1. www.bto.co.uk Employment Law and the Sector: All change? David Hoey, Partner, Accredited Employment Law Specialist and Visiting Professor of Employment Law December 2011

2. www.bto.co.uk What I’ll Cover  Background – a changing landscape in the sector  TUPE – what the law says  Redundancy – what the law says  Recent cases on TUPE and redundancy  Practical guidance and discussion points

3. www.bto.co.uk Background – A Changing Landscape  “Putting Learners at the Centre”: Collaboration and joint working (and the rest) – but remember Each college is a separate legal entity Change management issues Culture issues Don’t forget employment law!

4. www.bto.co.uk Background – A Changing Landscape  What could this mean for Scotland’s colleges? Mergers Shared services Reduced costs Reduced staff And more

5. www.bto.co.uk TUPE

6. www.bto.co.uk Terminology  Transferor – old employer  Transferee – new employer  Relevant transfer: Transfer of an economic entity or/and Service provision change Outsourcing Insourcing Second generation outsourcing

7. www.bto.co.uk Terminology  ELI – Employee Liability Information  ETO – “economic technical or organisational reason entailing changes in the workforce”

8. www.bto.co.uk TUPE – what is the law?  Pre April 2006 – Transfer of Undertakings (Protection of Employment) Regulations 1981  Now – TUPE 2006  TUPE and Pensions: Pensions Act 2004 and related regulations

9. www.bto.co.uk TUPE  1977 Acquired Rights Directive (now 2001/23/EC)  Purpose: protect the rights of employees when the business they work in is transferred to a new entity (whether that is the employer’s whole business or part of it)  Fundamentally: the employees’ employer will change by operation of law

10. www.bto.co.uk TUPE  The UK legislation (TUPE 2006) goes beyond the requirements of the Acquired Rights Directive  Service provision change is “gold plating” and a mere change of contractor (with nothing more) would not be a transfer under EU law  Government is considering removing gold plating (removing service provision changes)

11. www.bto.co.uk Key Employee Rights  Right not to be dismissed for a reason related to the transfer (either before or after transfer, and by transferor or transferee) unless there is an “ETO” reason. Regulation 7  Employees will transfer on, and retain, terms and conditions of employment and continuity of service. Regulation 4  Rights to be informed and consulted about transfer. Regulation 13

12. www.bto.co.uk Legal Effects  All employees “assigned” to the business/undertaking at time of transfer will transfer over.  Plus those sacked before transfer for transfer- related reason. Regulation 4(3)

13. www.bto.co.uk Legal Effects  New employer will inherit all historic liabilities – discrimination, personal injury, failure to consult etc. Regulation 4  New employer must respect contractual rights – he will need to know what these are.  Due diligence is essential: Know what you are getting into!

14. www.bto.co.uk Legal Effects  Complex provisions re pensions  Trade union recognition and collective bargains will transfer (but generally these are not legally binding anyway)  Changes to terms and conditions for transfer- related reason are prohibited, even if the employee agrees. Effect on harmonisation?

15. www.bto.co.uk Legal Effects  The fundamental issues New employer steps into the shoes of the old in respect of all claims, all contractual entitlements etc Dismissal because of the transfer is automatically unfair without an ETO reason Authority that the old employer cannot rely on an ETO reason that the new employer would have had Therefore dismissals should be by the new employer

16. www.bto.co.uk What is a relevant transfer?

17. www.bto.co.uk Transfer of an Economic Entity  This was the only test under TUPE 2006: There is an economic entity (organised grouping of persons or resources) It has changed hands (by sale or otherwise) It retains its identity  Need be no contract between the parties, can be simply by operation of law  Does not apply to share sales  Cannot contract out and can be public body

18. www.bto.co.uk Has there been a transfer?  Where there has been a merger of colleges, this will almost inevitably be a transfer of an economic entity  Merging to form a new college – the old colleges will be the “transferors” and the new entity the “transferee”  In a takeover situation where one of the existing institutions continues to exist, one college may be the transferor, the other the transferee

19. www.bto.co.uk Service Provision Change  Definition. Regulation 3(1)(b): Activities cease to be carried out by A (a client) for himself, and are instead carried out by B (a contractor) on his behalf Activities cease to be carried out for A by B and are instead carried out for A by C (a subsequent contractor) Activities cease to be carried out for A by B or C and are instead carried out by A for himself But only if before the change there is an organised grouping of employees which has as its principal purpose the carrying on of the activities for A.

