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Handling A TUPE Transfer Management Briefing July 2009 No Logo


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A high level guide for managers and HR Professional on the key issues when handling a TUPE transfer

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Handling A TUPE Transfer Management Briefing July 2009 No Logo

  1. 1. Handling a TUPE Transfer - Management Briefing Roy Mark , January 2010
  2. 2. <ul><li>“ The cheque is in the post” </li></ul><ul><li>“ Of course I will still respect you in the morning” </li></ul><ul><li>“ I’m an expert in TUPE” </li></ul>The Three Great Lies Roy Mark , HR Director
  3. 3. <ul><li>Legal Framework </li></ul><ul><li>what the Regulations require </li></ul><ul><li>key management issues </li></ul><ul><li>Transfer Process </li></ul><ul><li>management activity checklist </li></ul><ul><li>staff transition model </li></ul><ul><li>suggested timescales </li></ul>Introduction Roy Mark , HR Director
  4. 4. Legal Framework <ul><li>What the Regulations require: </li></ul><ul><li>Regs 1-4 operation of regulations in a ‘relevant transfer’ </li></ul><ul><ul><li>An ‘economic entity’ that retains its identity </li></ul></ul><ul><ul><li>An ‘organised grouping of resources which has the objective of pursuing an economic activity whether or not that activity is central or ancillary. </li></ul></ul><ul><ul><li>Requires a change of employer and will not apply to a share sale take over </li></ul></ul><ul><ul><li>Now includes services and does not require the transfer of any assets ( Suzen v Zehnacker ) </li></ul></ul><ul><li>Regs 5-6 maintenance of contract of employment, right to object, observance of collective agreements. </li></ul><ul><li>Reg 7 Occupational Pension Schemes not covered </li></ul><ul><li>Reg 8 Dismissals before or after transfer ‘automatically unfair’ if connected </li></ul><ul><li>Reg 9 trade union recognition transfers </li></ul><ul><li>Regs 10/11 employees’ right to be consulted, remedies for failure to consult </li></ul>Roy Mark , HR Director
  5. 5. Services <ul><li>Services now included under Reg 3(1)b: </li></ul><ul><li>A 'service provision change' occurs when a client who engages a contractor to do work on its behalf is either: </li></ul><ul><ul><li>reassigning such a contract (whether by contracting out, outsourcing or re-tendering), or </li></ul></ul><ul><ul><li>bringing the work ‘in-house’ (where a contract ends with the service being performed in-house by the client themselves) </li></ul></ul><ul><ul><li>It will not be a service provision change if: </li></ul></ul><ul><ul><li>the contract is wholly or mainly for the supply of goods for the client’s use, or </li></ul></ul><ul><ul><li>the activities are carried out in connection with a single specific event or a task of short-term duration. </li></ul></ul><ul><li>There is no longer the need for assets to transfer for TUPE to apply </li></ul>Roy Mark , HR Director
  6. 6. Decision tree for services in/out of scope decisions Roy Mark , HR Director
  7. 7. Operation of the Regulations in a ‘relevant transfer’ <ul><li>Main tests to establish if TUPE applies under Reg 3(1)a: </li></ul><ul><li>Identifiable ‘economic entity’ </li></ul><ul><li>‘ Significant’ transfer of assets, tangible or intangible </li></ul><ul><li>‘ Majority’ of skills are required </li></ul><ul><li>If customers are transferred </li></ul><ul><li>Undertaking will retain its identity after the transfer undertaking similar activities as prior to the transfer </li></ul><ul><li>Key management issues: </li></ul><ul><li>law is ambiguous </li></ul><ul><li>transferee assumes liability where regulations have wrongly not been applied </li></ul><ul><li>ensuring all ‘in scope’ staff are identified </li></ul><ul><li>dangers of ‘cherry picking’ </li></ul><ul><li>staff on Leave of Absence </li></ul><ul><li>The consequences could be seen many years in the future </li></ul>Roy Mark , HR Director
  8. 8. Operation of the Regulations in a ‘relevant transfer’ <ul><li>By way of broad guidance TUPE has been found to apply to: </li></ul><ul><ul><li>mergers </li></ul></ul><ul><ul><li>sales of a businesses by sale of assets </li></ul></ul><ul><ul><li>a change of licensee or franchisee </li></ul></ul><ul><ul><li>the gift of a business through the execution of a will </li></ul></ul><ul><ul><li>contracting out of services </li></ul></ul><ul><ul><li>changing contractors </li></ul></ul><ul><ul><li>where all or part of a sole trader's business or partnership is sold or otherwise transferred. </li></ul></ul><ul><li>However, TUPE does not apply to: </li></ul><ul><ul><li>transfers by share take-over (unless