be the effect, explicit or implicit, of Article 3 (1). It is concerned with the transfer of the old employer’s rights and obligations not... with the artificial prolongation of the old employer’s obligations. If [transferor] is under a continuing obligation to the [employees] in respect of pensions to be earned in the course of future employment by another employer, that


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obligation must arise not from anything in the Directive or in TUPE, but from the terms of the employment contract itself. It has not been suggested to me that there has been any breach of the contractual obligation of that sort (and the existence of such an obligation would, I think, be very unusual).” COURT OF APPEAL

The Court of Appeal upheld the decision of the High Court.

What pension rights can transfer under TUPE? There are a number of caveats to the starting proposition that pension rights do not transfer under TUPE. The wording of Regulation 10 is very specific referring to: “an occupational pension scheme within the meaning of the Pension Schemes Act 1993.” Whilst “occupational pension scheme” is defined quite widely within the Pension Schemes Act, Regulation 10 has to be interpreted purposively to conform with Article 3 of the Directive, which contains the narrower definition of “supplementary company or inter company schemes”. Moreover, often in practice, a transferee may be required to make pension provision by the transferor as a condition of the contract and the Pensions Act 2004 now requires minimum pension provision. Accordingly, there are a number of circumstances where rights may transfer or where, notwithstanding Regulation 10, in practice a transferee will be required to make pension provision.

Contractual right to contributions to a personal pension scheme On the basis that a personal pension scheme is not an occupational pension scheme, within the meaning of the Pension Schemes Act 1993, any such right will transfer.

Group personal pension schemes A group personal pension scheme is a scheme whereby individual employees have personal pensions with an independent financial services company, albeit under the umbrella of their employer.

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8 PENSIONS – TUPE

Whilst the position has not been settled by case law, the orthodox view of pension lawyers is that group personal pension schemes will not amount to an occupational pension scheme for the purposes of Regulation 10 of TUPE, where Regulation 10 is interpreted purposively in line with Article 3 of the Directive. Therefore rights relating to such schemes will transfer.

The Regulation 10 Caveat – provisions of an occupational pension scheme not relating to benefits for old age, invalidity or survivors As discussed above, Regulation 10 itself contains a caveat, this caveat being contained in Regulation 10(2) (previously Regulation 7(2) of the 1981 Regulations) which provides that the exclusion of occupational pension schemes, as set out within Regulation 10(1) (previously Regulation 7(1) of the 1981 Regulations), does not apply to “any provisions of an occupational pension scheme which did not relate to benefits for old age, invalidity or survivors.” This particular provision has led to much litigation, in particular the following cases.

Franklin v BPS Public Sector Ltd [1999] IRLR 212 Employees who had been employed within the NHS were transferred to BPS and subsequently made redundant. S45 and S46 Whitley provide for redundancy payments and pension enhancement on redundancy. The orthodox view had been that these sort of rights would come within Regulation 7(2) (now 10(2)) and would not, therefore, be caught by the Regulation 7 (now 10) exclusion, and so would transfer. DECISION OF THE EAT

S46 Whitley “relates to an occupational pension scheme” within 7(1) (now 10(1)). Regulation 7(2) (now 10(2)) does not exclude as: “Provisions of a pension scheme do not… cease to relate to benefits for old age merely because the employee has taken early retirement… although the benefits falling due to redundant employees were triggered by redundancy, the benefits retained their character as retirement benefits although accelerated and enhanced.” Therefore it is caught by the Regulation 7 (now 10) exclusion.


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Beckman v Dynamco [2002] IRLR 578 FACTS

Mrs B was a former employee of the NHS. The business was transferred to Dynamco. Mrs B claimed an early retirement pension and other benefits. The case concerned Article 3(3) (now Article 3 (4)) of the Directive (the occupational pensions exclusion). This provided as follows: “Paragraphs 1 and 2 [transfer of rights and obligations] shall not cover employees’ rights to old age, invalidity or survivor’s benefits under supplementary company or inter-company pension schemes outside the statutory social security schemes in member states.” The relevant provision for carve out from exclusion within TUPE is contained in Regulation 7(2) (now 10(2)) which provided as follows: “For the purposes of paragraph (1) above any provisions of an occupational pension scheme which do not relate to benefits for old age, invalidity or survivors shall be treated as not being part of the scheme.” For the purposes of the case, it was accepted that the NHS scheme was an occupational scheme as defined within Regulation 7(1) of TUPE. The case concerned in particular Section 45 and Section 46 of the Whitley Council Conditions of Service. Section 45 provides for redundancy payments. Section 46 provides for early retirement with immediate payment of retirement pension and compensation in circumstances including redundancy. In particular, as implemented within the NHS, an early retirement pension, a lump sum on retirement, an annual allowance and a lump sum compensation payment. Following her dismissal for redundancy Mrs B received a redundancy payment calculated in accordance with Section 45. She did not receive however, the payments provided for under Section 46. The UK High Court referred a question to the ECJ as to whether or not an employee’s entitlement to early pension and a retirement lump sum and/or to the annual allowance and lump sum compensation was a right to an old age, invalidity or survivors benefit within the meaning of the occupational pension scheme exclusion in Article 3(3). DECISION OF THE ECJ

“Given the general objective of safeguarding the rights of employees in the event of transfers of undertakings pursued by the Directive [when it provides

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for the transfer of rights and obligations] the exception to that rule provided for by Article 3(3) [the occupational pensions exclusion] must be interpreted strictly. That exception can therefore apply only to the benefits listed exhaustively in that provision and they must be construed in a narrow sense. In that connection, it is only benefits paid from the time when an employee reaches the end of his normal working life as laid down by the general structure of the pension scheme in question, and not benefits paid in circumstances such as those in the main proceedings (dismissal for redundancy) that can be classified as old age benefits, even if they are calculated by reference to the rules for calculating normal pension benefits. Therefore… early retirement benefits and benefits intended to enhance the conditions of such retirement, paid in the event of dismissal to employees who have reached a certain age, such as the benefits at issue in the main proceedings, are not old age, invalidity or survivors benefits under supplementary company or inter-company pension schemes within the meaning of Article 3(3) of the Directive” [i.e. are not within the occupational pensions exclusion and, therefore, transfer]. PRACTICAL EFFECT

Following Beckmann transferees must obtain specific pensions advice where a transferor has provided occupational pensions benefits, since a requirement to provide early retirement benefits is likely to significantly increase the cost of the taking on of employees under TUPE.

Martin v South Bank University [2004] IRLR 74 FACTS

The applicants had been employed within the NHS on Whitley terms and conditions including Sections 45 and 46. They were transferred to the employment of SBU following a move of nursing education from the NHS into the higher education sector. They wished to take early retirement on terms including the Whitley terms. ISSUES

Did these entitlements (ie to early pension and lump sum) transfer or were they caught by the Article 3(3) (now Article 3 (4)) exclusion?


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Note: this is effectively exactly the same issue as in Beckmann, except in Beckmann Sections 45 and 46 payments came into play on dismissal rather than early retirement. Could an employee agree to a change in their pension entitlements? DECISION OF THE ECJ

“In the light of… Beckmann… there is no reason to treat benefits applied for upon dismissal by reason of redundancy any differently from those applied for upon early retirement agreed between the employer and the employee which does not correspond to the departure of an employee at the end of his or her normal working life as laid down by the general structure of the pension scheme… Early retirement benefits intended to enhance the conditions of such retirement paid in the event of early retirement arising by agreement between the employer and the employee to employees who have reached a certain age… are not old age, invalidity or survivor’s benefits under the supplementary company or inter-company pension schemes within the meaning of Article 3(3) of the Directive [and therefore transfer under Article 3(1)].” As to the second issue the Court confirmed that Daddy’s Dancehall applied to preclude even consensual variation (see Chapter 12).

Beckmann following new TUPE In relation to the major issue of Beckmann, the Consultation Paper regarding New TUPE prior to its finalisation indicated: “the Government has considered whether or not any changes are required in light of the ECJ’s judgment in the Beckmann and Martin cases, but has concluded not.” Accordingly, no specific provision to deal with the Beckmann issue was contained in the 2006 Regulations. This was a disappointment for many contractors who regularly deal with TUPE transfers and for whom the Beckmann decision poses real practical problems.

Transfers from the public sector When transferring staff from the public sector, public sector employers are required to comply with the January 2000 Cabinet Office Statement of Practice on “Staff Transfers in the Public Sector”.

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Annexed to this is HM Treasury’s statement of practice, Staff Transfers from Central Government: A Fair Deal for Staff Pensions. In practice this requires a transferee to offer “broadly comparable” provision, this being assessed by the Government Actuary’s Department (GAD). With regard to local Government employees provision has been made where, following transfer, employees can either continue their membership of the Local Government Pension Scheme (“LGPS”) or transfer to a new contractor’s occupational scheme provided that scheme meets stringent requirements (see the Local Government Pension Scheme (Amendment etc) Regulations 1999, SI 1999/3438).


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Chapter 9 Pensions – the Pensions Act 2004 The position prior to the Pensions Act 2004 The Pensions Act 2004


Chapter 9 Pensions – the Pensions Act 2004

The position prior to the Pensions Act 2004 As discussed above, rights under occupational pension schemes do not transfer across under TUPE. As a result, a transferring employee effectively loses the right to continuing active membership of an occupational pension scheme. In practice, the Government’s policy with regard to transfers from the public sector has been for some time to require a transferee to offer “broadly comparable” occupational pension provision. This being assessed according to established criteria set by the Government Actuaries Department (“GAD”). The Government’s practice in this regard is confirmed in the document Staff Transfers from Central Government: A Fair Deal for Staff Pensions. Details of the approach taken by GAD is set out in a statement of practice entitled Assessment of Broad Comparability of Pension Rights. In the private sector, however, whilst in certain circumstances a transferor may seek to protect transferring employees by making it a condition of transfer that the transferee provides broadly comparable provision or some compensation for loss of pension, employees have had no rights. The Government has long set forward the view that where a transferor does not require a transferee to make broadly comparable provision after a transfer this would present a legal risk for the transferor (see Chapter 8, Regulation 10(3) – no constructive dismissal claim as a result of loss/reduction rights under OPS). The Government has, therefore, argued that this risk has required transferor employers to ensure that transferees make appropriate provision. In practice, however, no such claims have been brought and the orthodox view within the private sector has been that the risk of such claims is slight. As a result of the current position, therefore, up until the Pensions Act 2004, private sector employees may have found themselves in a significantly worse position after transfer than they were before.

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9 PENSIONS – THE PENSIONS ACT 2004

The Pensions Act 2004 The relevant provisions are contained within Section 257 and Section 258 of the Pensions Act 2004, with further provision being contained within the Transfer of Employment (Pension Protection) Regulations 2005 (“the Pension Protection Regulations”). The provision that is made is as follows.

Conditions for pension protection (Section 257) The section applies where there is a relevant transfer within TUPE and where an employee transfers from the transferor to the transferee as a result. The detailed requirements for protection are that there is an occupational pension scheme (“the Scheme”) in relation to which the transferor is the employer and one of the following applies. •

The employee is an active member of the Scheme and, if any of the benefits that may be provided under the Scheme are money purchase benefits, the transferor is either required to make contributions to the Scheme in relation to the employee or, if not required, has in practice made contributions.

•

The employee is not an active member of the Scheme but is eligible to be an active member and, if any of the benefits that may be provided under the Scheme are money purchase benefits, the transferor would have been required to make contributions to the Scheme in respect of the employee if the employee had been an active member of it.

•

The employee is not yet an active member of the Scheme nor eligible to be but would be if he had been employed by the transferor for a longer period and, if any of the benefits that may be provided are money purchase benefits, the transferor would have been required to make contributions to the Scheme in respect of the employee if the employee had been an active member.

With regard to the requirement that there was, prior to transfer, an occupational pension scheme in relation to which the transferor is the employer, for these purposes, “transferor” is defined to include any associate of the transferor which should, therefore, cover the circumstance where the pension scheme is provided through another group company.


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There is an anti-avoidance provision at 257(5) which provides that the requirement of there having been an occupational pension scheme provided by the transferor will still be met in a case where the requirement would have been satisfied, “but for any action taken by the transferor by reason of the transfer”.

Form of protection (Section 258 and Pension Protection Regulations) Where the conditions for protection are met it is a condition of the transferred employee’s contract of employment with the transferee that: •

the transferee secures that, as from either the time of transfer or, in the case where the transferring employee has not yet met a length of service eligibility requirement with the transferor, the time at which the employee would have met that requirement (“the Relevant Time”), the employee is, or is eligible to be, an active member of an occupational pension scheme in relation to which the transferee is the employer; and

•

where the Scheme is a money purchase scheme, as from the Relevant Time, the transferee makes “relevant contributions” to the Scheme in respect of the employee or, if the employee is not an active member of the Scheme but is eligible to be such a member, the transferee would be required under the Scheme to make such contributions if the employee were an active member;

•

in a case where the Scheme is not a money purchase scheme as from the Relevant Time the Scheme complies with the “statutory standard”; or

•

from the Relevant Time the transferee makes relevant contributions to a stakeholder scheme of which the employee is a member.

Meaning of “relevant contributions”/compliance with “statutory standard” This is set out within the Pension Protection Regulations. Where the scheme is not a money purchase scheme the Scheme will meet the requisite requirements if it provides either: •

for members to be entitled to benefits the value of which equals or exceeds 6% of pensionable pay for each year of employment, together with the total amount of any contributions made by them, and, where members are required to make contributions to the Scheme, for them

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to contribute at a rate which does not exceed 6% of their pensionable pay; or •

for the transferee to make relevant contributions to the Scheme on behalf of each employee of his who is an active member of it.

A definition of “pensionable pay” is provided, that being as follows: “that part of the remuneration payable to a member of a scheme by reference to which the amount of contributions and benefits are determined under the rules of the scheme.” Where the scheme is a money purchase scheme, a stakeholder pension scheme or a scheme other than a money purchase scheme where the requirement is met by making relevant contributions on behalf of each member: •

contributions must be made in respect of each period for which the employee is paid remuneration, provided that the employee also contributes to the Scheme in respect of that period; and

•

the amount contributed in respect of each such period must: –

in a case where the employee’s contribution in respect of that period is less than 6% of the remuneration paid to him, be an amount at least equal to the amount of the employee’s contribution;

–

in a case where the employee’s contribution in respect of that period equals or exceeds 6% of the remuneration paid to him, an amount at least equal to 6% of that remuneration.

It is made clear that for these purposes “remuneration” only includes basic pay. Bonuses, commission, overtime and similar payments are to be disregarded.

Contracting out of requirements There is a provision which would allow a transferee following transfer to reach agreement with an employee to vary the contractual term; i.e. remove the entitlement to pension going forward. This is contained in Section 258(6), under which any agreement must be reached after the time of transfer.


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Chapter 10 Information and consultation under TUPE Overview The new obligation to notify of employee liability information Source of the obligations to inform and consult The obligation to provide specified categories of information The obligation to consult Sanctions for non-compliance with obligations to inform and consult Will liability for failure to inform and consult transfer across to the transferee? Special circumstances defence The decision in Hagen v ICI [2002] IRLR 31


Chapter 10 Information and consultation under TUPE

Overview One particularly important practical consequence of the application of TUPE is the requirement on an employer to inform and consult staff. This needs to be considered at an early stage because these requirements are likely to impact upon timing. As is the case for all aspects of the law relating to TUPE, there have been significant developments regarding the obligations to inform and consult over recent years. In particular. •

These obligations now apply to all employers regardless of whether the employer recognises a trade union. Previously the obligation had only arisen where an employer recognised the trade union. This changed following the European Commission challenge to the then TUPE Regulations in the case of EC Commission v UK [1994] IRLR 392 and the subsequent amendment to TUPE made by the Collective Redundancies and Transfer of Undertakings (Protection of Employment) (Amendment) Regulations 1995 (“the 1995 Regulations”).

•

The maximum sanction for failing to comply has significantly increased and, following the Collective Redundancies and Transfer of Undertakings (Protection of Employment) (Amendment) Regulations 1999 (“the 1999 Regulations”), stands at 13 weeks’ actual pay with no provision for set off.

•

There is now detail regarding the requirements for election of employee representatives. This having been added as a new Regulation 10(A) TUPE by virtue of the 1999 Regulations.

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1 0 I N F O R M AT I O N A N D C O N S U LTAT I O N U N D E R T U P E

•

The landmark case of Hagen v ICI has made it clear that, in addition to obligations under TUPE regarding informing and consulting, employers may also be liable in both contract and tort for negligently providing misleading information during the information and consultation process.

•

The 2006 Regulations introduced a new obligation on a transferor to provide employee liability information to a transferee in advance of a transfer.

•

The 2006 Regulations effectively reversed the decision in Alamo v Tucker [2003] IRLR 266 by making the transferor liable for a failure to inform and consult with transferring employees, albeit also making the transferee jointly and severally liable.

The new obligation to notify of employee liability information Background The background to this new provision relates to a real practical problem which can arise on a second stage contracting out. The problem is that the client that is re-tendering in relation to the service needs detailed information from the first contractor regarding employees then assigned to the service in order to allow the various contractors tendering for the service to accurately price their bids, taking account of the employee costs they will inherit as a result of TUPE. Prior to the 2006 Regulations there was, however, no freestanding obligation within TUPE on the existing contractor to provide this information. Further, in practice, the first contractor may have been reluctant to play ball and provide the information in circumstances where it had been informed that it was about to lose the contract and also, where complying with the request, could require it to provide sensitive information about the terms and conditions on which it employs its staff to its competitors. The practical solution to this problem has always been for the client to take account of this issue in the contract entered into with the first contractor. In particular, to include express provisions requiring the first contractor to provide necessary TUPE information together with additional provisions designed to preclude any attempt to stymie a proper transfer. For example, precluding transfer of employees in and out of the service (addressing the problem of “lemon


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dropping;” transferring less able/poor performing staff to the service), changes to terms and conditions without agreement, etc. It was always likely that the 2006 Regulations would contain some provision to address this, given that it was the UK Government that pressed for inclusion of this particular provision within the Amending Directive.

Provisions within TUPE The provisions are contained within Regulation 11, which sets out the detail of the obligations and Regulation 12 which sets out details of the remedy for failure to comply.

What information has to be provided? “Employee liability information” is defined within Regulation 11(2) as meaning: •

“the identity and age of the employee;

•

those particulars of employment that an employer is obliged to give to an employee pursuant to section 1 of the 1996 Act;

•

information of any: –

disciplinary procedure taken against an employee;

–

grievance procedure taken by an employee

within the previous two years, in circumstances where the [statutory dispute procedures] apply; •

information of any court or Tribunal case, claim or action: –

brought by an employee against the transferor, within the previous two years;

–

that the transferor has reasonable grounds to believe that an employee may bring against the transferee, arising out of the employee’s employment with the transferor;

•

information of any collective agreement which will have effect after the transfer, in its application in relation to the employee.”

The transferor is obliged to provide employee liability information in relation to transferring employees and those who would have transferred but for being dismissed in circumstances where the sole or principal reason was the transfer itself or a transfer connected reason, other than an ETO reason. This is to cover Litster dismissals (discussed in Chapter 13, Litster principle – Regulation 4(3)), liability for which will pass to the transferee.

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When must the information be provided? Regulation 11(6) specifies that the information must be provided: “not less than fourteen days before the relevant transfer or, if special circumstances make this not reasonably practicable, as soon as reasonably practicable thereafter.”

To whom/how should the information be provided? The information is to be provided in writing or by making it available “in a readily accessible form” to “the transferee” (Regulation 11 (1)). The Regulations also specify, however, that the information may be provided “indirectly, through a third party” (Regulation 11 (7)). This would seem to envisage a circumstance where, on a change of contractor, a first contractor provides to a client which then provides to those tendering. The Regulations also provide that the employee information may be provided in more than one instalment (Regulation 11(7)).

Updating employee liability information There is an express obligation upon the transferor to notify the transferee in writing of any change in the employee liability information (Regulation 11 (5)).

Remedy for failure to comply This is provided for within Regulation 12. In brief, the remedy is provided to the transferee which has a right to pursue a complaint to an Employment Tribunal that the transferor has failed to comply with the obligation the complaint must be submitted within a 3 month period following the date of transfer, or within such further period as the Tribunal considers reasonable when the Tribunal is satisfied it was not reasonably practicable for the complaint to be presented within the 3 month period. When an Employment Tribunal finds the complaint well founded it is to make a declaration to that effect and it: “may make an award of compensation to be paid by the transferor to the transferee.”


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The amount of that financial penalty is to be such an amount as the Employment Tribunal “considers just and equitable in all the circumstances having particular regard to: •

any loss sustained by the transferee which is attributable to the matters complained of; and

•

the terms of any contract between the transferor and the transferee relating to the transferor under which the transferor may be liable to pay any sum to the transferee in respect of a failure to notify the transferee of employee liability information.” (Regulation 12 (4)).

It is made clear that common law rules regarding mitigation of loss apply. Further, Regulation 12(5) states that, subject to mitigation: “the amount of any compensation awarded… shall be not less than £500 per employee in respect of whom the transferor has failed to comply with [part of the obligation to notify] unless the Tribunal considers it just and equitable in all the circumstances to award a lesser sum .”