20. www.bto.co.uk Service Provision Change  Exceptions - supply of goods/single task/short term duration.  Practical effect – outsourcing, insourcing, 2 nd generation, all likely to be covered if there was an “organised grouping of employees”  Grouping need not retain its identity after the change and nothing need actually transfer  Service may be provided in a different way

21. www.bto.co.uk Service Provision Change  Where the drive to cut costs leads to colleges outsourcing or insourcing services or sharing services or (to a lesser extent) changing external service provides  There are clear TUPE implications in terms of “service provision change” and the various requirements of TUPE need to be observed

22. www.bto.co.uk Requirements of TUPE

23. www.bto.co.uk Employee Liability Information  Obligation on transferor (old employer) to give transferee info about Identities and ages Employment particulars Discipline/grievance/litigation issues in last 2 years, and litigation which may happen Collective agreements

24. www.bto.co.uk Employee Liability Information  Penalty – minimum £500 per employee  At least 14 days before Practicalities – too late? Is it enough?

25. www.bto.co.uk Employee Liability Information  The reality is that the transferee (new employer) will often want much more information sooner  In context of an agreed merger of institutions, likely to be a full process of due diligence re Terms of employment and relevant policies Collective agreements and union relations Disputes and grievances Departmental structures Custom and practice

26. www.bto.co.uk Information and Consultation  Regulation 13. Both parties to provide information to own affected employees Fact of transfer, date, reasons for it Legal, social, economic implications Measures envisaged  Election of representatives if no recognised TU reps in place  When? “long enough” before transfer to allow consultation

27. www.bto.co.uk Information and Consultation  Transferee must provide information to transferor regarding any measures envisaged, so that info can be passed on to transferor’s staff  Consult about measures envisaged in relation to own staff  Technically no need for transferor to consult about the transfer itself, or measures envisaged by the transferee

28. www.bto.co.uk Information and Consultation  In context of a merger of institutions, the provision of information about the new structure, and the dissemination of that information to staff, will be critical

29. www.bto.co.uk Failure  Penalty – 13 weeks pay per employee (uncapped)  Joint and several liability  In everyone’s interests to ensure that the consultation requirements are fully complied with

30. www.bto.co.uk Summary  Whether in context of mergers or merely contracting in or our of services, TUPE will play a major part: Ensure Board is aware!  Whether you are transferor or transferee, there are duties that must be complied with, or there will be claims and liabilities  Think about the TUPE angle early and take advice

31. www.bto.co.uk Redundancy

32. www.bto.co.uk Redundancy 1.Closure of business 2.Closure of employee’s workplace 3.Diminishing need for employees to do the available work

33. www.bto.co.uk Needing Fewer Employees  Work of a particular kind has diminished, and employees have become surplus to requirements,  Work has not diminished, but fewer employees are needed to do it, because (a) the employees have been replaced by, e.g. independent contractors or technology, or (b) because of reorganisation resulting in more efficient use of labour, or (c) simply due to a need to cut costs – everyone else must work harder!

34. www.bto.co.uk Redundancy  In light of the pressure to cut costs, redundancies may arise from Moving to more streamlined structure Cutting costs and everyone else has to work harder Ceasing provision of certain courses Merger leading to duplication/excessive numbers, and consequent need to reduce numbers

35. www.bto.co.uk Legal Test for Redundancy  Was the employee dismissed?  If so, had the requirements of the employer’s business for employees to carry out work of a particular kind ceased or diminished, or were they expected to cease or diminish?  If so, was the dismissal of the employee caused wholly or mainly by the cessation or diminution?