integration has taken place in effect) </li></ul></ul><ul><ul><li>transfers of assets only (for example, the sale of equipment alone would not be covered, but the sale of a going concern including equipment would be covered </li></ul></ul><ul><ul><li>transfers of a contract to provide goods or services where this does not involve the transfer of a business or part of a business </li></ul></ul><ul><ul><li>the supply of goods for the client's use, for example, supplying food to a client to sell in its staff canteen, rather than a situation where the contractor runs the canteen for the client. </li></ul></ul><ul><ul><li>transfers of undertakings situated outside the United Kingdom (although these may be covered by the regulations of other member states). </li></ul></ul>Roy Mark , HR Director
  9. 9. <ul><li>Main aspects: </li></ul><ul><li>all terms and conditions must transfer </li></ul><ul><li>all employer rights, responsibilities, powers, duties and liabilities also transfer </li></ul><ul><li>affected employees have the right to object </li></ul><ul><li>collective agreements transfer </li></ul><ul><li>changes to terms and conditions as a direct consequence of the transfer are not permitted </li></ul><ul><li>changes are possible if for economic ; technical ; organisational reasons (ETO) and not the transfer itself. </li></ul><ul><ul><li>Note that the reason must &quot; entail changes in the workforce &quot;. According to the UK courts ( Berriman v Delabole Slate Ltd 1985 ICR 546) this means changes in the numbers employed or changes in the functions performed by employees. It is likely, therefore, that where an employer's reason for altering terms and conditions is to harmonise terms and conditions across the workforce this will not amount to an ETO reason, even where employees agree to the changes. </li></ul></ul>Roy Mark , HR Director Maintenance of Contract of Employment
  10. 10. <ul><li>Key Management issues: </li></ul><ul><li>acceptability of proposals for dealing with terms not capable of transfer </li></ul><ul><li>lack of flexibility to change following transfer </li></ul><ul><li>potential liability for past errors/omissions of transferor </li></ul><ul><li>need to continue to observe future collective agreements, regardless if TU’s are subsequently de-recognised by the Transferee </li></ul><ul><li>unidentified terms and conditions not picked up in the due diligence process </li></ul><ul><li>custom and practice that exists and is significantly different to that identified in the due diligence process </li></ul><ul><li>actions or ‘in-actions’ taken/not undertaken by the Transferor </li></ul><ul><li>Retention of key transferred staff, indefinitely or for a defined period </li></ul>Roy Mark , HR Director Maintenance of Contract of Employment
  11. 11. Treatment of Occupational Pension Schemes <ul><li>Current situation: </li></ul><ul><li>Transfer regulations exclude occupational pensions </li></ul><ul><ul><li>However the exclusion is limited to ; </li></ul></ul><ul><ul><ul><li>Benefits for old age, invalidity and bows </li></ul></ul></ul><ul><ul><ul><li>Any benefits other than for old age, invalidity and survivors benefits do transfer </li></ul></ul></ul><ul><ul><ul><li>Other rights within the pension scheme such as employer contributions may transfer </li></ul></ul></ul><ul><li>Key management issues: </li></ul><ul><li>requirement for Government Actuary’s Dept. (GAD) Certificate </li></ul><ul><li>requirement to fully consult and inform staff of the ‘measures’ which the Transferee intends to take in relation to pensions </li></ul><ul><li>Pensions is one of the most sensitive areas for most transfers to deal with and potentially a ‘make or break’ issue for the sales due to the potential ongoing liability to the new owner </li></ul>Roy Mark , HR Director
  12. 12. Treatment of Occupational Pension Schemes <ul><li>No requirement to provide same benefit levels </li></ul><ul><li>But since 6 April 2006, some protection under TUPE </li></ul><ul><li>IF….an employee has been a member of an occupational pension scheme (or is eligible, or serving a qualification period) </li></ul><ul><li>THEN…..the new employer must provide one of the following: </li></ul><ul><ul><li>Traditional final salary scheme </li></ul></ul><ul><ul><li>Final salary scheme with employer matching employee contributions to 6% of basic salary </li></ul></ul><ul><ul><li>money purchase pension scheme with same 6% contributions </li></ul></ul><ul><ul><li>stakeholder pension arrangement with same 6% matched contributions </li></ul></ul><ul><li>New employer may have to make higher contributions than old employer in some circumstances </li></ul><ul><li>Employer and employee can agree to disapply pensions protection, but must be genuine agreement…… </li></ul>
