PROVIDING A SERVICE? THE NEW TUPE REGULATIONS 2006 BY STEPHEN CAVALIER AND RICHARD ARTHUR
Richard Arthur is a partner and head of collective and institutional employment rights at Thompsons. He specialises in TUPE, industrial action, recognition and all other aspects of trade union law and has a particular interest in human rights law. He regularly represents trade unions and their members in all courts and tribunals in the UK and in Europe.
Stephen Cavalier is Chief Executive Officer (Designate) at Thompsons Solicitors. Thompsons is the largest firm of personal injury and trade union lawyers in the country.
ISBNs 0 9551795 5 6 978 0 9551795 5 6 December 2006 published by the Institute of Employment Rights The People's Centre, 50-54 Mount Pleasant, Liverpool L3 5SD 0151 702 6925 e-mail office@ier.org.uk www.ier.org.uk printed by Upstream (TU) 020 7207 1560 ÂŁ6.50 for trade unions and students ÂŁ20 others
THE
INSTITUTE OF
EMPLOYMENT RIGHTS
providing a service? the new TUPE regulations 2006 Stephen Cavalier Richard Arthur
Contents
EXECUTIVE SUMMARY CHAPTER ONE
introduction
1
CHAPTER TWO
when is there a tupe transfer? 2.1 “Standard Transfers” 2.2 “Service Provision Changes” 2.3 public and private undertakings 2.4 reorganisation of Public Administrative Authorities
4 5 7 14 14
CHAPTER THREE
what happens when tupe applies? 3.1 who transfers (and when)? 3.2 the right to object 3.3 a substantial change in working conditions 3.4 when do assigned employees transfer?
17 18 20 21 22
CHAPTER FOUR
4.1 Continuity of employment 4.2 accident claims and insurance 4.3 Collective Agreements
23 23 24 26
coontents
transfering rights and obligations
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CHAPTER FIVE
changes to terms and conditions of employment 5.1 transfer-connected dismissals 5.2 trade union recognition 5.3 insolvency 5.4 pensions The Beckmann and Martin cases The Pensions Act 2004 5.5 no contracting-out
29 33 34 35 37 38 39 40
CHAPTER SIX
information and consultation 6.1 enforcement and remedies 6.2 interface with Information and Consultation Regulations 6.3 notification of Employee Liability Information
41 43 44 45
CHAPTER SEVEN
interface with other employment legislation
47
providing a service? the new tupe regulations 2006
CHAPTER EIGHT
iv
conclusion: looking to the future
51
endnotes
53
Institute publications
57
executive summary
The first chapter charts the history of the introduction of the EU Acquired Rights Directive in 1977 and the original version of TUPE in the UK in 1981. The aim was to protect employee’s rights, and ensure proper information and consultation, in the event of a change of employer. Over the years, unions have won significant victories in expanding the scope of TUPE to cover transfers of employment in the public sector. But the courts in Europe and the UK have often given inconsistent rulings-particularly on when TUPE and the Directive apply. This has led to increased litigation and uncertainty for unions and their members. Employers have also consistently sought to undermine the protections given by the Directive and TUPE-most importantly by attempting to reduce terms and conditions in connection with a transfer of employment.
Chapter 2 examines when TUPE applies and the two types of transfers provided for in the new TUPE Regulations: “standard transfers” and the new “service provision changes”. The intention is to provide for more comprehensive coverage of TUPE in both the public and private sectors and this is welcome. But Government policy in the public sector extends to other mechanisms of protection outside of TUPE-most notably in the form of a range of Codes and Statements of Practice. This is less welcome because of the difficulty in enforcing those Codes and Statements, and the undesirability of multiple sources of rights and obligations. Particualrly unwelcome is the continued exclusion from the coverage of TUPE of share transfers and, in the public sector, the administrative reorganisation of public administrative authorities. Chapter 3 summarises the consequences when TUPE applies:which
executive summary
Any analysis of a transfer involves a two stage approach: first, does TUPE apply; and, secondly, if it does, what are the consequences for workers and their unions.
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employees transfer, and which employment liabilities also transfer. It then lists the circumstances in which transfer-connected dismissals will be automatically unfair and variations to terms and conditions will be allowed. It also summarise the information and consultation obligations. These topics are then dealt with in more detail under specific sub-headings. We examine which employees of the old employer transfer to the new employer in the event of TUPE transfer. The test is whether an employee is “assigned” to the undertaking to be transferred. This has led to confusion in practice, which is likely to remain. Ordinarily, an “assigned” employee who objects to transferring is treated as having resigned. The new Regulations introduce a new right for employees to treat themselves as dismissed where the transfer involves a substantial change in their working conditions to their detriment. But enforcing this right will be fraught with difficultybecause the employee will have to treat their employment as at an end before being able to seek compensation.
providing a service? the new tupe regulations 2006
We focus in more detail in Chapter 4 on the employment rights and obligations which transfer when there is a TUPE transfer.These include continuity of employment , rates of pay and other terms and conditions. Where an old employer was not required to take out employer’s insurance cover, and so there is no cover to transfer, the new Regulations provide for the old employer and the new employer to be jointly liable for any pre-transfer injuries or disease.
