Transfer Of Undertakings Notes

Transfer of Undertakings

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

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

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

    2. Economic entity must retain its identity after the transfer

    • Spijkers: consider -

      1. Type of business;

      2. Transfer of tangible assets;

      3. Transfer of customers

      4. Majority of staff taken over

      5. Degree of similarity between outgoing business and incoming one

      6. Duration of any interruption

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

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

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

    3. Insourcing (from third party back to client)

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

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

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

Exceptions: Regulation 3(3)

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

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

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

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

• Effect:

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

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

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

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

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

     • Pensions:

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

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

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

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

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

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

   • ETO defence:

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

     2. Reason must entail a change in the workforce

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

• Changes to terms

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

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

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

    • Unless:

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

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

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

      • 'Relevant insolvency proceedings'

    • If dual purpose, consider circumstances.

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

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

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

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

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

    • Info = Reg. 13(2):

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

      2. Legal, economic and social implications for affected employees

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

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

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

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

  • Almost...

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