Will this new obligation solve the practical problems on a re-tendering? A major issue here is exactly what the new provisions are intended to achieve. The principal current problem, as already highlighted, relates to obtaining information from an existing contractor to be inputted into the tendering process. This, however, requires that information is provided at an early stage, more often than not where the eventual transferee has not yet been identified, and also requires provision of information to a number of parties; ie all those tendering. The principal problem with the proposed new provision, therefore, comes out of the requirement that the information is provided not less than fourteen days before “the relevant transfer”, and is provided to “the transferee”. No doubt the practical problem for the DTI when drafting this provision is that, in reality, the need is for a provision that assists the tendering process for the benefit of the client and those tendering. This does not, however, sit with the purpose of the Directive; that being to protect employee rights on transfer, not to assist a client in tendering/ensure a level playing field for tenderers, etc. The provision as contained within Regulation 11 only requires provision of information at a later stage, after the initial tendering process, to the successful tenderer, once it has been identified. It is arguably consistent with the purpose of the Directive, with a view to ensuring that the actual transferee has knowledge of employees’

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terms and conditions and, therefore, can give effect to them. It does not, however, address the real practical problem faced on second stage contracting out.

Source of the obligations to inform and consult The obligations regarding informing and consulting on a TUPE transfer stem from Article 7 of the Directive and are provided for within Regulations 13, 14 and 15 TUPE.

The obligation to provide specified categories of information What information has to be provided? Under Regulation 13(2) an employer is required to provide “appropriate representatives” of “affected employees” with the following information: •

The fact that the transfer is to take place, the date or proposed date of the transfer and the reasons for it. Note: the case of Bifu v Barclays Bank [1987] ICR 495 – the reference to, “fact of transfer” does not mean that an employer is entitled to wait to provide information until the transfer is almost definite. The obligation will apply in respect of a proposed transfer.

•

The legal, economic and social implications of the transfer for any affected employees. Note: the case of IPCS v Secretary of State for Defence [1987] IRLR 373 in which Mr Justice Millett indicates that he took “legal, economic and social implications” to mean “”consequences” of the transfer for the employees.”

•

Measures which the employer envisages taking in connection with the transfer in relation to affected employees or, if no measures are envisaged, that fact.


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Note: dicta of Mr Justice Millett in IPCS: “measures” is a word of the widest import, and includes any action, step or arrangement while “envisages” simply means “visualises” or “foresees”. Despite the width of these words, it is clear that manpower projections are not “measures” at all; though positive steps to achieve planned reductions in manpower levels otherwise than through natural wastage would be.” •

Where the employer is the transferor, the measures which the transferee envisages taking in connection with the transferring employees or, if the transferee envisages no measures, that fact. Note: dicta from Mr Justice Millett in IPCS: [Counsel for the transferor] “submitted that [the reference to the transferee envisaging measures it will take] excludes contingencies, and confines “measures” to those which are inevitable or at least non-negotiable. I reject that submission, which ignores the element of uncertainty involved in the choice of the word “envisages” rather than “intends”. But I accept that the use of the word “will” rather than “may” is apt to exclude mere hopes or possibilities… it is not enough that there should be some possibility in contemplation; the “transferee” must have formulated some definite plan or proposal which it has in mind to implement.” “[The transferee] is not placed under any obligation to envisage any measures which it will take in connection with the transfer and sub-section [(2)(d)] expressly contemplates that it may not. Nor is the [transferee] placed under any obligation to envisage any measures at any particular time… Moreover, if the [transferee] enters into discussions with the unions, it may well wish to develop or change the measures it has previously envisaged. In such a developing situation no criticism can be made of the [transferee] if, for reasons beyond its control, particular measures are not envisaged until shortly before the transfer, when there is insufficient time for effective consultations to take place.”

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This therefore meant that the obligation to provide details of measures envisaged by the transferee: “cannot sensibly be read as meaning “as soon as measures are envisaged and in any event long enough before the transfer” but rather “as soon as measures are envisaged and if possible long enough before the transfer”.”

When must information be provided? Under Regulation 13(2) the obligation is to provide the information: “long enough before a relevant transfer” to enable consultation to take place. Interestingly the relevant wording within Article 6 of the Directive provides that the information should be provided: “in good time, before the transfer is carried out.” Note: unlike the position with regard to collective redundancies (set out within TULCRA, Section 188 which sets out set periods of at least 30 or at least 90 days consultation prior to collective redundancies being carried out) no set time limits are provided for within TUPE.

To whom must information be provided? Information must be provided to and consultation must take place with “appropriate representatives”. Following the 1999 Regulations, where an employer recognises a trade union in respect of affected employees, information must be provided to, and any consultation take place, with trade union representatives (Regulation (13(3)(a)). In the absence of a recognised trade union or the union not being recognised in respect of all the affected employees, an employer must, at its choice, either: 1)

inform and consult with employee representatives appointed or elected by the affected employees for other purposes. This is provided that: “having regard to the purposes for and method by which they were appointed or elected”; those representatives, have authority from the affected employees to receive information and to be consulted with about the transfer on the affected employees’ behalf (Regulation 13(3)(b); or


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2)

inform and consult with employee representatives specifically elected by the affected employees for the purposes of Regulation 13 (Regulation 13(3)(b)(ii)).

With regard to point (1) above, note the DTI guidance which indicates that it “needs to be appropriate to consult” the relevant body. It goes on to indicate that: “it would not for example be sufficient to inform and consult a committee specifically established to consider the operation of a staff canteen about a transfer affecting say, sales staff, but it may well be appropriate to inform and consult a fairly elected or appointed committee of employees, such as a works council, that is regularly informed or consulted more generally about the business’s financial position and personnel matters.”

Election of employee representatives where there are none or insufficient in place In the event that there are no trade union representatives, or that there are not trade union representatives recognised in respect of all the affected employees, and that there are no other appropriate existing employee representatives of all of the affected employees, then an employer will have to take steps to have employee representatives elected for the specific purposes of Regulation 13. In these circumstances, an employer is required to issue an invitation to affected employees to elect representatives long enough before the time when the employer is required to provide information under Regulation 13 in order to allow representatives to have been elected. The particular requirements for the election of employee representatives (set out in Regulation 14 (1)) are as follows: •

the employer must make such arrangements as are reasonably practicable to ensure that the election is fair;

•

the employer must determine the number of representatives to be elected so that “there are sufficient representatives to represent the interests of all the affected employees, taking into account the number and classes of those employees”;

•

the employer must determine whether the affected employees should be represented either by representatives of all the affected employees or by representatives of particular classes of those employees;

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•

before the election the employer must determine the term of office of employee representatives and that term must be sufficient to enable information to be given and consultation under Regulation 13 to take place;

•

candidates for election as employee representatives must be affected employees on the date of the election;

•

an employer is not allowed to unreasonably exclude any affected employee from standing for election;

•

all affected employees on the date of election are entitled to vote for employee representatives;

•

employees entitled to vote may vote for as many candidates as there are representatives to be elected to represent them or, if there are to be representatives for particular classes of employees, may vote for as many candidates as there are representatives to be elected to represent their particular class of employee;

•

the election must be conducted so as to secure that so far as is reasonably practicable, those voting do so in secret;

•

the election must be conducted so as to secure that the votes given at the election are accurately counted.

The EAT in the decision of Howard v Millrise [2005] IRLR 84 confirmed that the effect of Regulation 10 of the 1981 Regulations (now Regulation 13) where there are no trade unions or representatives in place, is to require the employer to invite employees to elect representatives. If employees fail to elect within a reasonable time following invitation, then the employer must provide each individual affected employee with the required TUPE information.

Particular points to note Wide meaning of “affected employees” When considering the obligations within TUPE regarding informing and consulting it is particularly important to remember that these obligations will not necessarily be confined to obligations in relation to transferring employees. Regulation 13(1) provides that references to “affected employees”: “are to any employees of the transferor or the transferee (whether or not assigned to the organised grouping of resources or employees that is the subject of a relevant transfer) who may be affected by the transfer or may be affected by measures taken in connection with it.”


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Affected employees, therefore, include existing employees of the transferor other than the transferring employees and existing employees of the transferee who may be affected by the transfer. Content of information to be provided – must information to be provided include information on which an employer’s judgements have been based? (For example information regarding the reasons for a transfer) Note: dicta of Mr Justice Millett in the case if IPCS v Secretary of State for Defence [1987] IRLR 373: “insofar as any information is not factual but is based upon appraisal and judgment, as in the case of manpower forecasts for example, it does not include the calculations and assumptions on which the appraisal or judgment is based nor are the unions entitled to demand such calculations and assumptions in order to challenge their validity.” Will an employer have to disclose particular documents requested by employee representatives, for example tender documents? Again, relevant dicta on this issue comes from the IPCS case. On this issue Mr Justice Millett indicated that: “the unions are entitled to information, but that is all. They are not entitled to dictate the form in which the information is provided. The [transferor] took the view, as he was entitled to do, that it was neither necessary nor appropriate for the unions to see the bids or contracts. He was clearly entitled to extract the required information from the documents… and to supply the information while withholding the documents themselves.”

The obligation to consult When does this obligation arise? Regulation 13(6) provides that: “an employer of an affected employee who envisages that he will take measures in relation to an affected employee, in connection with the relevant transfer, shall consult...”

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What does consultation actually entail? TUPE makes clear that consultation must be: “with a view to seeking [appropriate representative’s] agreement to the intended measures.” (Regulation (13(6)). Regulation 13(7) also goes on to provide that, in the course of consultation, an employer shall consider any representations made by the appropriate representatives, reply to those representations and, if it wishes to reject any of those representations, state its reasons for so doing. There is also of course an issue as to exactly what is meant by “consultation”.

Particular points regarding consultation Is the obligation on an employer only to consult regarding measures and not regarding other information required to be provided by Regulation 10 or issues arising out of it? Dicta from the IPCS case seems to suggest that strictly the requirement is only to consult regarding measures and not regarding other information provided. Mr Justice Millett indicated that: “Parliament can hardly have intended to compel the employer… to consult the unions on the desirability of the transfer itself or the sufficiency of the reasons for it. These are matters of business policy for the transferring employer to decide, and the unions cannot expect to participate in the decision.” As to how to reconcile the requirement, previously Regulation 10(2) of the 1981 Regulations now 13(2), to provide information long enough before transfer to enable consultation to take place (this obligation covering all information whilst the obligation to consult is only in respect of measures) Mr Justice Millett indicated that: “The reconciliation is this. The consultations referred to in the opening words of [Regulation 10(2))] are voluntary consultations, which the unions may seek on any topic once they have the requisite information, but which the transferring employer is not compelled to grant if he chooses not to do so. The only consultations which he is obliged by law to enter into are those referred to in [(2)(d)].


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Who if anyone is required to consult with the transferring employees regarding measures envisaged by the transferee? Strictly, under TUPE as currently drafted, it is not clear that there is an obligation on any party. There is no obligation on the transferor as the requirement under Regulation 13(6) to consult only arises where an employer of any affected employees envisages that “he will, take measures in relation to an affected employee, in connection with the relevant transfer.” Here the transferor is not envisaging measures that it will take, rather it will have informed representatives regarding measures which the transferee envisages taking. It seems there may also strictly be no obligation on the transferee. This is because the transferee is not, prior to the transfer, the employer of the transferring employees. According to the strict wording of 13(6) it is not clear that the transferee is: “an employer of an affected employees who envisages that he will take measures in relation to an affected employee.” However, it is noteworthy that there are some minor differences in the wording of what was Regulation 10(5) of the 1981 Regulations and is now Regulation 13(6). Regulation 10(5) had referred to: “an employer of any affected employees envisaging that he will, in connection with the transfer, be taking measures in relation to any such employees” (words in bold author’s emphasis). This clearly seemed to impose the obligation only on an employer of affected employees in relation to whom it envisaged measures. It may be that the altered wording in Regulation 13(6), and in particular reference to taking measures in relation to “an affected employee” rather than “any such employee”, is intended to alter the position so that the obligation is on any employer of affected employees envisaging measures, in relation to affected employees, regardless of whether the measures are in relation to its affected employees. If this is not the effect of the minor wording change in practice this amounts to a major loophole. Those most likely to be affected by a TUPE transfer are, of course, the transferring employees, the most significant implications being measures envisaged by the transferee post transfer. Even assuming this technical loophole does still exist under Regulation 13(6), certainly the prudent

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approach, consistent with the purposive interpretation which must be given to TUPE, is nonetheless for consultation to take place and, in many cases, this consultation will take place with the transferee, the transferor allowing the transferee access to appropriate representatives for this purpose prior to the transfer.

Sanctions for non-compliance with obligations to inform and consult This is provided for within Regulation 15. A complaint can be made that an employer has not properly complied with its obligations to inform and consult within three months of completion of a relevant transfer (Regulation (15(12)). Where a Tribunal finds a complaint to be well founded under Regulation 15(7), it is to make a declaration to that effect and may order an employer to pay “appropriate compensation” to affected employees. As a result of Regulation 16(3), “appropriate compensation” being defined as: “such sum not exceeding 13 weeks’ pay for the employee in question as the Tribunal considers just and equitable having regard to the seriousness of the failure of the employer to comply with his duty.” Note: the case of Bifu v Barclays Bank provided obiter authority that a complaint can be made before a transfer has taken place. This was confirmed by the EAT in the decision of South Durham Health Authority v Unison [1995] IRLR 407. How then should an Employment Tribunal approach the issue of deciding what will be “appropriate compensation” in any given case? Clear guidance on this issue was given by the EAT in the case of Sweetin v Coral Racing [2006] IRLR 252. In brief the position is as follows. •

The guidance set out by the Court of Appeal in the case of Susie Radin Limited v GMB [2004] IRLR 400 in the context of protective awards for failure to inform and consult in relation to multiple redundancies also applies to awards for a failure to inform and consult in relation to a TUPE transfer.

•

The purpose of the award is penal; i.e. to penalise the employer for failing to comply with the consultation obligations.


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•

Whilst the Employment Tribunal, therefore, has a wide discretion to do what is just and equitable in all the circumstances, the focus should be on the seriousness of the employer’s default.

•

The employer’s default may vary in seriousness from a merely technical default to a complete failure to provide any of the requisite information or consult. The deliberateness of the failure may be relevant as may be the availability to the employer of legal advice regarding its obligations.

•

The proper approach to a case where there has been no consultation is to start with the maximum award and only reduce if there are mitigating circumstances justifying a reduction to an extent which the Employment Tribunal considers appropriate.

•

The Employment Tribunal would also be entitled to have regard to any losses caused to employees by the employer’s failure, so long as it is recognised that the focus of the award is penal and proof of loss is neither necessary nor determinative of the level of the award which should be fixed.

On the particular facts in Sweetin, therefore, where there had been no consultation whatsoever with employees prior to a transfer, albeit that there were some discussions with employees following transfer, and there were no mitigating factors, the EAT indicated it was not open to the Employment Tribunal to award less than the maximum award of thirteen weeks pay. The practical impact of this, therefore, is that employers who entirely fail to comply with obligations to inform and consult can expect to be penalised through maximum awards of thirteen weeks actual pay per employee regardless of whether employees are able to demonstrate any particular loss caused by the failure.

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Will liability for failure to inform and consult transfer across to the transferee? Position prior to the 2006 Regulations Prior to the 2006 Regulations there had been conflicting EAT decisions as to whether liability for a failure to inform and consult transferred to a transferee. In brief: •

In Angus Jowett & Co v NUTGW [1985] IRLR 326 it was held that a claim by an employee representative was not a right under, or in connection with, an employment contract and did not, therefore, transfer.

•

In Kerry Foods v Creber [2000] IRLR 10 it was held that liability for a failure to inform and consult did arise from an employment contract and did, therefore, transfer.

•

In TGWU v McKinnon [2001] IRLR 597 it was held that liability does not pass as, where it is finely balanced as a matter of construction whether the liability arose under or in connection with an employment contract, then Tribunals should ensure that a transferor had an incentive to comply with information and consultation obligations. It would not if liability transferred.

•

In Alamo v Tucker [2003] IRLR 266, having considered the previous authorities, the EAT held that liabilities did arise in connection with the contract of employment or employment relationship and, therefore, transferred.

Prior to the 2006 Regulations, therefore, on the basis of the Alamo decision, the position was that liability transferred to the transferee.

Rationale for change within the 2006 Regulations For the policy reason referred to in the TGWU v McKinnon case (i.e. that if liability for a failure to inform and consult did not transfer, there could be little incentive for a transferor to comply), the DTI introduced a provision effectively reversing Alamo and putting in place joint and several liability for transferor and transferee in relation to a failure to inform and consult in relation to transferring employees.


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Effective reversal of the Alamo decision and the introduction of joint and several liability This has been achieved by amending what had in the 1981 Regulations been Regulation 5(2) and is now Regulation 4(2) regarding what transfers, so that what transfers is subject to Regulation 15(9). Regulation 15(9) expressly states that the transferee and transferor shall be jointly and severally liable for compensation where a complaint against the transferor for a failure to inform and consult has been upheld.

Who will be liable in what circumstances? It is not true to say however, that there is now joint and several liability between transferor and transferee in all circumstances. The position is as follows: 1)

The transferee fails to inform and consult in relation to its affected employees. This covers the circumstance where the transferee’s existing staff will be affected by the transfer. Here there is no joint and several liability, it is only the transferee that can be liable (see Regulation 15(7)).

2)

The transferor fails to inform and consult as required because of the transferee failing to provide details of measures. Once again there is no joint and several liability. Provided the transferor has served notice on the transferee in accordance with Regulation 15(5), thereby making the transferee a party to the proceedings, and has shown that it was not reasonably practical for it to comply with its obligations because of the transferee’s failure, the liability will be the transferee’s (see Regulation 15(8)(b)).

3)

The transferor fails to inform and consult as required in relation to the transferring employees. Here, provided the failure is not one described at 2 above, there is provision for joint and several liability (see Regulation 15(9)).

4)

The transferor fails to inform and consult as required in relation to its affected employees other than the transferring employees. Here, although the justification for this is not immediately obvious, it would seem that once again there is, as a result of Regulation 15(9), joint and several liability.

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Special circumstances defence Regulation 13(9) provides as follows: “if in any case there are special circumstances which render it not reasonably practicable for an employer to perform a duty imposed on him [with regard to provision of information and consultation under Regulation 13] he shall take all such steps towards performing that duty as are reasonably practicable in the circumstances.” Regulation 15(2) then provides that, if on a complaint for failure to inform and consult: “a question arises whether or not it was reasonably practicable for an employer to perform a particular duty or as to what steps he took towards performing it, it shall be for him to show: •

that there were special circumstances which rendered it not reasonably practicable for him to perform the duty; and

•

that he took all such steps towards its performance as were reasonably practicable in those circumstances.”

The onus is, therefore, on the employer. Consistent with the purposive approach to TUPE this defence is only likely to be available in exceptional circumstances. There is also express provision, at Regulation 15(6), that a failure on the part of a person controlling the employer to provide information to an employer shall not amount to “special circumstances”. Note: one question which is often asked is whether a listed employer can avoid the obligation to inform and consult on the basis of concerns about confidentiality and, in particular, a concern to avoid triggering an obligation to make a Stock Exchange announcement. The orthodox view is that a Tribunal would have very little sympathy with this. It is also significant that the FSA disclosure rules expressly provide that an obligation to notify will not arise where a company discloses information to a person owing the company a duty of confidentiality and the company is able to ensure the confidentiality of that information (rule 2.5.1), and that the company may, depending on the circumstances, be justified in disclosing inside information to particular categories of recipient owing the company a duty of confidentiality including “employee representatives or trade unions acting on their behalf” (2.5.7).


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The decision in Hagen v ICI [2002] IRLR 31 In a significant decision the High Court held that employers may be liable in both contract and tort for negligently providing misleading information during TUPE consultation processes. FACTS

Employees employed by ICI in specialist engineering functions enjoyed generous pension benefits and significant security of employment. Following protracted negotiations the function was transferred to a third party. Under the terms of the transfer the third party agreed to provide a pension scheme “broadly comparable” with the scheme which had been available at ICI. There was detailed information and consultation with employees throughout the process, it being accepted that, without the employees’ support, the transfer could not go ahead. The employee claimants argued that they were only able to be persuaded to agree to the transfer because of promises made to them. Particularly that pension benefits would be broadly similar and they would be within 1⁄2%. In practice variation of pension rights were up to 5%. The claimants therefore argued that false statements had been negligently made by ICI and the third party, and that this had caused them to agree to the transfer. DECISION

The Court held that an employer will be under an implied contractual duty to take reasonable care in making statements to its employees where: •

the employer is proposing that its employees transfer their employment;

•

the transfer would impact upon the future economic interests of the employees;

•

the transfer would be unlikely to take place if a significant body of the employees objected;

•

the employer has access to certain information unavailable to the employees; and

•

the employer knows that its information or advice will carry considerable weight with the employees.

The Court indicated however, that it did not believe that negligent statements made in this context would amount to a breach of the implied term of trust and

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confidence, except in the most exceptional circumstances where employees could demonstrate “a real and unacceptable disregard for [their] interests.” The Court also indicated that it did not believe that there was a general duty on employers to make employees aware of their pension rights (as had been suggested following the leading case of Scally v Southern Health [1991] ICR 771). The Court also held that there was on the facts a duty in tort on the transferor to take reasonable care when making statements. This was because: •

the transferor knew and intended that the statements made should be drawn to the attention of the employees;

•

the statements were made at least in part for the purpose of seeking to encourage the employees to join the transferee in particular by giving them reassurance about their future with the transferee;

•

the class of employees affected was limited and clearly identifiable (those employed in the business to be transferred);

•

the transferor was in a particularly good position to know the truth of the information and opinions it was expressing given its status as a party to the negotiations with the transferee;

•

it was known that the information provided would be relied upon by the employees;

•

the transferor itself had a material interest in the transfer going ahead.