  13. 13. <ul><li>dismissal of staff either directly before or after the transfer for reasons relating to the transfer is ‘automatically unfair’ </li></ul><ul><li>the liability for such dismissals before the transfer become the liability of the transferee after the transfer. </li></ul><ul><li>only dismissals due to redundancy for ‘economic, technical or organisational (ETO) reasons, resulting in a change in the workforce’ are lawful </li></ul><ul><ul><li>Examples of ETO reasons; </li></ul></ul><ul><ul><ul><li>Economic – too expensive to make ; not viable/profitable ; not enough demand for products and services </li></ul></ul></ul><ul><ul><ul><li>Technical – new means of service delivery/production ; necessary raw materials/components no longer available ; change in law (eg, product banned from sale) or loss of licence </li></ul></ul></ul><ul><ul><ul><li>Organisational – relocation of workplace ; reorganisation of workplace/shifts/management structure </li></ul></ul></ul><ul><li>Employees with less than one year's service cannot usually present claims under TUPE as employment protection rights have not been accrued. </li></ul>Roy Mark , HR Director Dismissal of staff
  14. 14. <ul><li>Key management issues: </li></ul><ul><li>cost - both financial and IR - of ‘getting it wrong’ </li></ul><ul><li>need for protections against actions of transferor </li></ul><ul><ul><ul><li>Indemnities within the sale agreement </li></ul></ul></ul><ul><ul><ul><li>Tri-partite compromise agreements for redundancies prior to the transfer </li></ul></ul></ul><ul><li>duty to consult on ‘measures’ transferee plans to take in relation to size of workforce </li></ul><ul><li>Consultation periods may impact on the transfer date </li></ul>Roy Mark , HR Director Dismissal of staff
  15. 15. Trade Union Recognition: <ul><li>Main aspect: </li></ul><ul><li>where recognition agreements are in place prior to the transfer, these must transfer providing for continued recognition to the same extent </li></ul><ul><li>Key management issues: </li></ul><ul><li>while de-recognition after transfer is possible, where change to T&C’s by collective agreement is incorporated into contracts of employment, future collective agreements made by transferor with TU’s must be implemented by Transferee </li></ul>Roy Mark , HR Director
  16. 16. <ul><li>The obligation to consult will arise even if only one employee is to be affected by the business transfer. An employer must consult with the appropriate representatives of the employees affected by the transfer &quot;long enough before&quot; the transfer to enable meaningful consultation to take place and with a view to reaching agreement. </li></ul><ul><li>The transferor has a responsibility to conduct a full and meaningful consultation with employees at the earliest practicable time. Failure to conduct consultation results in liability for the payment of compensation which may be up to 13 weeks' pay. </li></ul><ul><li>The transferor and transferee are both liable for any award of compensation made by an employment tribunal for failure to inform and consult. </li></ul><ul><li>The Transferor has a duty to consult on the transfer intention, timescales and reasons; legal, economic & social implications on affected employees and the ‘measures’ which the transferee will take </li></ul><ul><li>The Transferee must provide transferor with details of these ‘ measures’ in good time to allow consultation to take place. </li></ul>Roy Mark , HR Director Right to be consulted/remedies for failure
  17. 17. Right to be consulted/remedies for failure <ul><li>Key management issues: </li></ul><ul><li>need to provide details of any plans which will have an effect on the workforce </li></ul><ul><li>failure of the transferor to consult can give rise to compensatory claims of up to 4 weeks pay for all affected staff </li></ul><ul><li>if fault lies with transferee, the Transfere could be enjoined in any proceedings </li></ul>Roy Mark , HR Director
  18. 18. Management Activity Checklist <ul><li>Key Topics: </li></ul><ul><li>agree scope of service provision </li></ul><ul><li>agree ‘in scope’ staff </li></ul><ul><li>ensure thorough Due Diligence </li></ul><ul><li>agree strategy for staff transition/any re-deployment </li></ul><ul><li>articulate ‘measures’ to be carried out in regards to the transfer </li></ul><ul><li>participate as necessary with staff consultation </li></ul><ul><li>negotiate Staff Transfer Agreement </li></ul><ul><li>Agree apportionment of staff costs </li></ul>Roy Mark , HR Director
  20. 20. Roy Mark , HR Director