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There has been particular difficulty identifying which components of a collective agreement transfer. Employers have been using a recent decision of the European Court of Justice to undermine the protection of collective agreements. We examine the Werhof case in detail and suggest arguments to resist employers’ strategies. The new Regulations attempt to clarify when transfer-connected variations to terms and conditions are permitted. We explain the new provisions in Chapter 5. Variations will be void where the reason for the variation is the transfer itself or a reason connected with the transfer that is not an “ETO” reason. This means that, under TUPE, variations are allowed where the reason is connected with the transfer, but is also an “ETO” reason. This may well not comply with the Directive. But we all need to beware-the Government has said that it intends to seek amendments to the Directive to permit harmonisation of terms and conditions. This is
not currently allowed, even under the new Regulations, and it must be resisted. We then explain the associated provision dealing with transfer-connected dismissals. The transfer of trade union recognition is also considered in this chapter. It is disappointing that there is still no provision in the new Regulations for declarations of recognition made by the Central Arbitration Committee to transfer automatically. Finally in this chapter we look at the use of compromise agreements and the ability or otherwise to contract out of TUPE. The new insolvency provisions are then explained. The automatic transfer provisions (and protection from dismissal) do not apply where the old employer is subject to insolvency proceedings instituted to liquidate its assets. Where the old employer is subject to “relevant insolvency proceedings”, the new employer is exempted from inheriting debts payable under the statutory protection schemes, and there are additional circumstances in which “appropriate representatives” are able to agree to variations to terms and conditions where the reason for the variation is safeguarding employment opportunities and ensuring the survival of the business. Pension entitlements are still excluded from the scope of TUPE. Here we examine the implications of the Beckmann and Martin cases (on the transfer of enhanced pension terms on redundancy). We then explain the limited forms of protection for pensions now contained in the Pensions Act 2004.
The new obligation on the old employer to notify employee liability information is explained. This includes information in relation to the identity of workers, terms and conditions and details of tribunal claims and grievances. It is disappointing that there is no provision for that information also to be supplied to the union.
executive summary
In Chapter 6, we explain the changes to the information and consultation obligations. The old employer is now under a duty to inform in relation to measures which the transferee envisaged taking. Liability for failure to inform or consult primarily lies against the employer which defaults, but where the defaulting employer is the old employer, the union can decide whether to pursue the old employer or the new employer (or both jointly).
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In Chapters 7 and 8, we explore the interface between the new Regulations and other employment protection legislation, and go on to predict future developments. There is evidence of an inceasing tendency for the European Court of Justice to draw on human rights principles. At the same time, it is disappointing that there is no apparent consideration in terms of Government policy of the impact of TUPE on areas such as equal pay and industrial action.
providing a service? the new tupe regulations 2006
It has taken an awfully long time for the new Regulations to be brought into force. Against that timescale, it may not be wise to anticipate further changes in the near future. But one thing that we do know is coming is a renewed attempt by the Government to secure amendments to the Directive to permit harminsation of terms and conditions. If this is allowed to happen, then such protection as TUPE does provide, and the numerous advances secured under the old Regulations by unions, will be severely undermined.
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WHAT IS THE INSTITUTE? The Institute of Employment Rights was launched on 28th February 1989 and was granted charitable status in 1994. As a labour law “think tank”, supported by the trade union movement, our purpose is to provide research, ideas and detailed argument on all aspects of employment law. As a charity, however, we are not a campaigning organisation. The Institute has attracted wide and distinguished support creatinga unique network of lawyers, academics and trade unionists. Among the membership are John Hendy QC, Professor Keith Ewing, Professor Aileen McColgan, Professor Brian Bercusson and the general secretaries of Britain’s largest trade unions. The results of our work are published in papers and booklets. We also provide short articles, free of legal jargon, for trade union journals and other publications. Dissemination of our ideas is increasingly achieved through seminars and conferences as well as our educational courses. The Institute does not assume that legal measures can offer ultimate solutions for political, economic and social problems. However, we recognise that law has a part to play in influencing the employment relationship, both individually and collectively. Our funding is from various sources, including subscriptions, which entitle subscribers to a copy of all our new publications and reductions in conference fees. If you are interested in subscribing or would like to know more about the Institute, then contact us at The People’s Centre, 50-54 Mount Pleasant, Liverpool L3 5SD, tel: 0151 702 6925, fax: 0151 702 6935 or email us at office@ier.org.uk. Or visit our website at www.ier.org.uk
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