The Court also held that the transferee was under a duty in tort to take reasonable care to ensure that information provided by it, which was then passed on to the transferor’s employees, was accurate and that any statements of intention were capable of being fulfilled. On the facts, the Court held that the transferor was liable for negligent misstatement in respect of statements made regarding the pension benefits which would be provided by the transferee post transfer. The Court also held that if the correct information had been given to staff they would collectively have been able to force the transferor to negotiate a better deal with the transferee regarding pension and, therefore, that there was a recoverable loss. PRACTICAL IMPLICATIONS

The decision in Hagen is significant. It makes clear that, in the context of TUPE transfers, an employer may be liable if it negligently provides inaccurate information to its employees, whether through their representatives or directly. This will, moreover, apply both to the transferor providing information to its own


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employees and the transferee, which provides information in the knowledge that this will be passed on by the transferor to its employees. It also seems likely that there will, following this decision, also be scope for claims of breach of contract and negligent misstatement where an employer provides misleading information in the context of consultation in respect of multiple redundancies. Whilst the facts in Hagen are likely to be unusual, in that they suggested that the transfer would not have taken place without employees’ collective agreement, and, therefore, in many cases it is likely to be difficult for employees to obtain findings of liability in this type of case, it is clear that employers must, following the case, take particular care to verify the accuracy of information provided to employees and their representatives during consultation processes. If they do not, they may face liability, not only for failing to inform and consult under TUPE or the collective redundancy provisions contained within TULCRA, but also for breach of contract and negligent misstatement.

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Chapter 11 Transfer of collective agreements and recognition Collective agreements Trade union recognition


Chapter 11 Transfer of collective agreements and recognition

Collective agreements Regulation 5 Provision is contained at Regulation 5. This provides that, where at the time of transfer a collective agreement is in place between the transferor and a trade union recognised by the transferor in respect of any transferring employee then: “that agreement, in its application in relation to the employee, shall, after the transfer, have effect as if made by or on behalf of the transferee with that trade union, and accordingly anything done under or in connection with it, in its application in relation to the employee, by or in relation to the transferor before the transfer, shall, after the transfer, be deemed to have been done by or in relation to the transferee.” In short, if the transferor recognised a trade union in respect of any transferring employee then that collective agreement transfers in relation to the transferring employee. For these purposes a collective agreement “is as defined” within the Trade Union and Labour Relations (Consolidation) Act 1992 (“TULCRA”) i.e.: “any agreement or arrangement made by or on behalf of one or more trade unions and one or more employers or employers’ associations and relating to one or more of: a)

terms and conditions of employment, or the physical conditions in which any workers are required to work;

b)

engagement or non-engagement, or termination or suspension of employment or the duties of employment, of one or more workers;

c)

allocation of work or the duties of employment between workers or groups of workers;

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11 TRANSFER OF COLLECTIVE AGREEMENTS AND RECOGNITION

d)

matters of discipline;

e)

a worker’s membership or non-membership of a trade union;

f)

facilities for officials of trade unions; and

g)

machinery for negotiation or consultation, and other procedures, relating to any of the above matters, including the recognition by employers or employers’ associations of the right of a trade union to represent workers in such negotiation or consultation or in the carrying out of such procedures” (Section 178(1) and (2)).

Practical impact The transfer of collective agreements, insofar as they apply to transferring employees under Regulation 5, is arguably not of great practical significance given that, under UK law and, in particular, as a result of section 179 TULCRA, collective agreements as between an employer and trade union are presumed not to have been intended to be legally enforceable contracts. It nonetheless needs to be borne in mind that a decision to terminate or breach a collective agreement would undoubtedly have industrial relations implications and could lead to lawful industrial action. In practice, the more significant issue regarding collective agreements, may often not be the extent to which, as a result of any collective agreement, the transferee might be bound to a recognised union as a result of Regulation 5, but the extent to which individual contractual rights in relation to employees might transfer under Regulation 4. (See Chapter 7, Case law on what transfers) One caveat to the general principle that, even if collective agreements do transfer to a transferee in relation to transferring employees, the transferee nevertheless would be free to resile from the agreement because of the presumption against legal enforceability is the argument put forward by John McMullen in his text Business Transfers And Employee Rights. This is to the effect that there may be an argument that the practical impact of Regulation 5, when combined with section 179 TULCRA, is that it does not comply with the requirements of the Directive. In particular, article 3(3) of the Directive. Assuming this is correct, then it may be possible to run an argument that a pubic sector employer is precluded from resiling from a collective agreement on the basis of public sector employees being able to rely directly on article 3(3) of the Directive.


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Trade union recognition Regulation 6 – recognition transfers The transfer of trade union recognition is provided for within Regulation 6. The position is as follows. Where, before a transfer, an independent trade union was recognised “to any extent” by the transferor in respect of transferring employees then, after the transfer: “the trade union shall be deemed to have been recognised by the transferee to the same extent in respect of [those employees].” (Regulation 6 (2) (a))

Regulation 6 – caveat There is, however, one caveat which is that recognition will only transfer: “where after a relevant transfer the transferred organised grouping of resources [reflecting the requirements for a Type A business transfer] or employees [reflecting the requirements for a Type B service provision change transfer] maintains an identity distinct from the remainder of the transferee’s undertaking.” (Regulation 6 (1)) An interesting practical issue raised by Regulation 6, on which there does not seem to be any reported authority, is how widely an Employment Tribunal should interpret the above caveat. It is not unusual following transfer in the case of a business transfer and, on occasion, in the case of a service provision transfer, for the business or service to become part of the transferee’s larger business or service offering such that a distinct identity is not maintained. Given, however, that article 6 of the Directive itself contains a caveat that representation only transfers, “if the undertaking, business or part of an undertaking of business preserves its autonomy,” it does seem that Regulation 6 is consistent with the Directive and that there is no requirement, therefore, applying a purposive approach to TUPE, to interpret this particular caveat restrictively.

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Provision within the Directive for transitional/replacement representation – potential impact on public sector transferees Significantly, there is further provision contained within article 6 of the Directive which does not seem to be reflected within TUPE. This is as follows: “If the undertaking, business or part of an undertaking or business does not preserve its autonomy, the Member States shall take the necessary measures to ensure the employees transferred who were represented before the transfer continue to be properly represented during the period necessary for the reconstitution or reappointment of the representatives of employees in accordance with national law or practice.” This seems to envisage that non-representation as a result of a loss of autonomy on transfer should only be temporary, pending replacement representation coming into effect, and also that, during this period, employees should continue to be represented through transitional arrangements. Given that this is not reflected within TUPE, this provision will have no impact on a private sector employer. Where the transferee is a public sector entity, however, it may be possible to argue that employees are entitled to rely directly on these provisions of the Directive to require the transferee employer to put in place transitional representative arrangements in the event of recognition not transferring and to ensure representation going forward.


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Chapter 12 TUPE connected contractual variations Background The new provisions Options open to an employer seeking to vary


Chapter 12 TUPE connected contractual variations

Background The background to the provisions which can now be found in Regulation 4(4) and 4(5) TUPE can be summarised as follows. •

In the case of Foreningen Af Arbejdsledere v Daddy’s Dancehall [1988] IRLR 315, the European Court of Justice held that an employee is not entitled to waive rights conferred on them by the mandatory provisions of the Directive by agreeing new contractual terms, even if the consequences of so doing is that overall they are left in a no worse position because of the disadvantages of agreeing the new terms being offset by advantages. Nevertheless, the Directive does not preclude an alteration in the employment relationship insofar as such an alteration is permitted by applicable national law in cases other than transfers of undertakings.

•

In the leading UK decision in the joined cases of Wilson v St Helens Borough Council and British Fuels v Baxendale and Meade [1998] IRLR 706 the House of Lords held that where an employee is dismissed in relation to a transfer and then, following dismissal, re-engaged on new terms and conditions, such a dismissal will be effective even if it maybe unfair under TUPE. The effect of this decision, in conjunction with other dicta to the effect that, in line with Daddy’s Dancehall, a variation of contract due to a transfer is invalid, being that the only way for employers to have certainty that TUPE connected variations will be effective has been to dismiss and re-engage. Pursuing this course involves unfair dismissal risk and arguably does not sit well with maintenance of good industrial relations.

•

In subsequent UK decisions it was confirmed that TUPE connected variations are legally ineffective even if agreed to by employees and even if they are overall no worse off. (See, for example, the cases of

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1 2 T U P E C O N N E C T E D C O N T R A C T U A L VA R I AT I O N S

Credit Suisse First Boston v Padiachy [1998] IRLR 504 and Credit Suisse First Boston v Lister [1998] IRLR 700.) •

In Ralton v Havering [2001] IRLR 718, the EAT offered a glint of hope for employers wishing to make variations by holding that, the correct test for ascertaining whether any contractual change is void following Daddy’s Dancehall, is whether the change is “solely by reason of the transfer” not whether it is “connected with the transfer”.

•

In Martin v South Bank University [2004] IRLR 74 the European Court of Justice, in the context of a case concerning what pension rights transfer under the Directive (discussed in Chapter 8, The Regulation 10 Caveat – provisions of an occupational pension scheme not relating to benefits for old age, invalidity or survivors), held, effectively overturning Ralton, that, where a transferee sought to change transferring employees entitlements in order to harmonise with its existing employees, this was precluded by the Directive as such a change must be regarded as connected to the transfer and, therefore, invalid.

•

As a result of the above line of authorities, the difficulty in varying terms and conditions post transfer had been one of the most significant concerns for contractors inheriting staff under TUPE. During the consultation period prior to the 2006 Regulations, therefore, many employers and employers’ organisations pushed for the position to be simplified and clarified.

•

In Power v Regent Security Services Ltd [2007] UKEAT 0499 06 2901, the EAT, in a judgement given by the Honourable Mr Justice Elias, held, in a case considering the 1981 Regulations, that an employee can rely on a term in a new contract even if that term would have been void under the Daddy’s Dancehall principle had the employer sought to rely on it. This decision has further compounded the difficulty for employers seeking to vary contracts in a TUPE context. In short, any contractual variation the employer might wish to rely on is at risk of being void. Any contractual term which the employee wishes to rely on, in either the old contract or the new contract, is likely to be upheld.

The new provisions As a result of the above, possibly the most eagerly awaited part of the 2006 Regulations was the part dealing with contractual changes. The detailed provision is contained at Regulations 4(4) and 4(5).


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As a result of these provisions the position is as follows.

Three different types of purported contractual variation These are as follows. 1)

Purported variations for which the sole or principal reason is the transfer itself or a reason connected with the transfer other than an economic, technical or organisational reason entailing changes in the workforce (“an ETO reason”). This type of purported variation is void, i.e. legally ineffective.

2)

Purported variations for which the sole or principal reason is not the transfer itself but is a reason connected with the transfer that is an ETO reason. This type of purported variation will be legally effective if agreed with employees.

3)

Purported variations the sole or principal reason for which is a reason unconnected with the transfer. Valid provided that agreed with employees.

How can you ascertain whether a variation is solely or principally by reason of the transfer itself or only connected with the transfer? As a result of the above the crucial issue becomes how to ascertain whether the variation is solely or principally by reason of the transfer itself, in which case it is automatically void, or, is solely or principally for a reason which is only “connected with the transfer”, in which case the variation may be valid, subject to the second requirement of being able to demonstrate that the reason is an ETO reason. No guidance on how to draw this distinction is contained within TUPE. There is however, some guidance contained within the DTI guide which, whilst not binding on an Employment Tribunal, may well be considered and, in any event is a useful indicator of the DTI’s thinking in relation to these provisions. The DTI guide provides as follows: “Where an employer changes terms and conditions simply because of the transfer and there are no extenuating circumstances linked to the reason for that decision, then such a change is prompted by reason of the transfer itself. However, where the reason for the change is prompted by a knock-on effect

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of the transfer – say, the need to re-qualify staff to use different machinery used by the transferee – then the reason is “connected to the transfer”. “ On the basis of the above, therefore, it would seem that, in order for a variation not to be solely and principally by reason of the transfer itself, it is necessary to produce evidence of “extenuating circumstances” or a “knock-on effect”.

How does this impact on harmonisation variations? Following on from this, the most significant issue for transferring employers becomes whether a desire to harmonise the terms and conditions of transferring staff with the terms and conditions of their own existing staff will amount to such extenuating circumstances or a knock-on effect. In short, where a variation is made and the reason for the variation is to harmonise, will the variation be regarded as solely or principally by reason of the transfer or is it possible to say that the variation should only be regarded as solely or principally for a reason connected with the transfer? This issue is dealt with in the DTI guide, which provides as follows: “Q. Does this freedom to vary contracts permit the transferee employer to harmonise the terms and conditions of the transferred workers to those of the equivalent grades and types of employees he already employs? A.

No. According to the way the courts have interpreted the Acquired Rights Directive, the desire to achieve “harmonisation” is by reason of the transfer itself. It cannot therefore constitute “an ETO reason connected with the transfer entailing changes in the workforce”.”

This view, if correct, is particularly unhelpful for employers. It is noteworthy that there was an unofficial draft of the new regulations, prior to finalisation of the 2006 Regulations, which did contain express provision to the effect that a harmonisation variation agreed would be treated as a variation solely or principally for a reason connected with an ETO reason (i.e. as valid), provided that the contract overall was no less favourable to employees. This provision did not find its way into the final form of the 2006 Regulations, however. The reason for this is likely to be because of advice from lawyers to the DTI that, to provide for this, would have been in breach of the Directive given the decision in Martin. Certainly, as discussed above, in Martin, the European Court of Justice did seem to come to a decision to the effect that a variation with a view to harmonisation is necessarily connected to a transfer, and, therefore, void.


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The impact of the ETO reason requirement Even assuming, however, that an employer seeking to uphold a purported variation as valid were able to get over the first hurdle of satisfying a Tribunal that the reason for the variation was not solely or principally by reason of the transfer, but was only solely or principally for a reason connected with the transfer, a second major hurdle is imposed by the requirement that, in order to be valid, the reason must also be an ETO reason. The difficulty here stems from case law regarding the meaning of the words “entailing changes in the workforce.” The words “economic, technical or organisational reason entailing changes in the workforce” was not used pre the 2006 Regulations in relation to TUPE connected contractual variations. It was, however, used in the context of TUPE dismissals, and indeed it still is (see Chapter 13, Provision within TUPE). Further, following the leading case of Berriman v Delabole Slate [1985] ICR 546 as applied in the case of Crawford v Swinton Insurance Brokers [1990] IRLR 42, the words “entailing changes in the workforce” require that there must be a change in the numbers of employees and/or in their functions. In the case of London Metropolitan University v Dr Sackur UK EAT0286/06, the EAT rejected a submission that Berriman is no longer good law. Assuming that the Berriman line of authorities is also regarded as binding in relation to the use of the same wording in the context of TUPE variations, as seems highly likely, then the impact of this is that, in order to be valid, it is also necessary that any variation in terms and conditions involves a change in numbers of employees or the functions of employees. This is of course a significant difficulty as, in many circumstances, purported variations to terms and conditions will not involve any reduction in the number of employees or changes in functions. If an employer wishes to amend employees’ terms and conditions, it does not generally wish to amend terms and conditions with a view to reducing numbers of staff and, in many circumstances, amendments to terms and conditions may not involve any significant change in employee functions.

A summary of the legal hurdles to valid variations In summary, therefore, there are two very significant impediments to an employer looking to effect a valid variation to employees’ terms and conditions in the context of a TUPE transfer. •

Firstly the need to demonstrate that the purported variation is not solely or principally by reason of the transfer itself. This is against a background where, the European Court of Justice in the Martin case,

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held that attempts to harmonise will necessarily be connected to the transfer and, where the DTI’s view, no doubt on the basis of legal advice regarding the Martin decision, is that harmonisation is by reason of the transfer itself. •

Secondly “the Berriman problem”. The need to also show that any variation for a reason solely or principally connected to the transfer is for an economic, technical or organisational reason entailing changes in the workforce, this requiring that it involves a reduction in numbers or a change in employees’ functions.

Options open to an employer seeking to vary What then are the options for a transferring employer wishing to amend the terms and conditions of transferring or transferred employees? In brief the options can be summarised as follows. 1)

To seek to construe as robust an argument as possible that purported variations are not solely or principally by reason of the transfer and are not, therefore, purely harmonisation variations. For example, the transferee might be able to produce evidence that a process of review and likely change to terms and conditions was already underway by the transferor. Alternatively, that the reason for the change is as a result of some change in the market place or other external factor, such as legislation, rather than the transfer. It may also be the case that an employer’s argument can here be assisted if, rather than merely amending the terms and conditions of transferring staff so that they mirror the terms and conditions of its existing staff, which would suggest a pure harmonisation exercise, it introduces new terms and conditions for all staff, both transferring and its own existing staff. In addition, the employer would need to construe as robust an argument as possible to the effect that the “entailing changes in the workplace” requirement was also met. For example, because there was some change in technology which resulted in a need for a change to terms and conditions and at the same time a need for fewer staff and/or the change in terms and conditions also involves/reflects employee changes in function.


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It does seem clear, however, that effecting variations in this way will often involve a significant element of risk of the variation being found to be void if challenged. 2)

To follow the “Wilson route” of terminating employees’ existing contracts by serving with notice and then re-engaging on new terms and conditions. As already flagged, however, this necessarily involves unfair dismissal risk because it requires dismissal and, is unlikely to be seen as fitting well with maintaining good industrial relations.

3)

To take a pragmatic view and effectively implement changes to terms and conditions against a background of detailed consultation with staff to allay any concerns. Here, implementing the changes on the basis of a view that in practice changes need to be made and that, where there has been proper consultation with staff and where overall staff are no worse off as a result of the changes, the practical risk of challenge should hopefully be remote.

The impact of the EAT decision in Power v Regent Security This decision is referred to at the beginning of this chapter. Although judgement in the case was handed down in January ‘07 the relevant transfer took place prior to April 2006 and, therefore, the EAT had to consider the 1981 Regulations rather than the 2006 Regulations. Following the decision however, issues will arise as to how Regulation 4(4) sits with the decision. In particular, how will Employment Tribunals reconcile Regulation 4(4), which states that any purported variation solely or principally by reason of the transfer, or for a transfer connected reason which is not an ETO reason is void, with the EAT’s judgement that the Directive requires that an employee should be able to rely on a new contractual term if they believe it favourable to them, even if the new terms were connected to a TUPE transfer. The position is likely to be as follows: •

If an employee is a public sector employee, Regulation 4(4) may not preclude them from relying on the new term because, as a public sector employee, they can rely directly on the Directive.

•

If an employee is a private sector employee, the issue will be whether the wording of Regulation 4(4) can be interpreted purposively in line with the Directive to allow the new term to be relied on. This would seem difficult given the clear drafting of Regulation 4(4). If it cannot, then the

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employee would not be able to rely on the new term against their employer but might have a Francovich claim against the government for failing to put in place UK legislation to protect their rights under the Directive. The other possibility is that the DTI will amend Regulation 4(4) to give effect to the Power decision and stave off any risk of Francovich claims or infraction proceedings.


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Chapter 13 Transfer connected dismissals Provision within the Directive Provision within TUPE Case law under the 1981 Regulations on transfer connected dismissals Case law regarding “economic, technical or organisational reason” Case law regarding “entailing changes in the workforce” Can the transferor rely on the transferee’s ETO reason? Can a place of work redundancy provide an ETO defence? Litster principle – Regulation 4(3)


Chapter 13 Transfer connected dismissals

Provision within the Directive Provision regarding transfers and dismissal is contained within Article 4 of the Directive. This provides as follows: “The transfer of the undertaking, business or part of the undertaking or business shall not in itself constitute grounds for dismissal by the transferor or the transferee. This provision shall not stand in the way of dismissals that may take place for economic, technical or organisational reasons entailing changes in the workforce.”

Provision within TUPE This is contained within Regulation 7.

Three different types of dismissal The provision made within Regulation 7 follows the same format as already discussed in relation to TUPE contractual variations in Chapter 12, The new provisions. Therefore there are three different types of dismissal as follows. 1)

A dismissal either before or after a relevant transfer of any employee of the transferor or transferee, the sole or principal reason for which is the transfer itself, or a reason connected with the transfer that is not an economic, technical or organisational reason entailing changes in the workforce (“an ETO reason”). This type of dismissal is automatically unfair.

2)

A dismissal either before or after a relevant transfer of any employee of the transferor or transferee, the sole or principal reason for which is a reason connected with the transfer that is an ETO reason. Where such a reason is available this is sometimes referred to as an “ETO defence”.

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13 TRANSFER CONNECTED DISMISSALS

Such a dismissal is not automatically unfair. The fairness or otherwise of the dismissal is to be ascertained in accordance with ordinary unfair dismissal principles. 3)

A dismissal for which the sole or principal reason is unconnected with the transfer. TUPE will have no impact. Ordinary unfair dismissal principles will apply.

It is made clear that the right to pursue an unfair dismissal claim is subject to the qualifying provisions of the 1996 Act. Most significantly, an employee requires at least one year’s service in order to be entitled to pursue a claim. It is also made clear (within Regulation 7(4)) that these provisions apply to any employee of the transferor or transferee, not merely those assigned to the appropriate grouping of employees or resources such that they do or would, but for dismissal, transfer.

