August 28, 2013
by Jeffrey
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According to an article Personnel Today changes to TUPE will come into force in January 2014 with new Regulations being laid before Parliament in December 2013.
http://www.personneltoday.com/articles/27/08/2013/59622/government-plans-changes-to-tupe-regulations-for-january.htm
August 14, 2013
by Jeffrey
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The long reach of TUPE is illustrated by this case which concerns a collective agreement incorporated into the employment contracts of the Claimants who were first transferred 13 years ago in April 2000.
The Facts
The Claimants transferred from Ford in April 2000. At the time of that transfer there was a Mirrored Terms Agreement (‘MTA’) incorporated in to the Claimants’ contracts. The MTA had been negotiated between Ford and Ford’s European Works Council on 25 January 2000. It provided that “for the duration of the employees’ employment” the terms and conditions of employees who transferred from Ford would mirror those of existing Ford employees. The MTA also referred to this as “lifetime protection”. The MTA also provided that the Ford collective bargaining arrangements would continue for 6 years.
The first transfer was to Visteon UK Ltd in April 2000 and then there was a subsequent transfer to the Visteon Engineering Services Ltd (‘Visteon’) in July 2007. Ford had made a number of pay agreements with its employees over the years. Visteon had honoured those pay agreements in respect of both the employees who transferred and other employees who had subsequently joined it after the transfer. The latest Ford pay agreement was a 3-year agreement reached in 2008. Visteon refused to honour that agreement. It had reached its own collective agreement with its employees in April 2006 to last until 2008. This did not depart for the Ford pay agreement then in place. It had also reached an agreement regarding collective bargaining arrangements with Unite in 2007 to replace the Ford collective bargaining arrangements.
Visteon sought to argue that the 2006 collective agreement had replaced the MTA as the source of the terms and conditions of the claimants’ employment. It also argued that MTA terms ceased to have effect when the Ford collective bargaining arrangements expired in 2006.
The EAT
The EAT held the words “for the duration of the their employment” in the MTA were perfectly clear, not ambiguous and not capable of bearing two possible meanings. They meant what they said and the Claimants were entitled to the Ford pay terms. The EAT observed that it was open to the parties to negotiate a different collective agreement but that had not been done by the date of the tribunal hearing. The fact this was a bad bargain or in the words of the ET “bears heavily on the company” and “is not good in industrial relations terms” was not enough to conclude that something had gone wrong in the drafting of the MTA
Note: For the related ongoing dispute about the loss of pension entitlements see the Visteon Pension Action Group website here
July 29, 2013
by Jeffrey
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The P&G pensions case which was expected to be appealed has settled. Where does this leave the law on pension transfers under TUPE?
The Background
Under Reg 10 of TUPE, entitlements under occupational pensions schemes do not transfer. However, by Reg 10(2), (which enacts Art 3(4) of the Acquired Rights Directive), the provisions of occupational pensions schemes that do not relate to benefits for ‘old age’, ‘invalidity’ or ‘survivors’ are not treated as part of the occupational pension scheme these entitlements do automatically transfer on a TUPE transfer.
Beckmann and Martin
Two cases, Beckmann (2002) and Martin (2003), considered what was meant by ‘old age’ benefits. In Beckmann the employee was made redundant and because of her age was entitled to an early retirement pension and other early retirement enhanced benefits. The ECJ (now CJEU) held that the exclusion of pension liabilities from the Directive did not apply to the early retirement pension and other early retirement benefits payable on redundancy. The old age, invalidity and survivors pension exception was to be narrowly construed. The only material difference between Beckmann and Martin was that in Martin rather than being made redundant the employees took early retirement. The ECJ again held early retirement benefit entitlements were not within the ‘old age’ exception and did transfer. Only benefits that are payable when the employee reaches the end of his normal working life fall within this exception.
The Proctor & Gamble Company v Svenska Cellulosa Aktiebolaget SKA [2012] EWHC 1257 (Ch)
Unlike Beckmann and Martin which both concerned public sectors schemes, the P&G case was a private sector pensions case. The calculation and entitlements typical trust based private sectors scheme are very different from public sector schemes and had been considered that it might be possible to distinguish Beckmann and Martin in a private sector case.
In the P&G case a dispute arose regarding the price adjustment to be adopted in a sale and purchase agreement between P&G and SCA depending on whether certain pension scheme benefits transferred under TUPE.