36. www.bto.co.uk Alternative Job Offers  Employment protection legislation requires employers to offer alternative jobs to those becoming redundant  Dismissal should be last resort  Failure by employer to offer alternative work may convert fair dismissal into unfair dismissal, even in genuine redundancy situation

37. www.bto.co.uk Duty to Consult - Collective  Requirement to “inform and consult” about proposed redundancies.  Where employer contemplates 20 or more redundancy dismissals within 90 days, employer must collectively consult with appropriate representatives starting at least 30 days (at least 90 days if more than 100 dismissals contemplated) before the first dismissals are planned  Periods may be reduced

38. www.bto.co.uk Collective Consultation  With TU reps, failing which with other elected representatives  With a view to reaching agreement  Certain information must be provided in writing to the reps to start the process  Consult about – ways of avoiding dismissals, minimising their number, mitigating the consequences of them  There remains a separate obligation to consult individually

39. www.bto.co.uk Collective Consultation  Does the employer need to consult about the business decision that gives rise to the redundancies, or merely the implementation of that decision?

40. www.bto.co.uk Redundancy Pay  The employee is entitled to: 1.5 weeks’ pay for each complete year of service after reaching the age of 41; 1 week’s pay for each complete year of service between the ages of 22 and 40 inclusive; and Half a week’s pay for each complete year of service up to age 21  The current ceiling on the amount of a week’s pay is £400 and the maximum length of service which can be taken into account is 20 years.

41. www.bto.co.uk Enhanced Redundancy Pay  To avoid claims for age discrimination any enhanced redundancy payment needs to follow the regime within the Employment Rights Act.  The employer may do one or both of the following things- he may treat a week's pay as not being subject to the maximum amount of £400, or he may multiply the appropriate amount allowed for each year of employment (0.5 weeks, 1 week, 1.5 weeks) by a figure of more than one

42. www.bto.co.uk Enhanced Redundancy Pay The employer can also then increase the amount so calculated by multiplying it by a figure of more than one. Any other scheme is susceptible to a challenge on grounds of age discrimination and will require to be objectively justified. Audit your schemes and carry out analysis.

43. www.bto.co.uk Enhanced Redundancy Pay  Are you contractually obliged to provide it?  If not, what are you prepared to pay on this occasion? Subject to Compromise Agreement?

44. www.bto.co.uk Getting it Wrong

45. www.bto.co.uk Automatically Unfair Redundancy  Certain health and safety reasons  Relating to employee’s rights under the Working Time Regulations 1998  Relating to employee’s role as an employee representative  Dismissal because employee made a protected disclosure

46. www.bto.co.uk Automatically Unfair Redundancy  Relating to employee’s assertion of a statutory right  Because the employee took industrial action  Relating to the employee’s pregnancy, maternity leave, parental leave or dependant care leave  Because of Trade Union non/membership or participation in Trade Union activities  For a transfer related to a TUPE transfer (even if no specific transferee identified)

47. www.bto.co.uk Discrimination Claim  Where selection for redundancy amounts to direct or indirect discrimination on grounds of Age Disability Religion or belief Sex Transgender status Sexual orientation Marital status Pregnancy or childbirth Race

48. www.bto.co.uk Discrimination Claim  Don’t forget Part time worker discrimination Fixed term employee discrimination

49. www.bto.co.uk Unreasonable Redundancy/ Unfair Dismissal  Even if dismissal is not automatically unfair or discriminatory, a redundancy dismissal may still be unreasonable (and therefore unfair) under the general unfair dismissal provisions.  Did the employer act reasonably in dismissing, taking account of size and administrative resources?  Employee needs 1 year’s service to bring a claim (soon to be 2 years)

50. www.bto.co.uk Unreasonable Redundancy/ Unfair Dismissal  Wrong selection pools  Unfair/subjective criteria  Unfair application of selection criteria

51. www.bto.co.uk Unreasonable Redundancy/ Unfair Dismissal  No meaningful individual consultation  Failure to fully consider alternatives to redundancy  Failure to look for alternative employment

52. www.bto.co.uk Recent case law

53. www.bto.co.uk TUPE and Dismissal  TUPE related unfair dismissal? No transferee identified View taken that incumbent managing director would be too expensive for any purchaser Managing director made redundant  What are the implications for mergers?

54. www.bto.co.uk TUPE and Changing Terms of Employment  When can an agreed variation of the employment contract following a TUPE transfer be effective? What is the reason for the variation?  What are the issues for harmonising terms and conditions post merger?