The crucial distinction between dismissals for which the sole or principal reason is the transfer itself and dismissals for which the sole or principal reason is a reason connected with the transfer As is the case in relation to TUPE contractual variations, the effect of the provisions as drafted is to make the above distinction crucial. The guidance given within the DTI guide as referred to in Chapter 12, The new provisions, will be relevant in relation to this issue. Whilst there is also a long established body of case law regarding TUPE dismissals, this case law related to what was Regulation 8 under the 1981 Regulations, where the same distinction was not drawn. Under Regulation 8 of the 1981 Regulations, there was reference to dismissals being unfair “if the transfer or a reason connected with it is the reason or principal reason for… dismissal”. Further, in many of the cases regarding Regulation 8 dismissals under the 1981 Regulations, the distinction between where a transfer itself was the reason or principal reason and where a transfer connected reason was the reason or principal reason, was not explored. A recent exception to this being the decision in R G Hynd v D Armstrong EATS/0005/04. Discussed below (can the transferor rely on the transferee’s ETO reason?) One reason for the cases not drawing out this distinction was an approach in many cases that there was effectively overlap between Regulations 8(1) and 8(2) of the 1981 Regulations. In short, this being on the basis that the approach to


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be taken when considering dismissals and whether they were automatically unfair under Regulation 8, was firstly to ascertain whether the transfer, or a reason connected with it, was the reason or principle reason for dismissal (without necessarily making a finding as to which, i.e. whether it was the transfer or a reason connected to it). Then, if it was, to ascertain whether the reason or principle reason was also an ETO reason, in which case Regulation 8(1) was effectively overruled so that the dismissal would not be automatically unfair. In Hynd, however, a different approach was taken, that being that if the reason or principle reason for dismissal was the transfer itself, then the reason could not be an ETO reason, therefore Regulation 8(2) could not come into play and the dismissal was automatically unfair. Hence, on this approach to Regulations 8(1) and 8(2), the distinction between “by reason of the transfer” and “transfer connected” became crucial. Therefore, although the authorities regarding Regulation 8 of the 1981 Regulations assist in distinguishing between dismissals the reason for which is, or principally is, a reason connected with a transfer and those which are not connected with a transfer, they are generally of less assistance in relation to the now crucial distinction under Regulation 7 as stated above.

Case law under the 1981 Regulations on transfer connected dismissals There is a line of case law as to the circumstances where dismissals were found to be transfer connected, such that they came within the ambit of Regulation 8 of the 1981 Regulations. The majority of these cases concerned dismissals taking place shortly prior to insolvency sales. The cases are also notable for the imaginative language used in the judgements, in particular the reference to a transfer being “a mere twinkle in the eye” and to a transferee “sniffing around the company”. Subject to the caveat indicated above (i.e. the wording now used within Regulation 7 differs from that which was used in Regulation 8), these cases may provide guidance as to the circumstances where a dismissal will be found to be solely or principally for a reason connected with the transfer, if not in distinguishing between these circumstances and circumstances where a dismissal will be found to be solely or principally by reason of the transfer itself.

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These decisions are summarised below.

Harrison Bowden Limited v Bowden EAT 735/92 Dismissal by the receiver of an employee at a time when the potential buyer was interested but not formally committed. Held was a transfer connected dismissal and: •

for a dismissal to be transfer connected there did not have to be an identifiable transferee at or before the dismissal;

•

for a dismissal to be transfer connected there did not need to be collusion between the receiver and transferee;

•

a Tribunal was entitled to take account of the fact that the dismissal occurred shortly before the sale when considering whether dismissal was transfer connected.

Longden and Paisley v Ferrari Limited and Kennedy International Limited [1994] IRLR 157 The EAT held that a Tribunal was entitled to find that employees dismissed the day following receivers receiving a list from the then potential purchaser of staff that it was essential were retained, were dismissed because of financial constraints and pressure from the Bank and, therefore, that neither the transfer nor a reason connected to it was the reason or principal reason for dismissal. Further, there was evidence on which the Tribunal could find that the list prepared by the purchaser containing essential staff did not necessarily carry with it a request to dismiss all other employees.

IBEX Trading Company Limited v Walton EAT 911/93 Following the appointment of receivers the company made some employees redundant prior to any offer being made. After the sale of the business the employees brought claims for unfair dismissal. The EAT held that this was not transfer connected. Mr Justice Morrison, in setting out the EAT’s conclusion, stated as follows: “Contrary to what was said in the Harrison Bowden case, we attach significance to the definite article in Regulation 8(1) “that employees shall be treated... as unfairly dismissed if the transfer or a reason connected with it is the reason or the principal reason for the dismissal...


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…here, the employees were dismissed before any offer had been made for the business. Whilst it could properly be said that they were dismissed for a reason connected with a possible transfer of the business, on the facts here we are not satisfied that they were dismissed by reason of the transfer or for a reason connected with the transfer. A transfer was, at the stage of the dismissal, a mere twinkle in the eye and might well never have occurred.”

Swinnock v Grosvenor of Chester EAT 189/93 This case concerned the managing director of a company which had a car dealership agreement with Mazda and sold second-hand cars. Following the appointment of a receiver, the MD was dismissed together with a number of other employees. The reason for the dismissal being that there was no role for him, the administration of the company had been taken out of his hands by the receiver and Mazda was refusing to supply any new cars to sell and there was, therefore, no money to pay his salary. It was also the case that the receiver had advertised the company’s business for sale as a going concern and the receiver felt that without the services of the MD he could sell for a better price. In due course, some time after his dismissal, the business was acquired. The view of the MD being that the eventual acquirer had been “sniffing around” the company before his dismissal. The EAT upheld the Tribunal decision that dismissal was fair on grounds of redundancy and that dismissal was not automatically unfair as it was not connected to the transfer. The EAT indicated: “At the most it could be said that his dismissal was in connection with a possible sale at some future unknown date to an as yet unidentified purchaser. Even if [eventual acquirer] had been “sniffing around the company”, they were only one of several potential purchasers. It could not be said… dismissal was in connection with the transfer which is what Regulation 8(1)… requires.” The EAT also indicated: “we do not accept the conclusion that Regulation 8(1) applied to a dismissal which is in connection with a possible transfer where the transfer is – to use a colloquial expression appropriate we think to the facts of this case as well – “only a twinkle in the eye”.”

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Michael Peters Limited v Farnfield [1995] IRLR 190 FACTS

The company was in receivership. The employee was made redundant the day after an offer was made to purchase the business. A Tribunal held that the dismissal was connected with the transfer. DECISION OF THE EAT

The EAT held that: “The Tribunal were correct in finding that the probable reason for [the employee’s] dismissal was connected with the transfer because in order to achieve the transfer it was deemed necessary to reduce the number of staff employed by the group.” The EAT went on to state that it saw no significance in the use of the word “the” in Regulation 8(1). That it had previously been held in Bowden that it was not necessary for the actual transferee to be identified, that it had been conceded by counsel in the instant case that it was not necessary for an actual contract to be in place and that, in its view, Ibex was not inconsistent with Bowden.

Morris v John Grose Group Limited [1998] IRLR 499 An employee was dismissed by receivers to make the company more attractive as a going concern. The eventual purchaser was introduced to the receivers on the same day as the dismissal took place. The EAT held: “the words “the transfer” towards the end of Regulation 8(1) do not by necessary construction have to refer to the relevant particular transfer which has actually taken place... …this view of the meaning of Regulation 8(1) is more consistent with the broad scope of the Directive... …to construe Regulation 8(1) in the way in which we do will not open the floodgate of automatic unfair dismissal in any case where dismissal has in fact preceded a transfer... transfer or a reason connected with it must still be the reason or principal reason for dismissal for Regulation 8(1) to apply and a Tribunal is unlikely to find that requirement proved if there are dismissals so that an undertaking can continue in operation when a transfer is no more than a remote possibility... we therefore prefer what was said about the definite article in Harrison Bowden to what was said in IBEX.”


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In other words, it is not necessary for the particular transfer to be in view.

Taylor v Connex South Eastern Ltd EAT/1243/99 An employee dismissed for refusing to accept a variation to their contract of what was regarded as an important term which formed part of their contract on transfer, was found to have been dismissed for a reason connected to a transfer, notwithstanding that the dismissal took place some 2 years after the transfer. On the issue of the relevance of the passage of time since transfer, the EAT indicated that the Tribunal had been correct in accepting a submission that: “there is no particular time limit as to what can be considered as being connected with a transfer.” The Tribunal had gone on to state that there is no doubt that the chain of causation weakens with the passage of time and that two years appeared to be a long time to maintain such a connection. The EAT indicated: “On one level that may be true, but the weakening of the chain of causation with passage of time is simply because there is greater opportunity for intervening events to occur which break the chain of causation. The mere passage of time without anything happening does not in itself, constitute a weakening to the point of dissolution of the chain of causation.”

Case law regarding “economic, technical or organisational reason” Leading Authority v Wheeler v Patel [1987] IRLR 211 The leading case on what is meant by and the scope of “economic, technical or organisational reason” in the context of TUPE dismissals is the case of Wheeler v Patel. The facts of the case involved an employee who was dismissed by the transferor prior to a TUPE transfer, at the request of the transferee. The Tribunal had held that the dismissal was for an economic reason within Regulation 8(2) of the 1981 Regulations and, therefore, that it was not automatically unfair under Regulation 8(1). The case then came before the EAT.

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The EAT indicated that the view that, where the transferor had dismissed an employee at the insistence of the transferee, the transferor’s reason was economic and, therefore, Regulation 8(2) applied was incorrect. “The reference to “technical” and to “organisational” reasons seem to us to be references to reasons which relate to the conduct of the business… the adjective “economic” must be construed ejusden generis with the adjectives “technical” and “organisational”. The “economic” reasons apt to bring the case within [Regulation 8 (2)] must… be reasons which relate to the conduct of the business. If the economic reason were no more than a desire to obtain an enhanced price, or no more than a desire to achieve a sale, it would not be a reason which related to the conduct of the business. It would not… be an “economic” reason for the purposes of [Regulation 8(2)]… an ejusden generis approach to construction justifies giving a limited meaning to the adjective “economic” in [Regulation 8(2)]… the need to leave a sensible scope for [Regulation 8(1)] similarly requires a limited meaning to be given to the adjective “economic” in [Regulation 8(2)].” In short, therefore, there is unlikely to be an economic reason in circumstances where the transferor dismisses at the transferee’s request/where dismissals are carried out with a view to obtaining a sale/getting a better price. Economic, technical or organisational reasons must all relate to the ongoing conduct of the business. “Economic” for these purposes should be construed narrowly.

Post Wheeler cases where an ETO was found Following Wheeler, however, there were a number of decisions where a valid economic reason was nonetheless found. In Warner v Adnet Limited [1998] IRLR 394, the Court of Appeal held that a Tribunal had been entitled to find that an individual had been dismissed for an economic reason within Regulation 8(2) in circumstances where the individual was made redundant by administrative receivers immediately before the transfer. Similarly, in the case of Whitehouse v Blatchford [1999] IRLR 492, the Court of Appeal upheld a Tribunal decision that there was an economic reason in circumstances where a contractor which won a supply contract to a hospital dismissed the employee on the basis that their award of the contract by the hospital had been made conditional upon a reduction in staffing costs by reducing staff by one. In these circumstances, the Court of Appeal was satisfied that this did relate to the ongoing conduct of the business and was not analogous to the position


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of a seller dismissing staff solely for the purpose of achieving best price on a business sale. The case of Thompson v SCS Consulting [2001] IRLR 801, involved a dismissal of employees by receivers prior to a transfer. In deciding whether the Employment Tribunal had been entitled to find that these dismissals were for an ETO, the EAT first set out the following principles in cases regarding ETO reasons: •

in deciding whether an ETO reason is or is not the reason or principle reason for dismissal a Tribunal is making a factual decision;

•

in making that factual decision the Tribunal must consider whether the reason was connected with the future conduct of the business as a going concern;

•

the Tribunal is entitled to take into account, as relevant factual material, whether there was any collusion between transferor and transferee and whether the transferor or those acting on its behalf had any funds to carry on the business or any business at the time of the decision to dismiss;

•

following a factual decision by a Tribunal, the EAT should only interfere if the Tribunal erred in law by applying the wrong test, by considering an irrelevant factor, by failing to consider a relevant factor or by reaching a perverse decision.

The EAT then found that: “It was… open to the Tribunal to conclude on the facts… that the business was overstaffed, inefficient in terms of sales and insolvent, and that the only way in which it could be made viable for the future and continued as a going concern was for the workforce to be reduced in size. The Tribunal found as facts that this was not a case of collusion and that left to their own devises the receiver would have dismissed all of the employees.” On the basis of these facts dismissal of the employee: “could properly be seen as taking place not in order to secure a sale or to enhance the sale price or at the behest of the transferee but for an ETO reason.” A case where there was found to be an organisational reason is the case of Porter v Queens Medical Centre [1993] IRLR 486. This case, which involved a contract for the provision of paediatric services, was one where the provisions of the Directive were considered on the basis that the case concerned public sector employees. The principle issue in the case was whether or not there was a transfer

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(the High Court found there was). It also found that there was a valid organisational reason in circumstances where the new provider made a bona fide decision regarding the senior paediatric posts it would need filled in order to provide the service going forward. In essence, the decision seems to be that the bona fide decision that a new organisational structure was necessary, which also resulted in the new provider requiring a free hand regarding who to appoint in the senior posts, was sufficient to provide an organisational reason.

Case law regarding “entailing changes in the workforce” The principal case law regarding this is as follows.

Berriman v Delabole Slate Limited [1985] ICR, 546 Mr Berriman was employed in a quarry business which was transferred to Delabole Slate. Delabole Slate wrote to Mr Berriman offering him new terms on a lesser rate of pay. Mr Berriman gave notice and claimed constructive unfair dismissal. The Tribunal found that the reason that Delabole Slate had sought to obtain Mr Berriman’s agreement to the lower rate of pay was its desire to put Mr Berriman and others on the same rate of pay as its existing employees; i.e. to harmonise. The Court of Appeal indicated that the principal point to decide was: “whether, as a matter of law, the Tribunal were entitled to hold that the case fell within Regulation 8(2) in that the employer’s reason for dismissal was a reason “entailing changes in the workforce”.” It indicated that: “the phrase “economic, technical or organisational reason entailing changes in the workforce…” requires that the change in the workforce is part of the economic, technical or organisational reason. The employer’s plan must be to achieve changes in the workforce. It must be an objective of the plan, not just a possible consequence of it. …we do not think that the dismissal of one employee followed by the engagement of another in his place constitutes a change in the “workforce”… the word “workforce” connotes the whole body of employees as an entity, it corre-


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sponds to the “strength” or the “establishment”. Changes in the identity of the individuals who make up the workforce do not constitute changes in the workforce itself so long as the overall numbers and functions of the employees looked at as a whole remain unchanged.” On the basis that there was not, therefore, an ETO reason entailing a change in the workforce, the Court of Appeal found the dismissal was unfair.

Crawford v Swinton Insurance Brokers [1990] IRLR 42 In Crawford the EAT had to consider whether an ETO defence could be available where a post transfer reorganisation meant changes in job functions for employees but no change in the identity of the employees. Again this was in the context of an individual resigning and claiming unfair constructive dismissal following changes made by the transferee. The EAT held: “What… has to be looked at, is the workforce as an entity, that is to say, as a whole, separate from the individuals who make it up and it then has to be seen whether the reason in question is one which involves a change in that workforce, strength or establishment and we are satisfied that there can well be a change in the workforce if the same people are kept on but they are given entirely different jobs to do. We would regard a workforce that was engaged in a different occupation as being, for the purposes of Regulation 8(2) changed if that happened as a result of an organisational change on a relevant transfer.” The EAT therefore held that it was not necessary for there to be a change in the identity of the employees making up the workforce in order for an ETO defence to be available.

Mrs R Green v Elan Care Limited EAT/18/01 The EAT, confirming the approach from Crawford, held that there did not necessarily have to be a reduction in numbers of the workforce in order to entail a change in the workforce on the basis that either a change in number or a change in functions may be sufficient. The EAT indicated that: “while a minor change in the functions of one employee or a small number of employees in a large workforce might not be sufficient, considering the workforce as a whole, to amount to a change in the workforce… where the

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steps taken by the employer involve a real change in functions in a substantial or key area of the workforce it is open to a Tribunal to find that changes in the workforce are entailed.”

Can the transferor rely on the transferee’s ETO reason? It is common in the context of a business sale for a purchaser, having carried out its due diligence, to identify that it will not need the entirety of the seller’s workforce. Similarly, in the context of a service provision change, it may be that on a stage one outsourcing a contractor has identified that it will not need all of the client’s current staff. In these scenarios the purchaser/contractor would often prefer, if possible, for the seller/client to dismiss the staff it does not require prior to transfer so that on transfer it only takes the staff it will actually need. Also it may often be the case that the purchaser/contractor, if it did take a transfer of all staff, would be able to demonstrate the necessary ETO reason for carrying out redundancy dismissals post transfer. The issue which frequently arises, however, is whether, in this scenario, the transferor can carry out dismissals pre-transfer at the transferee’s behest, effectively relying on the ETO reason which would have been available to the transferee if the transferee had dismissed post transfer. As frustratingly is often the case with TUPE, there has not been any entirely clear cut and unequivocal authority on this particular point. The orthodox view of practitioners however largely has been that, in these circumstances, the transferor cannot rely on the transferee’s potentially available ETO reason and, therefore, that the appropriate way to carry out dismissals in this scenario, consistent with seeking to minimise the chances of unfair dismissal liability, is for dismissals to be carried out after transfer by the transferee. Fortunately this issue has now been specifically addressed in the case of Hynd.

Hynd v Armstrong & Others [2007] IRLR 338 The facts of the case concerned a solicitor dismissed by a firm on its dissolution immediately prior to a TUPE transfer to a new firm formed by a group of ex-partners of the dissolved firm. The Employment Tribunal found the solicitor’s dismissal to be fair on the basis that the dismissal was in anticipation of the transfer and because prospective partners in the new firm had decided for


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economic and organisational reasons that the solicitor would not be required for the future conduct of the business by the new firm following the transfer. DECISION OF THE COURT OF SESSION

The court firstly considered the provisions of the Directive. It indicated that it did not appear that the Court of Justice had had to consider the particular issue of whether a transferor might dismiss employees because the transferee would not require such employees for an ETO reason following transfer. Nevertheless, the Court indicated that it appeared to be “reasonably clear” that the relevant provision of the Directive (Article 4(1)) does not permit dismissals in such circumstances. The Court indicated that the following considerations appeared to be relevant. First, on its interpretation of Article 4(1), Article 4(1) would not cover dismissals by the transferor for reasons which did not entail changes in the transferor’s own workforce but which, failing such dismissals, would entail changes in the workforce of the transferee following the transfer. Secondly, the purpose of the Directive is to ensure employee rights are safeguarded rather than to expand the circumstances where an employer may dismiss on grounds of redundancy. Applying this to the facts in Hynd, a finding of unfair dismissal could only be avoided on the basis that Regulation 8(2) of the 1981 Regulations (providing for the ETO defence) extended the circumstances in which an employer could make his employees redundant by entitling an employer to dismiss his employees prior to a transfer on the ground of redundancy where the employees are surplus to the requirements of the transferee. Thirdly, if Article 4(1) was interpreted as permitting a transferor to dismiss employees prior to the transfer because employees would otherwise be surplus to the transferee’s requirements, the consequence of this would be that such staff would not transfer under Article 3 of the Directive and the obligations of the transferor would not, therefore, transfer across to the transferee. A consequence of this in a situation where the transferor is insolvent would be that there would be every incentive for redundancies to be effected by the transferor in advance of transfer with a view to avoiding liabilities to the employees. Fourthly, in a circumstance where the combined workforces of the transferor and the transferee are greater than the transferee will require, and where redundancies will therefore be necessary, interpreting Article 4(1) as permitting the transferor to effect redundancies at the transferee’s behest in anticipation of the transfer would enable the selection of employees for redundancy to be made solely from the transferor’s workforce, thereby relieving the transferee of the

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need, which would otherwise arise, to consider all the employees of the combined workforce on an equal footing. The Court then went on to consider the provisions within the 1981 Regulations to see whether they could be construed in line with this interpretation of the Directive. The Court firstly considered the wording of Regulation 8(2). It indicated that the crucial wording was the wording within Regulation 8(2), “of either the transferor or the transferee before or after a relevant transfer”, such wording not appearing in the Directive. “On one interpretation, the phrase simply makes explicit what otherwise would be implicit: that the workforce in question may be that of either the transferor before the transfer (where the dismissal is effected by the transferor), or that of the transferee after the transfer (where the dismissal is effected by the transferee). An alternative interpretation is that the workforce in question may be that of either the transferor or the transferee, before or after the transfer, regardless of whether the dismissal is effected by the transferor or by the transferee.” The Court indicated that the particular question did not seem to have been directly addressed by the cases and then referred to a number of cases which, albeit not direct on the point, supported an interpretation that Regulation 8(2) would not allow dismissals by the transferor for the transferee’s reason. Having done so, the Court indicated that interpreting Regulation 8(2) in this way (ie so that it would not allow dismissals by the transferor for the transferee’s reasons), achieves a result consistent with Article 4(1) of the Directive. “Just as the Directive is intended to ensure that the rights of an employee under domestic law… are safeguarded in the event of a transfer, without otherwise adding to or subtracting from those rights so Regulation 8(2) can be understood as preserving the ordinary rights of an employer to dismiss for “an economic, technical or organisational reason entailing changes in the workforce” without necessarily incurring a liability for unfair dismissal. That right arises, however, where the employer dismisses the employee for a reason of its own, relating to its own future conduct of the business, and entailing a change in its own workforce… and not where the employer dismisses the employee for reasons unrelated to the future conduct of its own business.” Although this decision considered Regulation 8(2) of the 1981 Regulations, the wording in Regulation 7(2) TUPE is almost identical and, therefore, this judgment should apply equally to Regulation 7(2).


