1 TUPE – Employment Issues and Competitive Tendering By Andrew Monroe Employment Advice Manager Community Accounting Plus

2 What is TUPE? Legislation designed to protect the employment rights of employees when a business (or undertaking) transfers or is taken over. AND (as from 1 st April 2006) TUPE Regs Legislation designed to protect the employment rights of employees when a “Service Provision Change” takes place (for example where a contractor takes on a contract to provide a service for a client from another contractor)

3 Service Provision Changes TUPE 2006 only applies where “there is an organised grouping of employees……which has as its principal purpose the carrying out of the activities concerned on behalf of the client” The intention being: Where the old service provider (i.e. the transferor) has in place a team of employees to carry out the service activities, and that team is essentially dedicated to carrying out the activities that are to transfer (though they do not need to work exclusively on those activities).

4 Situations where TUPE most likely would apply TUPE could apply where: You receive a grant or contract to run a service previously provided by another organisation. You take on a project or a piece of work previously run by another group. You set up a new group to take on a project or a piece of work previously run by another group. You merge with (or take over) another group.

5 Transfers where TUPE most likely does not apply Changes in control of a group, e.g. new trustees or committee members. Sales or transfer of shares of a business. The sales of assets without any of the connected activity. Transfer of Undertakings outside the UK ?? Provide or run a new service under a grant or contract using your existing staff and in a different manner to any other services.

6 Employee TUPE Rights Upon “transfer” all employees AUTOMATICALLY become employees of the new employer. Employees transfer on the same terms and conditions as if their Contracts of Employment have NEVER BEEN BROKEN and retain full continuity of employment. Any dismissal (at any time) of an employee for any reason due to a TUPE transfer would be deemed automatically unfair (as long as they have the qualifying length of service to lodge a claim; one year). If any terms and conditions are changed for the worse, employees can still resign for Constructive Dismissal. Dismissals due to Economic, Technical or Organisational (ETO) reasons may be fair depending on the reasonableness of the circumstances (but its then redundancy).

7 Employer TUPE Obligations The transferor and transferee employers MUST consult with employees or their representatives. Consultation must inform employees why, when and whether the new employer intends to take “measures that will affect employees”. Information must be provided before the transfer to allow meaningful consultation to take place. The employer must give employees the “option” not to transfer if they do not want to. All employment related liabilities transfer as well, e.g. outstanding Tribunal claims, redundancy etc. Transferor must pass over all relevant “employee liability information” records to the transferee (fine of £500 per employee up to £75,000)

8 Due-Diligence Investigations Upon transfer all employment liabilities pass to the new employer !!!!!!!!! Investigate, ask questions, submit questionnaire Ask questions on the basis of the expected transfer date, i.e. “what will be the salaries on the transfer date” Indemnities Redundancy risk? i.e. CA Plus redundancy risk currently stands at £45,000 Can we afford to do this?

9 Consultation Rights If more than 20 employees, you MUST consult collectively and in a set priority Firstly with any trade union representatives, then …. Employee representatives, if none …. you MUST facilitate their election. If still none …. Employees themselves Consultation must be about all “measures that will affect employees”. Therefore, consult about everything that might happen …. restructuring, redundancies, changing work patterns, job descriptions, new place of work etc.

10 Pensions and TUPE The original 1981 TUPE Regs, excluded occupational pensions as an automatic employment right. However, as of 6 th April 2005, the TUPE (Pension Protection) Regs. came into force. Employees pension rights are protected in relation to occupational pensions if they “transfer”. New employer does not have to provide an identical but it does have to provide a pension scheme that provides similar “value related” pension benefits. New employer can choose if this is to be defined benefit scheme, defined contribution scheme or a stakeholder arrangement.

11 Dismissal and Redundancy General rules on unfair dismissal still apply i.e. one years qualifying service required TUPE protects against: Neither the new or old employer may fairly dismiss an employee because of the transfer or for a reason connected with it UNLESS the reason is due to an “Economic, Technical or Organisational” (ETO) reason If there is no “ETO reason” any dismissal is automatically unfair Dismissals unconnected with the transfer (discipline?), TUPE does not apply

12 What is an ETO ? Dismissals due to ETO reasons are not automatically unfair but still have to pass the test of being fair and reasonable Dismissals due to redundancy are generally deemed to be an ETO reason All the following are possible reasons due to Economic, Technical or Organisational reasons !! Can’t afford them - company would go bust! New staff don’t have the skills/knowledge to do the job! After reorganisation we will have too many managers!

13 Who Transfers ? Neither the transferor or the transferee can pick and choose employees ALL the employees in the “organised grouping” MUST transfer However, any employees working “temporarily” in the organised grouping do not have any TUPE rights Any employees transferred “permanently” by the transferor to another dept etc. before the TUPE transfer do not have any rights

14 ETO Changes to Terms An ETO reason which is connected with a transfer is NOW POSSIBLE The ETO must be a reason that “entails changes to the workforce” i.e. changes in the numbers employed or changes involving the functions performed by employees This does not include freedom to harmonise T & C’s There is no “safe period” after which T & C’s can be changed Things like pay negotiations should continue in the new employer in much the same way as they operated with the old employer