55. www.bto.co.uk TUPE and Equal Pay  TUPE red-circling Justification of disparity in pay between male and female employees Is this right? Should employers be allowed to maintain a pay differential indefinitely?

56. www.bto.co.uk TUPE and Collective Agreements  Where contracts of employment of transferring staff incorporate a collective agreement, does that agreement continue to apply?  What about a new collective agreement that the old employer enters into after the transfer (and that the new employer is not party to)?

57. www.bto.co.uk Redundancy After TUPE  Redundancy selection after TUPE transfer How should the employer carry out selection process with 2 sets of employees? Where looking to reduce numbers post merger, what is the safest approach?

58. www.bto.co.uk Redundancy Selection  Employees interviewing for newly created role following deletion of old roles Normal redundancy rules about objective criteria etc do not apply Process still needs to be fair subject to “band of reasonable responses”

59. www.bto.co.uk Redundancy Selection  The Tribunal should not subject employer’s scoring to undue scrutiny – is it a fair process?  But the vaguer the criteria, and the weaker the consultation, the more the employer risks a finding of unfair dismissal

60. www.bto.co.uk Practical Guidance and Discussion Points

61. www.bto.co.uk Redundancy Guidelines (1)  First warn staff in advance of the potential for redundancy dismissals in the future and seek views. You may wish to consider seeking applications for voluntary severance.  Next, consult the Union (where applicable) as to the best means by which the desired management result can be achieved fairly and with as little hardship to the employees as possible.

62. www.bto.co.uk Redundancy Guidelines (2)  Aim to agree with the Union the criteria to be applied in selecting the employees to be made redundant and the pools from which a selection will be made.  Carefully consider the pools. Do employees have interchangeable skills? Getting the pools wrong can make the dismissal unfair  Consider bumping. You should consider your reasons for not considering this.

63. www.bto.co.uk Redundancy Guidelines (3)  The selection criteria should be objective and not depend upon the opinion of the person making the selection. Must also be non discriminatory.  The employer should seek to ensure that the selection is made fairly in accordance with these criteria and should consider any representations the Union may make as to such selection.  The employer should continue during the process to identify any ways to avoid dismissal.

64. www.bto.co.uk Redundancy Guidelines (4)  Individual consultation Aim to set out position with staff on one to one basis Seek agreement as to way ahead Seek agreement as to assessment Attempt to identify any alternatives to dismissal

65. www.bto.co.uk TUPE – what risks need to be addressed?  If you are a transferee acquiring a business Will inherit staff and may have too many; incur redundancy costs Possible claims for failure to consult Inherit claims from other employer – deduction of wages, sick pay, holiday pay, discrimination, unfair dismissal (if related to transfer) Two-tier workforce may lead to discontent – how to harmonise?

66. www.bto.co.uk Specific Issues Arising From Mergers

67. www.bto.co.uk New Structure  What are the risks of “slimming down” with a view to transfer?  What will the new structure be?  What is the process for “matching” employees into new roles?

68. www.bto.co.uk New Structure  How will selection pools be identified, and what criteria will be used?  What about bumping?

69. www.bto.co.uk New Structure  If there are genuinely new roles, what will be the process to fill these?  What about timing? It is not uncommon for a restructuring/redundancy consultation process to run concurrently with TUPE consultation, pre transfer  How many employees, ultimately, will be surplus to requirements?

70. www.bto.co.uk New Structure  What termination payments will be available?  Compromise Agreements?  Will employees work notice or be paid in lieu? How will this impact on the college?

71. www.bto.co.uk Redundancy After TUPE  Can still be fair even if dismissals are transfer related (ETO reason)  How to fairly assess 2 different workforces? How will the scoring be carried out?  Requirements for fair redundancy dismissal apply  Staffing changes should be disclosed to old employer(s) as part of TUPE consultation process

72. www.bto.co.uk Harmonising Terms of Employment Post-Transfer  How long must you wait before you can harmonise terms of employment?  If you get the employees to agree is this a complete solution?  How, practically, can this be addressed?

73. www.bto.co.uk Conclusion and Questions

74. www.bto.co.uk Employment Law and the Sector: All change? David Hoey, Partner, Accredited Employment Law Specialist and Visiting Professor of Employment Law December 2011