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Can a place of work redundancy provide an ETO defence? This is another longstanding unresolved TUPE issue. It is often said, with a view to simplifying the position, that an ETO defence will be available where there is a genuine redundancy. It is not clear, however, that this is the case in the circumstances of a place of work redundancy. The reason for this is the requirement, following on from the Delaboé Slate decision and subsequent cases, that there must be an ETO reason “entailing changes in the workforce”, this requiring a change in number and/or functions. In a place of work redundancy scenario it is not clear that there will be the necessary change in numbers or function. In short, it is not necessarily the case that the transferee needs less employees, rather the transferee needs employees in a different place. Frustratingly there is no authoritative decision on this point. It might be possible to argue that there is the necessary change of numbers insofar as there is a change in numbers at the original location; i.e. the employer needs less employees at that location and/or there is a change in numbers insofar as the employer needs more at the new location. Alternatively, it may be that, on the facts of a particular case, in addition to there being redundancies because of the change in location there will also be redundancies as a result of the employer needing less employees. In which case, it might be possible to argue that the requirement for entailing a change in the workforce is met in relation to all the redundancies. Alternatively, it could be held that the requirement is only met in relation to those redundancies coming about as a result of the reduced requirement for numbers, rather than purely the change in location. It is far from ideal from the point of view of transferees that the issue of whether or not an ETO defence will or will not be available is unclear. Often in practice, however, a transferee may, in any event, be paying enhanced redundancy payments, in which case, the practical route will be to require employees to sign up to compromise agreements precluding unfair dismissal claims in return for such payments. An additional feature under the 2006 Regulations in relation to place of work redundancies is the risk of employees, rather than waiting to be dismissed on grounds of redundancy, pursuing claims under Regulation 4(9) against the transferor or transferee on the basis that the change in location “involves or would involve a substantial change in working conditions to their detriment.” Indeed, this example is given in the DTI guide (see Chapter 14, The new provision – the practical impact of Regulation 4(9)).

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Litster principle – Regulation 4(3) The Litster principle derives from the House of Lords decision, in the case of Litster v Forth Dry Dock [1989] 2WLR 634, that applying a purposive approach to TUPE, as required by the Directive, the 1981 Regulations had to be read so that employees and liabilities transferred to the transferee if employees were employed immediately before the transfer: “or would have been so employed but for being automatically unfairly dismissed contrary to TUPE prior to transfer.” In short, therefore, the transferee would, in addition to inheriting liabilities relating to contracts of the transferring employees (i.e. those employed and assigned immediately prior to transfer), also inherit liability for unfair dismissal in relation to the transferor’s former employees dismissed prior to transfer by reason of the transfer, or a reason connected with it, where an ETO defence was not available. The Litster principle has now effectively been codified within Regulation 4(3) TUPE. This provides that: “Any reference in [Regulation 4(1)] to a person employed by the transferor and assigned to the organised grouping of resources or employees that is subject to a relevant transfer, is a reference to a person so employed immediately before the transfer, or who would have been so employed if he had not been dismissed under circumstances described in Regulation 7(1)…” Regulation 7(1) refers to automatically unfair dismissals where dismissals are solely or principally by reason of the transfer or a reason connected with the transfer that is not an ETO reason.


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Chapter 14 Constructive dismissals under TUPE The position under the 1981 Regulations – did TUPE create a wider category of constructive dismissal? The position under the 1981 Regulations – combined impact of right to claim constructive dismissal and right to object to transfer Constructive dismissal claims arising out of changes proposed by the transferee The new provision – Regulation 4(9), 4(10) and 4(11) of the 2006 Regulations The new provision – the practical impact of Regulation 4(9) The new provision – how do Regulation 4(9) and 4(11) interrelate with the right to object to transfer and who will be liable in what circumstances? The new provision – how does this analysis impact on the need for indemnities? The new provision – can Regulation 4(9) be relied upon against the transferee following transfer?


Chapter 14 Constructive dismissals under TUPE

The position under the 1981 Regulations – did TUPE create a wider category of constructive dismissal? One significant issue under TUPE, prior to the 2006 Regulations, was whether the concept of a TUPE dismissal claim under Regulation 5(5) of the 1981 Regulations was wider than the concept of constructive dismissal under the common law. In short, whether the threshold hurdle in order for there to be a Regulation 5(5) claim was a lower hurdle than generally set under the common law; that hurdle being a requirement for a repudiatory breach of contract. Regulation 5(5) of the 1981 Regulations provided that [the preceding paragraphs of Regulation 5 – transfer of contracts etc]: “are without prejudice to any right of an employee arising apart from these Regulations to terminate his contract of employment without notice if a substantial change is made in his working conditions to his detriment; but no such right shall arise by reason only that, the identity of his employer changes unless the employee shows that, in all the circumstances, the change is a significant change and is to his detriment.” The issue of whether Regulation 5(5) gave rise to a right for employees to regard themselves as dismissed in a wider set of circumstances than would be covered under the common law concept of constructive dismissal was resolved, in the Court of Appeal decision in the case of Rossiter v Pendragon plc [2001] IRLR 256. In this case the Court of Appeal held that, notwithstanding the language within Regulation 5(5), only conduct by the employer amounting to a repudiation of the employment contract (i.e. which would have found a constructive dismissal claim under established common law authorities) would entitle the employee to terminate the contract without notice.

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14 CONSTRUCTIVE DISMISSALS UNDER TUPE

The position under the 1981 Regulations – combined impact of right to claim constructive dismissal and right to object to transfer A further issue was how the right to object to transfer under Regulation 5(4A) and 5(4B) of the 1981 Regulations (now Regulations 4(7) and 4(8), see Chapter 6 ) interrelated with an employee’s right to regard themselves as dismissed under Regulation 5(5). This issue was considered by the Court of Appeal decision in the case University of Oxford v Humphreys [2000] IRLR 183. The facts of the case involved an employee of the transferor who, in solicitors correspondence in advance of a transfer, objected to the potential TUPE transfer of his employment to the transferee on the basis that this would involve a significant change in his working conditions to his detriment and indicated he would be pursuing a wrongful dismissal claim under Regulation 5(5). The employee then pursued a claim against the transferor. The transferor had sought to argue that, by objecting to the transfer, Regulation 5(4B) (which as discussed in detail in Chapter 6, The right to object to transfer provided that, where an employee objects to transfer under 5(4A), their contract is terminated without there having been a dismissal) applied and, therefore, there could not be any claim. Alternatively, in the absence of a dismissal, if the employee was entitled to pursue a claim, notwithstanding their objection to transfer, liability transferred to the transferee. The Court of Appeal, applying a purposive approach to Regulation 5(4A), 5(4B) and 5(5), found: •

that Regulation 5(5) was to be read as overruling 5(4B), i.e. where an employee objects in the circumstances set out in Regulation 5(5), 5(4B) does not apply.

•

that Regulation 5(5) was to be read as covering a circumstance where an employee terminates in advance of a transfer because the transfer would, necessarily, result in a substantial change in working conditions to the employee’s detriment.

•

that the right to sue under 5(5) was a right to sue the employer who wrongly terminated and that, where a Regulation 5(5) claim was pursued in advance of a transfer, liability could not transfer to the transferee because of the wording at the start of Regulation 5 referring to the right to pursue a claim being a right “arising apart from these Regulations”.


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This decision was particularly significant for transferors. In practice it meant that transferors would be at risk of constructive dismissal claims coming out of changes to transferring employee’s terms and conditions proposed by the transferee.

Constructive dismissal claims arising out of changes proposed by the transferee This issue was considered in the case of Sita (GB) Limited v Burton [1997] IRLR 501. In brief, the facts of the case were that employees of a local authority resigned and claimed constructive dismissal as a result of the behaviour of the transferee prior to transfer. In particular, as a result of their belief, as a result of the transferee’s behaviour, that the transferee intended to substantially alter their terms and conditions after transfer. The tribunal found that the transferee’s behaviour was such as to lead a reasonable employee to suspect that their terms and conditions might change substantially after transfer and, therefore, to strike at the implied term of trust and confidence. The tribunal went on to find that the constructive dismissal was in connection with the transfer and that the transferee was, therefore, liable. DECISION OF THE EAT

The employees could not have been constructively dismissed by the transferee as they were never in the transferee’s employment. The transferee also could not be held liable for constructive dismissal on the basis that the employees’ fears relating to their contractual terms and conditions after the transfer had led to a breach of the implied term of trust and confidence by the transferor liability for which transferred to the transferee. This was because there could not be a breach of the implied term if the conduct complained of would do nothing to alter the remedies available to the employee on transfer. Here, the employees’ concern was regarding their terms and conditions after transfer, and TUPE provided protection in relation to terms and conditions after transfer and, therefore, a remedy in the event of breach. The EAT did however indicate: “we cannot exclude the case that in the context of transfers of undertakings the consequences of the proposed transfer, as known to the transferor, to his employees are so dire, whether in health and safety terms or other-

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wise, that the proposal on the part of the employer to go ahead with the transfer could so undermine the confidence relationship with his employees as to defeat [the implied term].”

The new provision – Regulation 4(9), 4(10) and 4(11) of the 2006 Regulations One of the most significant new provisions within the 2006 Regulations is Regulation 4(9). This provides that: Subject to the specific provision regarding insolvency changes (see Chapter 15) “where a relevant transfer involves or would involve a substantial change in working conditions to the material detriment of the person whose contract of employment is or would be transferred… such an employee may treat the contract of employment as having been terminated, and the employee shall be treated, for any purpose, as having been dismissed by the employer.” Further, Regulation 4(11) provides that the transfer of employees under Regulation 4(1), the provision that employees shall not transfer if objecting to transfer under Regulation 4(7) and 4(8), and Regulation 4(9) itself: “are without prejudice to any right of an employee arising apart from these Regulations to terminate his contract of employment without notice in acceptance of a repudiatory breach of contract by his employer.” In short, therefore, old Regulation 5(5), TUPE constructive dismissal claims are provided for in Regulation 4(11) and there is provision for an entirely new type of claim at 4(9).

The new provision – the practical impact of Regulation 4(9) Regulation 4(9) amounts to a significant change to TUPE. This is because it introduces an entirely new right for employees to regard themselves as dismissed in the context of a TUPE transfer. Further, the threshold for employees to regard themselves as dismissed seems to have been set at a fairly low level insofar as, the only requirement is a “substantial change in working conditions to the material detriment” of a person whose contract of employment is or would be transferred.


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In relation to the question of what will amount to a “substantial change in working conditions” the DTI guide indicates as follows: “This will be a matter for the courts and the Tribunals to determine in the light of the circumstances of each case. What might be a trivial change in one setting might constitute a substantial change in another. However, a major relocation of the workplace which makes it difficult or much more expensive for an employee to transfer, or the withdrawal of a right to a tenured post, is likely to fall within this definition.” Significantly, Regulation 4(9) claims: •

do not require there to be a repudiatory breach of contract as required for common law constructive dismissal claims;

•

do not even necessarily require a breach of contract. For example, a transfer might involve a change in work location which is permitted under the employee’s contract but nonetheless amounts to a substantial change in working conditions to the employee’s detriment.

The new provision at Regulation 4(9) effectively reverses the decision in Rossiter v Pendragon insofar as it provides employees in a TUPE scenario with a right to regard themselves as dismissed without the need for a repudiatory breach, as would be required in order to found a common law constructive dismissal claim. Whilst under the 1981 Regulations, therefore, Rossiter v Pendragon confirmed that Regulation 5(5) did not give rise to a wider type of TUPE constructive dismissal claim, the drafting of new Regulation 4(9) clearly gives rise to a wider type of TUPE constructive dismissal claim. As to the consequences where an employee is entitled to regard themselves as having been dismissed under Regulation 4(9), Regulation 4(10) provides that: “no damages shall be payable by an employer as a result of a dismissal falling within [Regulation 4(9)] in respect of any failure by the employer to pay wages to an employee in respect of the notice period which the employee has failed to work.” In short, although the employee is entitled to regard themselves as dismissed, they will not have a wrongful dismissal claim in relation to their notice period and, effectively, therefore, in normal circumstances, will only have a right to pursue damages for unfair dismissal. Regulation 4(11) makes clear, however, that Regulation 4(9) is without prejudice to an employee’s right to pursue a common law constructive dismissal claim and, therefore, also sue for wrongful dismissal, where there is a repudiatory breach.

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Therefore, the position would seem to be as follows: •

If the relevant transfer would involve a substantial change in working conditions to the material detriment of a person whose contract of employment is, or would, transfer then the employee may treat themselves as dismissed under 4(9) and pursue an unfair dismissal claim, but not a wrongful dismissal claim in relation to their notice period.

•

If, in addition to meeting the necessary threshold to give rise to a Regulation 4(9) claim, the higher threshold of a repudiatory breach of contract is met, the individual would also, as a result of there having been a common law constructive dismissal, be entitled to pursue a wrongful dismissal claim and seek damages in relation to the notice period.

The new provision – how do Regulation 4(9) and 4(11) interrelate with the right to object to transfer and who will be liable in what circumstances? These issues become key in the scenario where, in advance of a transfer, an employee who would otherwise have transferred to the transferee, resigns as a result of proposed changes to their working conditions proposed by the transferee which they have been informed of either formally, through the TUPE information and consultation process, or informally. In this scenario, where the employee treats themselves as dismissed prior to the transfer, are they objecting to transfer under Regulation 4(7), treating themselves as dismissed under 4(9), 4(11) or both, and, dependent on this, will the transferor be liable or will the transferee? The above scenario raises key questions. •

Do Regulation 4(9) and 4(11) override Regulation 4(8) so that there is a dismissal and, therefore, liability?

•

Who will be liable for pre-transfer Regulation 4(9) claims?

•

Who will be liable for pre-transfer Regulation 4(11) claims?

These issues are not straightforward, involving detailed consideration of Regulation 4 and the Humphreys case already referred to above, The position under the 1981 Regulations – combined impact of right to claim constructive dismissal and right to object to transfer.


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The answer to the first question, ‘Do Regulation 4(9) and 4(11) override Regulation 4(8)?’, seems clear. As a result of the drafting of Regulation 4(8), Regulation 4(9) and 4(11) override Regulation 4(8) (the right to object to transfer) and, therefore, where Regulation 4(9) or 4(11) apply, an employee has a right to sue for dismissal notwithstanding Regulation 4(8). The next question, ‘Who will be liable for a 4(9) claim in these circumstances?’, is not so straightforward. The drafting of Regulation 4(9) suggests that an employee’s claim is against the employer at the time of the employee’s dismissal. Therefore: •

if the claim is pursued in advance of transfer the transferor;

•

if the claim is after transfer, the transferee.

What is less clear is if an employee claims to have been dismissed under Regulation 4(9) before transfer because of substantial changes to take effect after transfer, will liability then transfer across to the transferee? The position however, seems to be as follows. •

If the employee objects to transfer as provided for in Regulation 4(7) and pursues a Regulation 4(9) claim then the wording at the start of Regulation 4(1) “except where objection is made under paragraph (7)” and the wording in 4(7) itself “paragraph (1) and (2) shall not operate to transfer” has the effect that liability will not transfer to the transferee. The transferor will therefore be liable.

•

What though, if an employee is held not to have not objected under Regulation 4(7), but merely to have treated themselves as dismissed under Regulation 4(9)? Unlike the wording of Regulation 5(5), which was considered in the Humphreys case, and which was referred to as having the effect that liability for the 5(5) claim did not transfer to the transferee, Regulation 4(9) does not refer to “a right arising apart from these Regulations”. Further, Regulations 4(1) and 4(3) are not caveated to exclude a transfer of liability where an employee pursues a Regulation 4(9) claim. It therefore seems likely that liability will transfer under Regulation 4(3). This being on the basis that a dismissal because a relevant transfer involves a substantial change in working conditions must as a minimum be “transfer connected” for the purposes of Regulation 4(7), in which case, unless an ETO defence is available, the dismissal comes within 7(1) and liability for it transfers under 4(3).

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One of the Q&A’s given within the DTI guide considers whether dismissals will be automatically unfair when an employee resigns because of substantial changes within Regulation 4(9). The Q&A is as follows: “Q: Does this mean it is unlawful for the transferee to make such “substantial changes in working conditions” and it is automatically unfair when an employee resigns because such a change has taken place? A:

No. The Regulations merely classify such resignations as “dismissals”. This can assist the employee if he subsequently complains of unfair dismissal because he does not need to prove he was “dismissed”. However, to determine whether the dismissal was unfair, the Tribunal will still need to satisfy itself that the employer had acted unreasonably, and there is no presumption that it is unreasonable for the employer to make changes…” It does seem, however, that this analysis is wrong. In particular, it takes no account of Regulation 7(1) and the fact that, under Regulation 7(1), a dismissal will be automatically unfair if solely or principally by reason of the transfer itself, or a reason connected with the transfer which is not an ETO reason. If an ETO defence were available, however, the dismissal would be a dismissal in the circumstances described within 7(2) not 7(1), and liability would not, therefore, transfer under 4(3). In practice, however, given the difficulty of a transferor being entitled to rely on a transferee’s ETO defence (see Chapter 13, Can the transferor rely on the transferee’s ETO reason?) and the “entailing changes in the workforce” requirement (see Chapter 13, Case law regarding “entailing changes in the workforce”), it seems unlikely that an ETO defence will be available in normal circumstances. Consistent with this, it seems that, unlike the position in relation to Regulation 5(5) under the 1981 Regulations as considered in Humphreys, liabilities for Regulation 4(9) claims will transfer unless either the 4(9) claim is held to also involve a 4(7) objection or an ETO defence is available.

•

If, however, an employee, rather than merely pursuing a Regulation 4(9) claim, in relation to which, as already discussed, the remedy is limited to an unfair dismissal claim in normal circumstances, is able to also point to the necessary repudiatory breach to found a Regulation 4(11) claim, it seems that liability for the 4(11) claim at


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least cannot transfer to the transferee as a result of the express wording within Regulation 4(11), “arising apart from these Regulations” as considered in the Humphreys case. On the assumption that the above analysis is correct the following questions will become key as to which party will be liable in relation to TUPE constructive dismissals. •

Firstly, has there been a 4(7) objection? If so, this is the end of the matter, liability cannot transfer to the transferee.

•

Secondly, if the claim is a 4(9) claim and it is not found to involve an objection under 4(7), does the dismissal come within Regulation 7(1) (i.e. is it automatically unfair on the basis of being by reason of the transfer or a transferred connected reason where an ETO defence is not available?) in which case liability transfers to the transferee under Regulation 4(3)? Alternatively, if dismissal does not come within Regulation 7(1), on the basis that an ETO defence is found to be available (which, as discussed above, generally seems unlikely) then liability will not transfer under Regulation 4(3).

•

Thirdly, is the claim under both Regulation 4(9) and 4(11)? In which case it would seem that liability for the 4(9) claim is likely to transfer across to the transferee but that liability for the 4(11) claim, in practice in relation to the notice element, cannot transfer and, therefore, will remain with the transferor.

A crucial issue is therefore going to be whether a pre-transfer Regulation 4(9) and/or 4(11) claim necessarily brings with it an objection to transfer under Regulation 4(7). In considering this issue, Employment Tribunals will be referred to the Humphreys decision. On the facts in Humphreys it does seem as though there was communication which could be classified as an objection to transfer prior to the Regulation 5(5) dismissal claim. This would seem to open up the possibility of an argument that Humphreys is not authority that a Regulation 5(5) claim necessarily carries with it an objection to transfer and, therefore, in relation to Regulation 4(11) or 4(9) claims going forward, if an employee merely chooses to treat themselves as dismissed and does not separately refer to an objection to transfer, Regulation 4(7) will not be bought into play at all. It, of course, remains to be seen exactly what approach the Employment Tribunals will take to Regulation 4(9) given that this is an entirely new provision.

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The new provision – how does this analysis impact on the need for indemnities? Following the decision in Humphreys, it has been advisable for a transferor to seek an indemnity against the risk of anticipatory breach claims pursued by employees prior to transfer as a result of changes proposed by the transferee following transfer. This being on the basis that Humphreys provided authority that, certainly where an employee objected to transfer, liability for these type of claims will not transfer across to the transferee. On the basis of the above analysis, it is still necessary for a transferor to seek this type of indemnity. In particular, on the basis that liability for these type of claims will not transfer if the employee is held to have objected to transfer under Regulation 4(7), and it also seems that liability for a Regulation 4(11) claim will not transfer on the authority of Humphreys.

The new provision – can Regulation 4(9) be relied upon against the transferee following transfer? A further issue is whether Regulation 4(9) only provides protection to employees prior to/on transfer, or whether it also provides ongoing protection insofar as, at a later stage following transfer, the transfer involves “a substantial change in working conditions” etc. If it is the latter, then Regulation 4(9) would seem to effectively impose a further risk for transferee employers seeking to change terms and conditions, over and above the risk of variations being legally ineffective, as discussed in Chapter 12. In particular, a risk that any substantial change to an individual’s working conditions to their material detriment deriving from the transfer entitles employees to regard themselves as dismissed. Presumably also, as already discussed, it must necessarily follow that such dismissals would, as a minimum, be solely or principally transfer connected, such that dismissals would be automatically unfair unless an ETO defence were available. The potential impact of this would be significant given the difficulties of satisfying the “entailing a change in the workforce” element of an ETO defence (as already discussed in Chapter 13, Case law regarding “entailing changes in the workforce”).


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Chapter 15 TUPE and insolvency Background Summary provision made Applicability of TUPE to insolvency sales The meaning of “relevant insolvency proceedings” – application to different types of UK insolvency proceeding What statutory liabilities will not pass where the transferor is subject to relevant insolvency proceedings? Some issues arising regarding insolvency variations


Chapter 15 TUPE and insolvency

Background It was made clear in the Consultation Paper that the rationale behind the changes made to TUPE regarding insolvency in the 2006 Regulations is to “promote the rescue culture”, i.e. in practice to try and ensure that TUPE does not stand in the way of the purchase of insolvent businesses as going concerns.

Summary provision made The detailed provision is contained within Regulations 8 and 9. The provision can be summarised as follows: 1.

Staff and liabilities will not transfer where the transferor is subject to “bankruptcy proceedings or any analogous insolvency proceedings which have been instituted with a view to the liquidation of the assets of the transferor and are under the supervision of an insolvency practitioner.”

2.

Liability for sums payable under statutory insolvency provisions will not pass to the transferee if, at the time of transfer, the transferor is subject to “relevant insolvency proceedings”. It is noteworthy, however, that the DTI did not go as far as the Amending Directive allowed and, therefore, other liabilities still pass.

3.

Where transferors are subject to “relevant insolvency proceedings” Regulation 9 provides specifically for variations of contract. The effect of Regulation 9 is that TUPE shall not prevent the transferor or transferee and, “appropriate representatives”, from agreeing “permitted variations”. For these purposes: •

“appropriate representatives” has the same meaning as in relation to TUPE information and consultation, and consultation in relation to collective redundancies;

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•

“a permitted variation”, is a variation where: –

the sole or principal reason for the variation is the transfer itself or a reason connected with the transfer that is not an ETO reason; and

–

is designed “to safeguard employment opportunities by ensuring the survival of the undertaking, business or part”.

There is also express provision that, where appropriate representatives are nonunion representatives: •

agreement must be in writing and signed by each representative or, where this is not reasonably practicable, by a duly authorised agent of that representative; and

•

the employer must, prior to signature, provide all employees with copies of the text of the agreement and, “such guidance as those employees might reasonably require in order to understand it fully”.

Applicability of TUPE to insolvency sales TUPE is capable of applying to an insolvency sale in the same way as to any other sale. There are two caveats to this as follows. Firstly, Regulation 8(7) provides as follows: “Regulations 4 [transfer of employment contracts and rights] and 7 [dismissal of employee because of relevant transfer] do not apply to any relevant transfer where the transferor is the subject of bankruptcy proceedings or any analogous insolvency proceedings which have been instituted with a view to the liquidation of the assets of the transferor and are under the supervision of an insolvency practitioner.” This follows the wording of article 5(1) of the Directive almost word for word, this wording itself reflecting ECJ case law regarding the applicability of the Directive to insolvency proceedings, particularly the cases of Abels v Administrative Board [1987] 2 CMLR 406 and D’urso v Ercole Marelli [1992] IRLR 136. The second caveat is that there is express provision regarding those employee liabilities that will transfer under Regulation 8 (discussed below) and there is express provision regarding variations of contract where transferors are subject to relevant insolvency proceedings (see above).


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The meaning of “relevant insolvency proceedings” – application to different types of UK insolvency proceeding Relevant insolvency proceedings are defined as: “insolvency proceedings which have been opened in relation to the transferor not with a view to the liquidation of the assets of the transferor”. It can be seen from the summary at the beginning of this chapter, that in an insolvency scenario there is a vital distinction between the application of TUPE in cases where the transferor is the subject of bankruptcy proceedings, or any analogous insolvency proceedings instituted with a view to the liquidation of assets, and “relevant insolvency proceedings” opened not with a view to the liquidation of assets. In the former case, staff and liabilities do not transfer at all. In the latter case, staff do transfer, however, certain statutory liabilities will not transfer and there is greater scope to vary terms and conditions. There is no provision within TUPE itself as to which type of UK insolvency proceeding has the first consequence and which has the second. In August 2006 however, the DTI published guidance, the Transfer of Undertakings (Protection of Employment) Regulations 2006 – Redundancy and Insolvency Payments (URN 06/1368) (“the Guidance”). The Guidance followed on from a letter on the same issue sent out by the Director of the Redundancy Payments office on 3rd April 2006 (“The RPO Letter”). In short the purpose of that letter and now the Guidance is to set out the Government’s view as to the circumstances where the RPO will be liable for statutory payments. The view set out within the Guidance is that the following types of insolvency provisions are bankruptcy proceedings or analogous, such that staff and liabilities will not transfer: •

bankruptcy;

•

compulsory liquidation;

•

creditor’s voluntary liquidation.

The following types of insolvency proceedings are proceedings opened in relation to the transferor not with a view to the liquidation of assets, so that staff and

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liabilities do transfer, albeit that the RPO picks up liability for certain debts as at the time of transfer: •

administration;

•

voluntary arrangements;

•

administrative receivership.

In the case of a member’s voluntary liquidation, the view is that this is not an insolvency proceeding. Therefore, Regulations 8 and 9 do not apply, and TUPE applies in the same way as to any other non-insolvency related transfer.

What statutory liabilities will not pass where the transferor is subject to relevant insolvency proceedings? Regulation 8 refers to provisions within the Employment Rights Act 1996 regarding employee rights on an insolvency. In short, the view set out within the RPO Letter, the Guidance is that where there is a transfer to which the relevant insolvency proceedings provisions apply, the position regarding the liabilities which will be picked up by the RPO and which will not, therefore, transfer is as follows.

Staff who transfer •

Up to 8 weeks arrears of pay (being arrears as at the insolvency date).

•

Holiday taken but unpaid in the 12 months prior to the insolvency date.

For these purposes up to a maximum in either case of £310 a week. All other liabilities will pass.

Staff who are unfairly dismissed because of the transfer The view given within the RPO Letter is that, whilst arrears of pay and taken but unpaid holiday will be covered in the same way as for staff who transfer, all other liabilities will pass and, therefore, the RPO will not pick up any liability in relation to notice entitlement or unfair dismissal compensation.


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Staff dismissed for ETO reason The indication is that the RPO would, in addition to arrears of pay and taken but unpaid holiday, also cover: •

payment of statutory notice entitlement (up to the maximum weekly amount);

•

statutory redundancy payment; and

•

any basic award.

In order to avoid these liabilities from transferring however, dismissals would have to take place prior to transfer. It is made clear within the RPO Letter that, in the RPO’s view, the above will only apply if the transfer date takes place after the insolvency date.

Some issues arising regarding insolvency variations These include the following: •

The use of existing representative bodies Given that no doubt in practice there will be a very tight timetable for informing and consulting if the business is to be saved as a going concern, it could be argued that there should be a wider scope here for informing and consulting with an existing representative body, rather than having to carry out elections. Against this it can be argued that in these circumstances, given that representatives can agree variations, it is particularly important that representatives have the requisite authority.

•

Is unanimity amongst representatives required? It is not clear whether the effect of Regulation 9(5)(a) is intended to require unanimity from amongst all employee representatives. No doubt this may in practice often be difficult to obtain.

•

The extent of the obligation to provide guidance Issues may arise as to the extent of the employer’s obligation when it comes to providing “such guidance as employees might reasonably require to understand the agreement reached”.

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Chapter 16 Contracting out of TUPE Provision within TUPE Case law Contracting out of claims of failure to inform and consult


Chapter 16 Contracting out of TUPE

Provision within TUPE Provision is contained within Regulation 18 which provides as follows: “section 203 of the 1996 Act (restrictions on contracting out) shall apply in relation to these Regulations as if they were contained in that Act, save for that section shall not apply in so far as these Regulations provide for an agreement (whether a contract of employment or not) to exclude or limit the operation of these Regulations.” The 1996 Act refers to the Employment Rights Act 1996 (“the ERA”). Section 203 of the ERA provides as follows: “any provision in an agreement (whether a contract of employment or not) is void in so far as it purports: (a)

to exclude or limit the operation of any provision of this Act; or

(b)

to preclude a person from bringing any proceedings under this Act before an [employment tribunal].”

Therefore, in effect, Regulation 18 provides that section 203 of the ERA as quoted above should be read as though the words “this Act” were replaced by “TUPE”. Section 203 (2)(f) goes on to provide however, that section 203(1) does not apply to any agreement to refrain from instituting or continuing specified types of claim listed within certain sub-sections of section 18(1) of the Employment Tribunals Act 1996 (“the Employment Tribunals Act”) where a valid compromise agreement is used. In short, therefore, as a result of Regulation 18, any provision in an agreement to exclude or limit any provision of TUPE or preclude a person from bringing proceedings under TUPE is void. This does not apply however, in so far as the Regulations themselves expressly provide for an agreement to exclude or limit the Regulations. Therefore Regulation 18 does not make void transfer connected variations to contract for an ETO reason (expressly provided for within Regulation 4(5)) or permitted variations in an insolvency scenario (expressly provided for within Regulation 9).

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Case law Solectron Scotland Limited v Roper [2004] IRLR 4 FACTS

This case involved employees who had initially been employed by BT and who transferred firstly to one transferee on a first transfer, and secondly to a second transferee on a further transfer. The issue was whether the employees were entitled to rely on BT redundancy terms. There was also an issue in relation to certain of the employees who on termination had entered into compromise agreements giving up their BT redundancy rights. The employment tribunal held that Regulation 12 of the 1981 Regulations (the predecessor to Regulation 18 in the 2006 Regulations, which provided that any provision of any agreement (whether a contract of employment or not) would be void in so far as it purported to exclude or limit the operation of specified regulations including Regulation 5 (effect of relevant transfer on contracts of employment)) meant that the compromise agreements were not effective. DECISION OF THE EAT

The EAT in a decision where leading judgement was given by Mr Justice Elias indicated that the problem regarding agreements made following a TUPE transfer stemmed from the Daddy’s Dancehall case and, in particular, the principal following on from that case, that an employer cannot after transfer vary the terms of an employee’s contract for a transfer connected reason. The EAT then went on to state as follows: “it is, however, to be noted in this case that the effect of the compromise agreement is solely to compromise a financial claim that the employee has on the termination of his employment contract. The employer is not purporting to vary the contract but merely to compromise a dispute as to its value. Moreover, there is no change in the terms and conditions for the future by reason of the obvious fact that the contract has come to an end.” Therefore, looking at the policy behind Daddy’s Dancehall, this was not infringed by a compromise agreement made in these circumstances. The EAT also stated: “we think that properly analysed, it cannot be said that these particular compromise agreements arise solely or even mainly by reason of the transfer.”


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IMPACT OF THE DECISION

This decision was a welcome decision from the point of view of employers insofar as it, for the first time, provided authority that a compromise agreement could be effective in a TUPE scenario notwithstanding Regulation 12 (now Regulation 18). On the basis of the detailed wording of the EAT judgement, however, it is far from clear that a compromise agreement will be effective in all TUPE scenarios. In particular, it would seem open for an employment tribunal to find that, in appropriate circumstances, compromise agreements do offend against the Daddy’s Dancehall principle on the basis that they are solely or mainly by reason of the transfer. Alternatively, that compromise agreements offend against this principle in circumstances where used to terminate an existing contract and rights with employment continuing as, in these circumstances, there will be a change in terms and conditions for the future.

Contracting out of claims of failure to inform and consult Background As discussed in Chapter 10, TUPE imposes detailed obligations on employers to inform and consult with appropriate representatives with provision for financial sanctions of up to 13 weeks’ pay per employee in the event of a failure to do so. It is also now the case (as discussed in Chapter 10) that both transferor and transferee can be liable in relation to failures to inform and consult with the transferring employees.

Position under the 1981 Regulations One problem under the 1981 Regulations was that it seemed that an employer could not use a compromise agreement to reach a settlement with employees on termination which would be effective to preclude employees from pursuing claims for failure to inform and consult under TUPE. This was because Regulation 12 of the 1981 Regulations provided that any provision of any agreement, whether or not a contract of employment, would be void insofar as it purported to exclude or limit the operation of Regulation 10 (which imposed the obligations to inform and consult) or to preclude a person from presenting a complaint under Regulation 11 (which set out the provision for remedy for failure to inform or consult). Further, the detailed statutory provisions regarding the types of claim which can be validly settled using a compromise

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agreement (section 203 of the ERA and section 18 (1) of the Employment Tribunals Act) did not refer to claims under Regulation 11.

The position under the 2006 Regulations As explained above, the effect of Regulation 18 when read in conjunction with section 203 of the ERA, is that any provision in an agreement (whether a contract of employment or not) is void insofar as it purports: •

to exclude or limit the operation of any provision of TUPE;

•

to preclude a person from bringing any proceedings under TUPE.

This does not apply, however, to any agreement to refrain from instituting or continuing proceedings listed in certain sub-sections of clause 18 of the Employment Tribunals Act if the conditions regulating compromise agreements under the ERA are satisfied. Currently however, the proceedings listed in those sub-sections do not include claims under Regulation 15 (regarding remedies for a failure to inform or consult under the 2006 Regulations) or any other provision of TUPE. The practical impact of this, therefore, is that unless and until section 203(1)(f) of the ERA or the provisions referred to within that sub-section within the Employment Tribunals Act are amended to include claims under Regulation 15 TUPE, a compromise agreement cannot be used to validly effect a compromise of these claims.


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Chapter 17 Negotiating a transfer agreement Background Seller transferor in a business sale context Purchaser transferee in a business sale context Client transferor in a service provision change context Contractor transferee in a service provision change context


Chapter 17 Negotiating a transfer agreement

Background Understanding TUPE is of course essential to both transferor and transferee, whether in a business sale or service provision change context and, whether the transferor or transferee is a public or private sector employer, with a view to ensuring that particular obligations under TUPE are complied with and, therefore, potential liabilities under TUPE are avoided. Understanding TUPE is particularly important however, to a transferee as, as a result of TUPE, it will inherit employees, liabilities and ongoing employment costs, all of which it needs to factor in when deciding the price it is willing to pay for a business or the fee which it needs to charge for provision of the service. It will usually be the case, however, that the transferor and transferee will not merely leave the issue of apportionment of liability and costs to be determined under TUPE. Frequently, parties will seek to negotiate and agree appropriate contractual provision regarding allocation of cost and risk in the form of indemnities and warranties. In the context of a business sale, the purchaser will usually seek detailed warranties and indemnities from the seller and, similarly, the seller may often seek more limited indemnities from the purchaser. In the context of a service provision change transfer however, the position may be more complicated insofar as at least in the case of second stage contracting out the new service provider, the transferee, is unlikely to have any contractual relationship with the former service provider, the transferor, rather it will be entering into a contract with the client. Nonetheless, the new service provider transferee will often, in the contract with the client, seek to negotiate express provisions providing protection regarding liabilities transferring and employee costings. The client will similarly often seek provision regarding the service provider’s obligations in relation to the transfer on it taking on the service and also further provision regarding its obligations on exit, and on another service provider taking on provision.

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1 7 N E G O T I AT I N G A T R A N S F E R A G R E E M E N T

Seller transferor in a business sale context The seller’s principle concerns are likely to be: •

to achieve the best price for the business;

•

to be left with as few potential liabilities as possible.

Consistent with this, a seller transferor should seek the following types of provision.

Agreement that TUPE will apply The seller will want to ensure that staff transfer so that it is not left with unwanted employees and, therefore, costs. The seller will, therefore, want confirmation of the agreement between the parties that TUPE will apply and that the purchaser will, therefore, inherit the transferring employees on the same terms and conditions as they enjoyed with the purchaser prior to transfer. Ideally the seller should also seek an indemnity from the purchaser against any breach of such clause by the purchaser.

Letters to transferring employees In order that transferring employees are in no doubt as to their employment status going forward and, therefore, do not seek redundancy payments from the seller, the seller should seek agreement that, as soon as possible after completion, letters in an agreed form will be sent to the transferring employees these letters should confirm that the employees have transferred by virtue of TUPE and that they are now employed by the purchaser on the terms and conditions which they previously enjoyed with the seller.

Indemnity in respect of transferring employees after transfer The seller should seek an indemnity in respect of any employment claims of any sort relating to the transferring employees after transfer. This is likely to be the most essential indemnity for the seller. Liability for post-transfer claims will of course pass to the purchaser by virtue of Regulation 4, provided there is a TUPE transfer. However, this indemnity is nonetheless essential as, in a TUPE scenario, employees may be confused as to the legal position and, therefore, bring claims both against the purchaser and the seller.


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Indemnity with regard to collective obligations The seller should seek an indemnity relating to any failure to consult either pursuant to Regulation 13 TUPE, the provisions of the Trade Union and Labour Relations (Consolidation) Act 1992, or any collective agreement with the transferring employees or their representatives in relation to the acquisition of the business by the purchaser. If the purchaser is properly advised, however, it will ordinarily only be prepared to provide an indemnity to the seller in respect of Regulation 13 where the breach of Regulation 13 was because of its failure to provide, or provide in good time, the seller with the information necessary for it to comply with Regulation 13(2)(d). The need for an indemnity of this type has increased following the 2006 Regulations, and the provision for joint and several liability in relation to any failure to inform and consult with the transferring employees (see Chapter 10, Will liability for failure to inform and consult transfer across to the transferee?).

Indemnity in respect of anticipatory breach claims from transferring employees The seller should also seek to obtain an indemnity from the purchaser in respect of any claim from any of the transferring employees where the claim arose prior to transfer by reason of the transferring employee claiming constructive dismissal, whether under Regulations 4(9), 4(11) or otherwise, on the basis of proposed changes to their terms and conditions or working conditions by the purchaser following transfer. The case of Oxford v Humphreys confirmed that a transferring employee is entitled to claim constructive dismissal against his/her current employer (the transferor), if they object to transfer as a result of proposed detrimental changes to terms and conditions by the transferee. The need for such an indemnity remains (see Chapter 14, The new provision – how does this analysis impact on the need for indemnities?).

Indemnity to the purchaser in respect of pre-transfer liabilities In order to provide a balanced agreement, if drafting clauses, it is sensible for a seller to draft in clauses which are not entirely one sided. On this basis, it would be usual to include an indemnity to the purchaser in respect of pre-transfer liabilities.

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Purchaser transferee in a business sale context The concerns of a purchaser are likely to be: •

to purchase at the lowest possible cost;

•

inheriting as few liabilities (current and future) as possible.

Consistent with this a purchaser transferee should seek the following types of provision.

Full employment warranties Full employment warranties concerning those who will transfer. For example, warranties that full details have been provided regarding terms and conditions and remuneration, that employment legislation has been fully complied with, that no claims are anticipated, etc. Warranties should also confirm other points, for example, that listed employees have been assigned to the business for minimum periods, no-one other than the listed employees have been assigned to the business etc.

List of Transferring Employees It is essential in order to allow the purchaser to ascertain its employment costs once it takes over the business, that it knows which employees it will be inheriting. An agreed list of employees should, therefore, be included as a schedule, those listed then being referred to as the “Transferring Employees”.

Indemnity in respect of differential between terms and conditions disclosed and terms and conditions on which Transferring Employees transfer Given that the purchaser will be inheriting employees on their existing terms and conditions (and now Regulation 4(4), following Wilson, will find it difficult to vary those terms and conditions) it is vital that information provided by the seller regarding the Transferring Employee’s terms and conditions is accurate. A purchaser should, of course, insist on a warranty to this effect. A purchaser may, however, also want to seek an additional level of protection through a specific indemnity to cover any costs arising as a result of any differential between the terms and conditions disclosed and the terms and conditions on which Transferring Employees transfer across.


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Indemnity in relation to pre-transfer liabilities in relation to the Transferring Employees The most essential indemnity for a purchaser is a complete indemnity from the seller in respect of pre-transfer liabilities of any sort in relation to the Transferring Employees.

Indemnity in relation to “Former Employees” and “Retained Employees” Liability for transfer connected dismissals prior to transfer, transfers to the purchaser under Regulation 4(3). A purchaser should, therefore, ensure that it has an indemnity in respect of any employee related claims from “Former Employees” as defined. Similarly, because a purchaser is reliant upon the seller to accurately identify those employees who are assigned to the business and to list those as Transferring Employees, a purchaser also needs to cover the eventuality of employees other than the Transferring Employees transferring across. To cover this eventuality a purchaser should include a definition for “Retained Employees”, defined as all employees of the seller other than the Transferring Employees or Former Employees and obtain an indemnity from the seller in respect of any claims relating to such employees. Alternatively, the issue of additional employees potentially transferring across may be provided for through a detailed “wrong pocket provision”. In short, an express provision whereby, if any employees other than the Transferring Employees transfer across, the purchaser can dismiss and be fully indemnified against the costs of employment and dismissal.

Indemnity for failure to comply with collective obligations On the basis that the seller will be the employer of the Transferring Employees until the time of transfer, the obligations under Regulation 13 TUPE with regard to the provision of information to and consultation with appropriate employee representatives of the Transferring Employees will fall upon the seller. Regulation 15(9) makes clear however, that a transferee will be jointly and severally liable for the transferor’s failure. A purchaser should, therefore, seek an indemnity from the seller in respect of any failure to comply with Regulation 13, any requirement pursuant to the Trade Union and Labour Relations (Consolidation) Act 1992 or any collective agreement. If the seller is well advised it should seek a caveat to

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this indemnity to the extent that any failure to comply with Regulation 13 is caused by the purchaser’s failure to provide it with information pursuant to Regulation 13(4) about measures it intends to take.

Specific indemnity in respect of redundancy costs Although this will certainly not be a standard indemnity, there may be circumstances in which a purchaser will be able to obtain from the seller an indemnity against redundancy costs arising from certain envisaged redundancies of Transferring Employees following transfer. If the seller is prepared to provide such an indemnity it may well be that the indemnity will, however, be confined to statutory/contractual redundancy payments on the basis that the seller would argue that provided the purchaser follows a fair procedure there should be no further liabilities relating to unfair dismissal (as an ETO defence will be available for genuine redundancies). The issue of which party in this situation would pick up the cost of notice periods would be likely to depend upon the extent to which the purchaser has time to give notice whilst it still has a requirement for such employees.

Continuing obligation to provide employee information A purchaser may wish to include an on-going obligation on the seller to provide employee information for a period of time after transfer.

Indemnity to the seller regarding post-transfer liabilities When drafting initial indemnities within a transfer agreement, on behalf of either party, it is usually sensible to ensure that the clauses drafted are not entirely one sided. This is advisable if only to set a sensible tone for ongoing negotiations. Often, therefore, a purchaser may wish to include, within its first draft, an indemnity to the seller in respect of post-transfer liabilities.


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Client transferor in a service provision change context The client’s principal concerns are likely to be: •

continuity/quality of the service; A significant distinction from the position of a seller transferor is that a client transferor will continue to be the recipient of the Transferring Employees’ services. It may, therefore, wish to ensure that certain key employees are retained in provision of the service. It may want some degree of involvement in, veto over, or at least contractual provision, regarding, assignment of new staff to the service.

•

minimising the cost it is paying for the service;

•

minimising the risk which it retains following transfer;

•

ensuring a smooth re-contracting;

•

industrial relations. The client may be concerned to ensure it is seen to look after the interests of Transferring Employees consistent with its ongoing relationship with its remaining staff and any union representatives.

Consistent with this, a client may wish to consider the following types of provision in addition to those set above, Seller transferor in a business sale context.

Provision to protect Transferring Employees When contracting out, a client transferor may wish to include specific provision to try and protect the position of its employees from the point of view of industrial relations, if not a more altruistic motive. A client could, for example, seek to impose an obligation on the contractor precluding the contractor from making any detrimental change to terms and conditions for a specified period, or from dismissing an employee other than for poor performance or misconduct for a specified period. A client may also want to include a provision that the contractor will not de-recognise a recognised trade union.

Obligation to provide “Re-tendering Information” Where the client wishes to re-contract out the provision of the service there may well be little incentive for the incumbent contractor to co-operate in a process which may well ultimately lead to it losing the contract. Whilst Regulation 11 TUPE

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does now impose an obligation on a transferor to provide employee liability information (see Chapter 10, The new obligation to notify of employee liability information) this is of limited value. In these circumstances, a client should include a specific provision requiring the contractor on any re-tendering to provide specified “Re-tendering Information” regarding the employees then engaged in providing the service. Ideally the client should also obtain an indemnity in respect of any failure to provide that information, to provide the information in good time or any inaccuracy in it.

Provision precluding contractor from increasing remuneration or other terms and conditions of employees then engaged in providing the service A further concern for a client may be that if the contractor knows that it is due to lose a contract then it could, with a view to attempting to frustrate the recontracting out process, seek to improve the terms and conditions of the employees then engaged in providing the service shortly before any recontracting out, thereby increasing the potential cost to any new contractor. In order to safeguard against this, therefore, the client should seek to include a provision precluding the contractor from making any change in remuneration or other terms and conditions without the client’s prior consent following the giving of notice to the contractor by the client that it intends to re-tender, and within a prescribed period in advance of cessation of the service.

Provision preventing contractor from transferring employees A further concern may be that, prior to any re-contracting out, the contractor will seek either to assign the best employees then engaged in providing the service elsewhere within its business so that they do not transfer across, or alternatively will “dump” employees with particularly poor performance or disciplinary records (what is sometimes quaintly referred to as “lemon dropping”) or even lengthy periods of service, and, therefore, potentially high redundancy entitlements. The client should seek express provision preventing this, again following the giving of notice to terminate and within a prescribed period in advance of cessation.

Indemnity for a new contractor In a situation where the service is re-contracted out and the contract granted to a new contractor then, as discussed in Chapter 3 (The practical impact of Type B service provision change transfers on general outsourcing), there is likely to


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be a TUPE transfer from the first contractor to the second contractor. Clearly the second contractor would ideally wish to have the protection of an indemnity from the transferor (the first contractor) in respect of any employee liabilities prior to transfer. There would of course, however, be no incentive for the first contractor, which will in any event not be a party to an agreement with the second contractor, to provide such an indemnity on termination. The client may, therefore, wish to include a provision within the initial agreement requiring the contractor to provide any new contractor with an indemnity and/or provision whereby it can assign the benefit of an indemnity to any new contractor.

Contractor transferee in a service provision change context A transferee contractors’ principal concerns are likely to be: •

obtaining the best possible fee and, more particularly, maximising profit for providing the service;

•

being in a position to meet service level requirements;

•

minimising liabilities and ongoing risks inherited on transfer;

•

having protection regarding employee costings on which fees and viability of contract will have been based;

•

being in the best position to retain the contract going forward;

•

minimising the risk of being left with employee liabilities on termination.

Consistent with this, in addition to the provision above, Purchaser transferee in a business sale context, a contractor may wish to consider the following types of provision.

Provision requiring the client to make it a condition of re-contracting out to a new contractor that new contractor will take on the employees then engaged in providing the service One of the principle concerns of the contractor, as outlined above, is likely to be that on a re-contracting out, if the employees are not taken on by any new contractor, then it would be left with liabilities relating to redundancy dismissals. The contractor should, therefore, impose an obligation on the client to require any new contractor to take on the employees then employed by the contractor

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in providing the service. Alternatively, if the service is taken back in-house by the client, for the client to take on those employees. Whilst it could, and no doubt will, be argued that the provision for service provision change transfers reduces the need for this type of indemnity, because it reduces the risk of TUPE not applying, and largely means that whether or not TUPE will apply will depend upon how the contractor resources the contract, such a provision nonetheless gives the contractor an additional level of protection.

Indemnity regarding redundancy dismissals A contractor should also seek, although it is unlikely to obtain unless it has a particularly strong bargaining position, an indemnity from the client against redundancy dismissals in the event of a new contractor or the client not taking on the then existing employees on the termination of the contract. Assuming that the contractor were able to obtain such an indemnity there would be an issue as to whether or not such an indemnity would only cover statutory/contractual redundancy payments or also liability in respect of notice and unfair dismissal liability. One factor which often is not considered in relation to the need for this type of indemnity is that often, whilst it might seem unlikely, it is nonetheless conceivable that, on termination of the contract, the client will not require any party to provide the service going forward.

Indemnity from new contractor/client in respect of employee claims following re-transfer A contractor should also seek, although again it may well find it is unlikely to obtain, an indemnity in respect of employee claims relating to the employees who transfer over to the new contractor/client following re-transfer, any claims for failure to inform and consult in relation to a transfer on termination as a result of the client/new contractor failing to provide, or provide in good time, details of “measures”, and constructive dismissal Regulation 4(9)/4(11) claims as a result of employees’ objections to terms/working conditions offered by a new contractor/the client.


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Chapter 18 Public sector transfers Background Cabinet Office Statement of Practice: Staff Transfers in the Public Sector (“the Statement”) Annexure to Cabinet Office Statement of Practice: Staff Transfers from Central Government: a fair deal for staff pensions (“Annex A”) Office of the Deputy Prime Minister (“ODPM”) Circular 03/2003 – Annex D Code of Practice on Workforce Matters in Local Authority Service Contracts (“the LA Code”) Code of Practice on Workforce Matters in Public Sector Service Contracts (“Public Sector Code”) Retention of Employment Model (“REM”)


Chapter 18 Public sector transfers

Background Where a TUPE transfer takes place between two private sector entities the transferor and transferee must have regard to the Regulations. Where a transfer takes place from a public sector entity, however, whether to another public sector entity or a private sector entity, the position becomes more complex. Firstly, employees of the public sector entity may be entitled to rely directly on provisions of the Directive. This becomes relevant in the event of the Directive providing greater protection in any regard to employees than the Regulations, in which case public sector employees can effectively avoid the more restrictive position in the UK and rely directly on the Directive. In practice, following the coming into force of the 2006 Regulations, there should be few circumstances where it is necessary for public sector employees to rely directly on the Directive. A potential example, however, would include a circumstance where an employee, following on from the EAT decision in the Power case, wished to rely upon a term of a contract introduced principally or solely by reason of the transfer, or for a transfer connected reason other than an ETO reason. In which case, whilst Regulation 4(4) would seem to have the effect that the contract would be void and, therefore, the employee would be precluded from relying upon such a term, if the employee relied directly on the Directive, as interpreted by the ECJ in Daddy’s Dancehall and the EAT in the Power decision, the employee should be able to rely on such a term. In addition, there are various statements/codes of practice which apply to public sector transfers as discussed below.

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18 PUBLIC SECTOR TRANSFERS

Cabinet Office Statement of Practice: Staff Transfers in the Public Sector (“the Statement”) Coverage This is dealt with at paragraphs 6 and 7 of the Statement. The Statement applies directly to central government departments and agencies and to the NHS. The Statement also indicates that the government expects other public sector organisations to follow the Statement and local government, subject to legislation contained within the Local Government Act 1988. It is also made clear that the Statement will cover the following. •

Public private partnerships including contracting out, market testing, PFI, privatisation and other outsourcing and contracting exercises.

•

Second and subsequent generation and contracting where, when the contract was first awarded, staff transferred from the public sector. (Significantly here, although the transfer will be between private sector entities, the Statement nonetheless applies because staff initially transferred from the public sector on the first stage contracting out.)

•

Reorganisations and transfers from one part of the public sector to another.

•

Reorganisations and transfers within the civil service, even though TUPE cannot strictly apply because there is no change in employer.

Summary of the Statement requirements The Statement indicates that the government believes that public sector organisational change involving transfers will be best achieved by clarity and certainty about the treatment of staff and, therefore, that the government “is committed to ensuring that staff involved in all such transfers are treated fairly and consistently and their rights respected”. Following on from this, paragraph 5 of the Statement sets out the following principles: •

“contracting-out exercises with the private sector and voluntary organisations and transfers between different parts of the public sector, will be conducted on the basis that staff will transfer and TUPE should apply, unless there are genuinely exceptional reasons not to do so;


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•

this includes second and subsequent round contracts that result in a new contractor and where a function is bought back into a public sector organisation where, in both cases, when the contract was first awarded, staff transferred from the public sector;

•

in circumstances where TUPE does not apply in strict legal terms for certain types of transfer between parts of the public sector, the principles of TUPE should be followed (where possible using legislation to affect the transfer) and the staff involved should be treated no less favourably than had the Regulations applied; and

•

there should be appropriate arrangements to protect occupational pensions, redundancies and severance terms of staff in all these types of transfer.”

The Statement then sets out some further detail regarding exactly how the Statement applies in relation to different types of public sector transfer. In short, however, the position is that, in line with the principles, it should be made very clear in tendering exercises that staff are to transfer, staff and recognised unions should be informed that staff will transfer and TUPE should apply and there should be full compliance with TUPE. Non-TUPE bids should only be accepted in very exceptional circumstances. Following on from the 2006 Regulations and the provision for service provision change transfers (see Chapter 3, Type B – service provision change transfer), the circumstances where a non-TUPE bid will be appropriate will be even more limited.

Annexure to Cabinet Office Statement of Practice: Staff Transfers from Central Government: a fair deal for staff pensions (“Annex A”) In brief this sets out the approach to be taken in public sector transfers (the coverage being the same as within the Statement and (see Cabinet Office Statement of Practice: Staff Transfers in the Public Sector above) in relation to occupational pensions. Paragraph 9 refers to the two aspects to be covered in relation to treatment of occupational pensions: •

“first, staff should continue to have access after the transfer to a good quality occupational pension scheme under which they can continue to earn pension benefits through their future service;

•

second, staff should be given options for the handling of the accrued benefits which they have already earned.”

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Detailed provisions for these two aspects are then set out, very much in brief in relation to future service: “The guiding principle should be that the new employer offers transferring staff membership of a pension scheme which though not identical is “broadly comparable” to the public service pension scheme which they are leaving. To satisfy the criteria for broad comparability there must be a rigorous scrutiny of the alternative pension arrangements by a professionally qualified actuary which compares the alternative scheme with the public service scheme in detail. A broadly comparable scheme will be one which, in the professional opinion of the actuary, satisfies the condition that there are no identifiable employees who will suffer material detriment overall in terms of their future accrual of pension benefits in the alternative scheme.” In practice, those bidding for public sector contracts will often be required to obtain a Government Actuary’s Department (“GAD”) certificate confirming that their scheme provides broadly comparable benefits. In relation to accrued benefits there is provision for it to be a condition of transfer: “that there will be a bulk transfer agreement under which the pension scheme of the new employer provides day for day past service credits (or an equivalent recommended by the Government Actuary’s Department as a suitable reflection of differences in benefit structures between the schemes) to staff choosing to transfer their accrued credits.” As a result of Annex A the position has been (see Chapter 8, Transfers from the public sector), that employees transferring in the context of a public sector transfer have enjoyed significantly greater pension protection than employees transferring across under a private sector transfer. Although the gap has now narrowed as a result of the coming into force of the Pension Protection Regulations, as discussed in Chapter 9, it still remains the case that public sector employees obtain a greater level of protection because of the requirement to provide “broadly comparable” pension benefits, rather than the minimum level of benefits as provided for under the Pension Protection Regulations.


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Office of the Deputy Prime Minister (“ODPM”) Circular 03/2003 – Annex D Code of Practice on Workforce Matters in Local Authority Service Contracts (“the LA Code”) The LA Code was first announced in a press release from the ODPM on 13 February 2003 headed “Government strengthens measures to tackle two-tier workforce in local government”. The principal implications of the LA Code are as follows.

The Code is to form part of local authority service contracts Local authorities are required to ensure that the LA Code forms part of the service specification and contractual conditions for all local authority service contracts.

The requirement to apply with the Statement and Annex A The local authority is required to apply the principles set out in the Statement and Annex A.

Ongoing access to LGPS “staff must have ongoing access to the local government pension scheme (“LGPS”) or be offered an alternative good quality occupational pension scheme (as defined in Annex A) under which they can continue to earn pension benefits through their future service.”

Treatment of new joiners to the service provider’s workforce There is an obligation on a service provider, when recruiting new staff to work on the contract alongside staff who have transferred from the local authority, to offer employment on: “fair and reasonable terms and conditions which are, overall, no less favourable than those of transferred employees.” In addition, the service provider is also required to offer new joiners “reasonable pension arrangements” this being either: •

membership of the LGPS, where the service provider has “admitted body status” and makes requisite contributions; or

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•

membership of a good quality employer pension scheme, either final salary or defined contribution, where defined contribution employer contributions to match employee contributions up to 6%; or

•

membership of a stakeholder scheme under which the employer will match employee contributions up to 6%.

In addition, the service provider is required to consult with trade union representatives, or other elected representatives of the employees where there is no recognised trade union, regarding the terms and conditions to be offered to new recruits. Such consultation is to involve a “genuine dialogue”.

Monitoring A service provider is required to provide the local authority with information as requested throughout the duration of the contract in order to allow the local authority to monitor its compliance with the LA Code.

Enforcement The local authority is under an obligation to enforce the obligations of a service provider under the LA Code. In particular, there is provision that: •

employees of the recognised union should in the first instance seek to resolve any complaints directly with the service provider;

•

where it appears to the local authority that the service provider is not meeting its obligations, or where an employee of the service provider or recognised trade union writes to the local authority indicating it has not been able to resolve a complaint directly, the local authority will seek an explanation from the service provider;

•

if the service provider’s response does not satisfy the local authority: “it will ask the service provider to take immediate action to remedy this. If, following such a request, the service provider still appears to the local authority not to be complying with the Code, the local authority will seek to enforce the terms of the contract, which will incorporate this Code. In addition, where a service provider has not complied with this Code, the local authority will not be bound to consider that provider for future work.”


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Application to sub-contractors There is also provision that the service provider is responsible for ensuring that any sub-contractors comply with the LA Code.

Code of Practice on Workforce Matters in Public Sector Service Contracts (“Public Sector Code”) This was published by the Cabinet Office in March 2005. The Public Sector Code is drafted in almost identical terms (in the main, word for word) as the LA Code save that, in relation to arrangements for pension for new joiners, the service provider is required to provide one of two options, rather than three. In particular, those options being membership of a stakeholder pension scheme or good quality employer pension scheme (as set out in the LA Code above) but not membership of the LGPS or indeed, any other public sector scheme.

Retention of Employment Model (“REM”) The Retention of Employment Model describes a structure used in relation to private sector service provision to the NHS. It came about as a result of a desire to ensure that NHS staff, who would otherwise transfer to private sector employers, remain NHS employees and, therefore, can remain members of the NHS pension scheme. In brief, REM works (assuming it works (see discussion regarding Celtech in Chapter 6, Secondments)) by staff opting out of transferring to the private sector service provider and signing up to a new contract with the NHS Trust, including a term under which they agree to be seconded and work under the day to day control of the private sector service provider. The major issue in relation to REM is whether it works, in particular whether it is effective to stop staff becoming employees as a result of TUPE.

192


Other specially commissioned reports from Thorogood BUSINESS AND COMMERCIAL LAW Commercial Contracts: Drafting techniques and precedents Ribeiro, Robert

Email: Legal issues Singleton, Susan £169

ISBN: 978-185418271-5

This report takes you through the drafting process giving practical guidance from start to finish. With up-to-the-minute information on key cases and materials and in-depth analysis of the important drafting issues, it is a must for all those who need to draft commercial contracts.

Commercial Litigation: Damages and other remedies for breach of contract Ribeiro, Robert

£169

ISBN: 978-185418397-2

A great deal has changed in the last few years... a new emphasis on claims for damages such as loss of business, opportunity, chance, use and data and recent landmark cases have altered the ground-rules. Completely updated, this report includes accounts of all the most recent important cases and highlights significant changes in the way that the courts now assess damages.

£80

ISBN: 978-185418256-0

What are the chances of either you or your employees breaking the law? This report explains clearly: • How to establish a sensible policy and whether or not you are entitled to insist on it as binding • The degree to which you may lawfully monitor your employees’ e-mail and Internet use • The implications of the Regulation of Investigatory Powers Act 2000 and the Electronic Communications Act 2000 • How the Data Protection Act 1998 affects the degree to which you can monitor your staff • What you need to watch for in the Human Rights Act 1998 and TUC guidelines.

Freedom of Information Act Singleton, Susan

£95

ISBN: 978-185418347-7

The FOI Act gives companies and individuals important powers to request information from public bodies. Are you equipped to take advantage and to protect yourself?

Corporate Governance Martin, David

£85

International Commercial Agreements

ISBN: 978-185418354-5

Attree, Rebecca

This report is a clear, accessible and jargon-free analysis of the practical application of Corporate Governance. With short case studies to illustrate legal requirements, the author guides the reader through all aspects of the Corporate Governance programme, concentrating specifically on its use by organisations who are not required to adopt it, such as listed PLCs.

ISBN: 978-185418286-9

For full details of any title, and to view sample extracts, please visit:

www.thorogoodpublishing.co.uk

£95

A major report on recent changes to the law and their commercial implications and possibilities. The report explains the principles and techniques of successful international negotiation and provides a valuable insight into the commercial points to be considered as a result of the laws relating to: pre-contract, private international law, resolving disputes (including alternative methods, such as mediation), competition law, drafting common clauses and contracting electronically. It also examines in more detail certain specific international commercial agreements, namely agency and distribution and licensing.

Insights into Successfully Managing the In-house Legal Function O’Meara, Barry

Intellectual Property Protection and Enforcement £95

Brazell, Lorna

£159

ISBN: 978-185418174-9

ISBN: 978-185418054-4

Negotiating the fault-line between private practice and in-house employment can be tricky, as the scope for conflicts of interests is greatly increased. Insights into successfully managing the in-house legal function discusses these and other issues.

Incorporating the latest developments in IP law, this report reviews each of the principal forms of intellectual property right available in the United Kingdom, describing the nature of the right itself and explaining: How rights arise or can be obtained, How rights can be exploited, What is necessary to protect rights from erosion or loss, What actions will constitute infringement of a right, under either civil (enforced by the owner) or criminal (enforced by public authorities) law, What remedies are available to the owner of the right, once infringement has been proved.

Software Contract Agreements Bond, Robert

£80

ISBN: 978-185418146-6

Fully up-to-date with all changes to the law, this report is a thorough explanation of the law combined with expert guidance on negotiating and drafting the best contract for your client.

Achieving Business Excellence, Quality and Performance Improvement Chapman, Colin & Hopper, Dennis

£95

ISBN: 978-185418018-6

Each chapter can be read on its own for convenient reference, and the introduction to each chapter also makes it clear where awareness of another section may be useful.

Waste Management: The changing legislative climate Hand, Caroline

This valuable report identifies all the areas critical to developing an effective performance improvement process. It is a practical guide to the use of business excellence models and frameworks, quality standards, benchmarking tools, self-assessment programmes and the latest performance improvement initiatives.

ISBN: 978-185418367-5

This valuable report explains what all the new legislation, directives and regulations mean in practice and what you need to do to stay within the law. Recent far-reaching changes to the law and practice affect everyone – commerce and industry, central and local government and householders.

The Commercial Exploitation of Intellectual Property Rights by Licensing

Websites and the Law

DesForges, Charles

Singleton, Susan

£95

£80

£80

ISBN: 978-185418285-2

ISBN: 978-185418331-6

This report will show you – whether as licensor or licensee – how to identify and secure profitable opportunities, strategies and techniques for negotiating the best agreement, and finally the techniques of successfully managing a license operation.

Is your company/client website legal? Do you know what information you are required by law to put on it? What can you do with people’s personal data sent to your website? This report deals with all the practical legal issues which arise with websites – both those sites which sell goods or services and those which advertise.

HOW TO ORDER Email: [email protected]

Please see order form at the back of this report

Telephone: +44 (0)1235 465 500

Post: Marston Book Services, PO Box 269 Abingdon, Oxon OX14 4YN

Fax: +44 (0)1235 465 556

Web: www.thorogoodpublishing.co.uk

BUSINESS STRATEGY AND MANAGEMENT A Practical Guide to Knowledge Management Brelade, Sue & Harman, Chris

Understanding SMART Procurement in the MOD £99

Boyce, Tim

£69

ISBN: 978-185418230-2

ISBN: 978-185418164-0

An expert but jargon-free guide to enable you to manage the knowledge in your organisation successfully and to identify, gather and use that knowledge to maximum advantage.

The main thrust of this report is on issues to do with strategy, organisation and processes. The single most encouraging and exciting feature of the SMART procurement initiative is that it embraces the need to change the culture. There is a commitment within the high political echelon of the MoD to make this change happen. Probably the greatest single challenge is to ensure that this commitment is maintained through the inevitable changes of personality at the political and senior management level.

Analyse your Business – A performance health check O’Connor, Carol

£89

ISBN: 978-185418170-1

This briefing offers the tools and techniques for company-wide analysis and is essential reading for business leaders responsible for corporate performance. Its purpose is to put minor issues into perspective and discourage the use of quick fix solutions for bigger problems.

Tendering & Negotiating MoD Contracts Boyce, Tim

£95

ISBN: 978-185418276-0

This report aims to draw out the main principles, processes and procedures involved in tendering and negotiating MoD contracts. As Tim Boyce writes in the Introduction, ‘it is important to realise that the SPI embraces a conceptual shift in the role of the MoD procurers’. What does this ‘huge shift in thinking’ mean for contractors? How exactly has the role of MoD purchasing changed? This report covers every aspect of competitive tendering, negotiation and contractual negotiations in this new era. There can be few people who combine Tim Boyce’s experience and expertise with a gift for explaining issues and procedures with such clarity.

IT Governance Norfolk, David

£169

ISBN: 978-185418371-2

This specially commissioned report sets out what the latest legislation says and what it means, its impact on the organisation as a whole and on the IT group specifically, and how to implement an effective IT governance initiative in your company.

Practical Techniques for Effective Project Investment Appraisal Tiffin, Ralph

£99

ISBN: 978-185418099-5

How to ensure you have a reliable system in place. Spending money on projects automatically necessitates an effective appraisal system – a way of deciding whether the correct decisions on investment have been made.

Project Risk Management: The commercial dimension Boyce, Tim

£95

ISBN: 978-185418257-9



This report will show you how to fully appreciate all the commercial dimensions of important projects and understand how to identify all the risks during the pre-contract bidding phase.

Strategy Implementation Through Project Management

Surviving a Corporate Crisis: 100 things you need to know

Grundy, Tony

£99

Batchelor, Paul

£80

ISBN: 978-185418250-0

ISBN: 978-185418208-1

The gap: Far too few managers know how to apply project management techniques to their strategic planning. The result is often strategy that is poorly thought out and executed.

Seven out of ten organisations that experience a corporate crisis go out of business within 18 months. This report not only covers remedial action after the event but offers expert advice on preparing every department and every key player of the organisation so that, should a crisis occur, damage of every kind is limited as far as possible.

The answer: Strategic project management is a new and powerful process designed to manage complex projects by combining traditional business analysis with project management techniques.

Technical Aspects of Business Leases: Overcoming the practical difficulties Dowden, Malcolm

THE THOROGOOD PROMISE

£95

ISBN: 978-185418194-7

If you are not totally satisfied and you return a publication in mint condition within 14 days of receipt, we will refund the cost of the publication, no questions asked.

The purpose of this report is to highlight areas where technical issues might lead to practical difficulties, and to give clear guidance to help those involved in property management avoid the pitfalls.

FINANCE Tax Planning for Businesses and their Owners Hughes, Peter

Trade Secrets of Successfully Acquiring Unquoted Companies £95

Pearson, Barrie

£145

ISBN: 978-185418334-7

ISBN: 978-185418366-8

Written for business owners and managers, this special briefing offers expert advice on the tax implications of your business decisions – guiding you in making the right business and personal choices for tax reduction.

In this invaluable new briefing one of the City’s most successful deal-makers distils 40 years’ experience as both principal and advisor. “Losing a deal by adopting the wrong tactics is unforgiveable” he writes, but it happens all too often. This briefing offers both professional advisors and principals the opportunity to transform their rate of success, clarifying hard truths and highlighting avoidable mistakes. It is laced throughout with proven tactical advice to ensure that both deals and post-acquisition management are carried out with maximum success.

Trade Secrets of Business Disposals Pearson, Barrie

£145

ISBN: 978-185418321-7

If you’re like most people, you’ll only get one chance to sell your business and to capitalise on years of hard work and planning. You can either fluff it, or make sure you get the best possible advisor and become financially secure for life, and possibly very rich. This report shows you how to make your business ‘investor-ready’ for maximum capital return.

VAT Liability and the Implications of Commercial Property Transactions Buss, Tim

£149

ISBN: 978-185418307-1

The option to tax is a major VAT planning tool but you have got to get the detail right to take full advantage – and getting it wrong can be very costly. This report shows you how to plan for maximum advantage and avoid costly mistakes.

EMPLOYMENT LAW Data Protection Law for Employers Singleton, Susan

THE THOROGOOD PROMISE £80


ISBN: 978-185418283-8

The four-part Code of Practice under the Data Protection Act 1998 on employment and data protection places a further burden of responsibility on employers and their advisers. The Data Protection Act also applies to manual data, not just computer data, and a tough enforcement policy was announced in October 2002.

Howard, Gillian

Discrimination Law and Employment Issues Martin, David

£95

ISBN: 978-185418281-4 £55

ISBN: 978-185418339-2

The Age Discrimination Act is billed by lawyers as the most significant change in employment law since the 1970’s. In addition to sex and race discrimination laws, in the last two years employers have also had to cope with sexual orientation discrimination and religious discrimination. David Martin, an expert on employment law and practice, analyses the practical aspects of dealing with each of the anti-discrimination laws. He demonstrates how to ensure that paperwork and systems comply totally with the law, and he provides a range of helpful case studies to illustrate the key issues and bring them to life.

Effective Recruitment: A practical guide to staying within the law Leighton, Patricia & Proctor, Giles

Employee Sickness and Fitness for Work: Successfully dealing with the legal system

Many executives see employment law as an obstacle course or, even worse, an opponent – but it can contribute positively to keeping employees fit and productive. This report will show you how to get the best out of your employees, from recruitment to retirement, while protecting yourself and your firm to the full.

Employment Law Aspects of Mergers and Acquisitions: A practical guide Ryley, Michael

£95

ISBN: 978-185418363-7

This Report will help you to understand the key practical and legal issues, achieve consensus and involvement at all levels, understand and implement TUPE regulations and identify the documentation that needs to be drafted or reviewed within the context of a merger, acquisition or disposal.

£85

ISBN: 978-185418303-3

The ways to undertake the task continue to grow, making the decision as to how best to recruit for a given employment situation more complex. This specialist text is responding to a number of imperatives, including legal ones. There have been, and are, anticipated changes that make it essential that recruitment practitioners act both effectively and within the law.



Need it now? Download a PDF of the report at: www.thorogoodpublishing.co.uk

Navigating Health and Safety Law: Ensuring compliance and minimising risk

Successfully Defending Employment Tribunal Cases

Pope, Chris

Hunt, Dennis

£95

£95

ISBN: 978-185418353-8

ISBN: 978-185418267-8

If you have already been challenged by the insurer, inspector, or one of your workforce about the status of your health and safety this report will give you a workable answer to questions like Is my health and safety policy legally compliant? How do I avoid being liable for an employees ill health arising from previous employment? Who should carry out safety inspections – is it my responsibility?

Sweeping changes to the way employment tribunal claims are dealt with have increased the risk of higher costs and more expensive claims. This indispensable report covers all the changes and their implications for HR professionals.

HR, RECRUITMENT AND TRAINING Applying the Employment Act 2002: Crucial developments for employers and employees

Enabling Beyond Empowerment Williams, Michael

£95

ISBN: 978-185418084-1 Williams, Audrey

£95

ISBN: 978-185418253-1

The Act represents a major shift in the commercial environment, with far-reaching changes for employers and employees. The consequences of getting it wrong, for both employer and employee, will be considerable – financial and otherwise. The Act affects nearly every aspect of the workplace.

By applying the range of practical management techniques detailed in this report, you can provide the authority and means to empower in a way that substantially reduces the dangers.

Flexible Working Williams, Audrey

£95

ISBN: 978-185418306-4

Dismissal and Grievance Procedures Hunt, Dennis

£95

ISBN: 978-185418376-7

This report explains what all the regulations say and what steps you need to take to operate effective dismissal, disciplinary and grievance procedures. It covers all the requirements of the Disputes Resolution Procedures that came into effect in October 2004. It tells you where and when the regulations apply – and what you need to do.

Recent research shows that far too many individuals, as well as firms, are unaware of flexible working rights. How employers and employees deal with them is of crucial – and increasing – importance to both. This report clarifies the law, sets out the rights of employer and employee, and offers valuable practical advice on best practice.



HOW TO ORDER Email: [email protected]

Please see order form at the back of this report

Telephone: +44 (0)1235 465 500

Post: Marston Book Services, PO Box 269 Abingdon, Oxon OX14 4YN

Fax: +44 (0)1235 465 556


New Ways of Working

THE THOROGOOD PROMISE

Jupp, Stephen


ISBN: 978-185418169-5

How to Turn your HR Strategy into Reality Grundy, Tony

£85

ISBN: 978-185418183-1

From a diagnosis of HR issues to an analysis of the external and internal future environment of your company and the effect on your human resources – this is practical information aimed at HR and senior line managers.

Internal Communications Farrant, James

£99

£95

ISBN: 978-185418149-7

There is growing evidence that the organisations that ‘get it right’ reap dividends in corporate energy and enhanced performance. In these organisations, internal communications have equal status with the external communications functions. This practical report will show you how internal communications, taken in their widest sense, can improve the performance of organisations.

New ways of working examines the nature of the work done in an organisation and seeks to optimise the working practices and the whole context in which the work takes place. It is more about promoting the best ways of doing things than simple cost driven change. Although it emphasises the importance of business and organisation, it spans the concerns of people, property, technology, community and environment.

Power Over Stress at Work Araoz, Daniel

£99

ISBN: 978-185418176-3

The HR manager can learn how to deal creatively with stress from the information in this briefing and pass on their knowledge down the ranks. He or she will then halt the downward spiral of diffusing stress and produce a more positive knock-on effect – namely to increase the productivity of the entire workforce and reduce absenteeism resulting from this terrible illness.

Reviewing and Changing Contracts of Employment Phillips, Annelise; Player, Tom & Rome, Paula £95 ISBN: 978-185418296-8

Mergers and Acquisitions: Confronting the organisation and people issues Thomas, Mark

£95

ISBN: 978-185418008-7

Why do so many mergers and acquisitions end in tears and reduced shareholder value? This report will help you to understand the key practical and legal issues, achieve consensus and involvement at all levels, understand and implement TUPE regulations and identify the documentation that needs to be drafted or reviewed.

The Employment Act 2002 has raised the stakes. Imperfect understanding of the law and poor drafting will now be very costly. This report will: • Ensure that you have a total grip on what should be in a contract and what should not • Explain step by step how to achieve changes in the contract of employment without causing problems • Enable you to protect clients’ sensitive business information • Enhance your understanding of potential conflict areas and your ability to manage disputes effectively.



Trade Secrets of Using e-Learning in Training Bray, Tony

Transforming HR Hunter, Ian and Saunders, Jane £95

ISBN: 978-185418326-2

Definitely not for ‘techies’, this report is practical and jargon-free – giving you step-by-step skills and processes to enable you to design effective e-learning products with confidence.

£95

ISBN: 978-185418361-3

The blue-print for the future of HR – how to deliver proven value to your Board, business and colleagues. The report is based on interviews with 60 HR leaders from across industry and public and not for profit sectors. The report covers HR outsourcing and shared services.

MARKETING, PR AND SALES Corporate Community Investment Genasi, Chris

£99

Scott, Simon

ISBN: 978-185418192-3

Supporting good causes is big business – and good business. Corporate community investment (CCI) is the general term for companies’ support of good causes, and is a very fast growing area of PR and marketing.

Defending your Reputation Taylor, Simon

£99

ISBN: 978-185418251-7

‘Buildings can be rebuilt, IT systems replaced, people can be recruited, but a reputation lost can never be regained…The media will publish a story – you may as well ensure it is your story’ Simon Taylor. ‘News is whatever someone, somewhere, does not want published’ William Randolph Hearst When a major crisis does suddenly break, how ready will you be to defend your reputation?

Implementing an Integrated Marketing Communications Strategy Hart, Norman

Insights into Understanding the Financial Media: An insider’s view

£99

£99

ISBN: 978-185418083-4

This briefing will help you understand the way the financial print and broadcast media works in the UK. It will also provide you with techniques and guidelines on how to communicate with the financial media in the most effective way, to help you achieve accurate and positive coverage of your organisation and its operations.

Lobbying and the Media: Working with politicians and journalists Burrell, Michael

£99

ISBN: 978-185418240-1

Lobbying is an art form rather than a science, so there is inevitably an element of judgement in what line to take. The best lobbying is always based on accurate, up-to-date information and on a wellargued case, founded on credible evidence, and delivered to the right audiences in the right tone of voice at the right time. Sounds simple, but it isn’t. This expert report explains the knowledge and techniques required.

ISBN: 978-185418120-6

Get ahead and stay ahead of your competition through better integration of your marketing communications. Norman Hart was an international consultant, lecturer and author on marketing, advertising and public relations. His books included The CIM Marketing Dictionary, Strategic Public Relations, The Practice of Advertising and Industrial Marketing Communications.

THE THOROGOOD PROMISE If you are not totally satisfied and you return a publication in mint condition within 14 days of receipt, we will refund the cost of the publication, no questions asked.

Managing Corporate Reputation: The new currency Dalton, John & Croft, Susan

Strategic Customer Planning Melkman, Alan & Simmonds, Ken £95

ISBN: 978-185418272-2

ENRON, WORLDCOM… who next? At a time when trust in corporations has plummeted to new depths, knowing how to manage corporate reputation professionally and effectively has never been more crucial. This report shows you how to:

£95

ISBN: 978-185418388-0

This is very much a ‘how to’ report. After reading those parts that are relevant to your business, you will be able to compile a powerful customer plan that will work within your particular organisation for you. Charts, checklists and diagrams throughout.

• Develop PR, brands and relationship management as the vanguards of your corporate reputation

Strategic Planning in Public Relations

• Strengthen your internal as well as external communications

ISBN: 978-185418225-8

• Improve the effective management of your stakeholders

Practical Techniques for Effective Lobbying Miller, Charles

£95

Knights, Kieran

£99

Tips and techniques to aid you in a new approach to campaign planning. Strategic planning is a fresh approach to PR. An approach that is fact-based and scientific, clearly presenting the arguments for a campaign proposal backed with evidence. This report provides valuable tips and techniques to improve your PR and campaign planning.

ISBN: 978-185418089-6

Understanding the system and the process in which it works is essential to lobbying effectively. Uncoordinated, uncontrolled and badly planned approaches will do more harm than good, and risk antagonising the people you most want to influence. This report provides the techniques required for effective lobbying.

Successful Competitive Tendering

Public Affairs Techniques for Business

Techniques for Ensuring PR Coverage in the Regional Media: An insider’s view

Wynne-Davies, Peter

£95

Woodhams, Jeff ISBN: 978-185418235-7

To win business, you must make a convincing case. This report will help you become more skillful, and more successful in your tendering.

Imeson, Mike

ISBN: 978-185418175-6

This report shows in practical terms how you can counter potential threats through a professionally structured and implemented public affairs campaign. Today’s successful companies recognise that in order to survive and prosper a comprehensive and disciplined approach to public affairs is no longer just a useful asset, it is now a necessity.

£95

£99

ISBN: 978-185418019-3

This in-depth briefing will give you the tools and techniques you need to enjoy the opportunities offered by the regional and local media. It offers you practical guidance and advice on how to apply them with maximum effect for your next PR campaign.

Selling Skills for Professionals Tasso, Kim

£99

ISBN: 978-185418179-4

Many professionals still feel awkward about really selling their professional services. They are not usually trained in selling. This is a much-needed report which addresses the unique concerns of professionals who wish to sell their services successfully and to feel comfortable doing so.



Order Form FIVE WAYS TO ORDER: Email: [email protected] Tel:

+44 (0)1235 465 500

Post: Marston Book Services, 10-12 Rivington Street, London EC2A 3DU

Fax:

+44 (0)1235 465 556


Title

ISBN

Price Authors

Commercial Contracts: Drafting techniques and precedents

978-185418271-5 £169

Ribeiro, Robert

Commercial Litigation: Damages and other remedies for breach of contract

978-185418397-2 £169

Ribeiro, Robert

Corporate Governance

978-185418354-5 £85

Martin, David

Email: Legal issues

978-185418256-0 £80

Singleton, Susan

Freedom of Information Act

978-185418347-7 £95

Singleton, Susan

International Commercial Agreements

978-185418286-9 £95

Attree, Rebecca

Insights into Successfully Managing the In-house Legal Function

978-185418174-9 £95

O’Meara, Barry

Software Contract Agreements

978-185418146-6 £80

Bond, Robert

Achieving Business Excellence, Quality and Performance Improvement

978-185418018-6 £95

Chapman, Colin & Hopper, Dennis

The Commercial Exploitation of Intellectual Property Rights by Licensing

978-185418285-2 £95

DesForges, Charles

Intellectual Property Protection and Enforcement

978-185418054-4 £159

Brazell, Lorna

Waste Management: The changing legislative climate

978-185418367-5 £80

Hand, Caroline

Websites and the Law

978-185418331-6 £80

Singleton, Susan

A Practical Guide to Knowledge Management

978-185418230-2 £99

Brelade, Sue & Harman, Chris

Analyse your Business – A performance health check

978-185418170-1 £89

O’Connor, Carol

Tendering & Negotiating MoD Contracts

978-185418276-0 £95

Boyce, Tim

Understanding SMART Procurement in the MOD

978-185418164-0 £69

Boyce, Tim

IT Governance

978-185418371-2 £169

Norfolk, David

Practical Techniques for Effective Project Investment Appraisal

978-185418099-5 £99

Tiffin, Ralph

Project Risk Management: The commercial dimension

978-185418257-9 £95

Boyce, Tim

Strategy Implementation Through Project Management

978-185418250-0 £99

Grundy, Tony

Surviving a Corporate Crisis: 100 things you need to know

978-185418208-1 £80

Batchelor, Paul

Technical Aspects of Business Leases: Overcoming the practical difficulties

978-185418194-7 £95

Dowden, Malcolm

Tax Planning for Businesses and their Owners

978-185418334-7 £95

Hughes, Peter

Trade Secrets of Business Disposals

978-185418321-7 £145

Pearson, Barrie

Qty

THE THOROGOOD PROMISE If you are not totally satisfied and you return a publication in mint condition within 14 days of receipt, we will refund the cost of the publication, no questions asked.

Title

ISBN

Price Authors

Trade Secrets of Successfully Acquiring Unquoted Companies

978-185418366-8 £145

Pearson, Barrie

VAT Liability and the Implications of Commercial Property Transactions

978-185418307-1 £149

Buss, Tim

Data Protection Law for Employers

978-185418283-8 £80

Singleton, Susan

Discrimination Law and Employment Issues

978-185418339-2 £55

Martin, David

Effective Recruitment: A practical guide to staying within the law

978-185418303-3 £85

Leighton, Patricia & Proctor, Giles

Employee Sickness and Fitness for Work: Successfully dealing with the legal system

978-185418281-4 £95

Howard, Gillian

Employment Law Aspects of Mergers and Acquisitions: A practical guide

978-185418363-7 £95

Ryley, Michael

Navigating Health and Safety Law: Ensuring compliance and minimising risk

978-185418353-8 £95

Pope, Chris

Successfully Defending Employment Tribunal Cases

978-185418267-8 £95

Hunt, Dennis

Applying the Employment Act 2002: Crucial developments for employers and employees

978-185418253-1 £95

Williams, Audrey

Dismissal and Grievance Procedures

978-185418376-7 £95

Hunt, Dennis

Enabling Beyond Empowerment

978-185418084-1 £95

Williams, Michael

Flexible Working

978-185418306-4 £95

Williams, Audrey

How to Turn your HR Strategy into Reality

978-185418183-1 £85

Grundy, Tony

Internal Communications

978-185418149-7 £95

Farrant, James

Mergers and Acquisitions: Confronting the organisation and people issues

978-185418008-7 £95

Thomas, Mark

New Ways of Working

978-185418169-5 £99

Jupp, Stephen

Power Over Stress at Work

978-185418176-3 £99

Araoz, Daniel

Reviewing and Changing Contracts of Employment

978-185418296-8 £95

Phillips, Annelise; Player, Tom & Rome, Paula

Trade Secrets of Using e-Learning in Training

978-185418326-2 £95

Bray, Tony

Transforming HR

978-185418361-3 £95

Hunter, Ian and Saunders, Jane

Corporate Community Investment

978-185418192-3 £99

Genasi, Chris

Defending your Reputation

978-185418251-7 £99

Taylor, Simon

Implementing an Integrated Marketing Communications Strategy

978-185418120-6 £99

Hart, Norman

Insights into Understanding the Financial Media: An insider’s view

978-185418083-4 £99

Scott, Simon

Lobbying and the Media: Working with politicians and journalists

978-185418240-1 £99

Burrell, Michael

Managing Corporate Reputation: The new currency

978-185418272-2 £95

Dalton, John & Croft, Susan

Qty



Title

ISBN

Price Authors

Practical Techniques for Effective Lobbying

978-185418089-6 £95

Miller, Charles

Public Affairs Techniques for Business

978-185418175-6 £95

Wynne-Davies, Peter

Selling Skills for Professionals

978-185418179-4 £99

Tasso, Kim

Strategic Customer Planning

978-185418388-0 £95

Melkman, Alan & Simmonds, Ken

Strategic Planning in Public Relations

978-185418225-8 £99

Knights, Kieran

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