The Scheme under consideration was a non-contributory defined benefit scheme and had a Normal Retirement Age (NRA) of 65. The Scheme was an integrated scheme that meant that after the NRA the pension payable taken together with the state pension would reach a particular target. Employees of P&G were ‘active’ members of the Scheme. Those who transferred to SCA became ‘deferred’ members. Whilst both ‘active’ and ‘deferred’ members of the Scheme were entitled to an early retirement pension (at a reduced rate), ‘active’ members of the Scheme were entitled to two enhanced benefits to which ‘deferred’ members were not, namely: (i) The right to a further ‘bridging’ pension for those who retired after the age of 55 with the consent of their employer – that is a temporary pension to bridge the gap between the early retirement pension and the state pension age which would pay a sum equivalent to the state pension up to the NRA. (ii) Preferential actuarial reductions if the member had completed 15 years’ continuous service.
Three questions arose:
(i) Had the early retirement benefits transferred from P&G to SCA under TUPE?
It was held that they did. A purposive construction was to be adopted to TUPE and no regard should be had to the domestic law distinction between discretionary entitlements and legally enforceable rights.
(ii) Did liability for all early retirement benefits transfer or just the enhancements?
Deferred members retained the right to their accrued early retirement pensions under the P&G scheme. It was argued on behalf of SCA that employees would be entitled under TUPE to be paid this by SCA and therefore the price adjustment in the sale and purchase agreement should reflect this. This was referred to as the ‘smiling pensioner’ argument on the basis that theoretically the transferred employee could claim his deferred pension from P&G and the same pension from SCA. (It would also benefit SCA greatly if they were compensated for this eventuality but the employees did not in fact claim against them). SCA’s argument was rejected and it was held that the only rights that transferred were the rights that would otherwise have been lost by the transfer – namely the enhanced rights.
(iii) Did the obligations to pay early retirement benefit cease at the normal retirement age at which point the normal retirement pension became payable?
It was held that it was not the case that a “a pension paid to a 100 year-old is not an old age benefit simply because by the consent of the employer it initiated at the age of 64 and not 65″. Early retirement benefits could be old age benefits so long as they continued to be paid after the NRA from the same scheme and that part of the retirement benefit did not transfer under Reg 10(2) of TUPE. The only part that was not related to old age was that part that was paid before the NRA.
Issues that remain
A number of issues remain following the P&G case. For example;
– Where a benefit is discretionary, in what circumstances can the transferee withhold consent? For example, how far will the transferee’s economic interests prevail having regard to their Imperial duty?
– How are discretionary rights, which by their nature, may never be exercised, to be valued?
– How, practically, can the transferee purport to exercise discretionary rights in the transferor’s scheme?
– Will payment of enhanced rights by the transferee breach the ‘authorised payment’ provisions of Chapter 3 of the Finance Act 2004?
It is probable that the Mitie principle of substantial equivalence will be applied to answer some of these questions insofar as they relate to the nature of the benefit that a transferee is required to provide to transferring pension scheme members. Also, the recent CJEU case in Alemo-Herron v Parkwood Leisure is likely to inform arguments that relate to the inability of transferees to become involved in decisions of trustees of pensions schemes of which they are not a party.
July 19, 2013
by Jeffrey
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This case does not concern any new principle but is another example of an unsuccessful perversity appeal in a Service Provision Change (SPC) case and relates to the issue of whether the same activities were carried on ‘before’ and ‘after’ the transfer – in the context of inadequate performance of the activity after transfer.
The Facts
B was employed by CSV as its project coordination manager. She was responsible for recruiting, training, screening and supporting volunteers towards becoming Independent Visitors. The Council has statutory duties under the Children Act 1989 to appoint Independent Visitors to befriend and advise vulnerable children (as defined). The Council appointed CSV pursuant to a contract to discharge their statutory duty. The contract was due to come to an end and B was at the time subject to disciplinary action. Another supplier, Action for Children, was unwilling to take on the contract with B in place. B was then dismissed for redundancy by CSV on 31 March 2011. As of the 1 April 2011 no replacement supplier was in place and, although it did not wish to do so the Council took the service back in house. Five months later it engaged Action for Children to undertake the service on a different and much reduced basis. When the Council took over the service it spent less time on the service than CSV. The recruitment aspect of the service also became somewhat neglected with a reactive approach being taken by the Council. A Council employee was given the task of dealing expenses of the Independent Visitors and another employee was given as a point of contact. The ET held that there was an SPC notwithstanding that there was unsatisfactory performance and under resourcing of the service by the Council.
The ET held at a PHR that the activities, having been performed by a contractor, had now been brought back in house within the meaning of Reg 3(1)(b)(iii).
The Council mounted a perversity appeal submitting that the ET had failed to adequately identify the activities carried out by CSV and failed to take account of differences between the activities it carried out and those carried out by the Council which it was argued were not similar and/or had been fragmented.
The EAT
The EAT restating (yet again) that whether or not there is an SPC is a question of fact (see Metropolitan Resources Ltd v Churchill Dulwich Ltd). The issue which the EAT identified was whether imperfect performance of the activities after the transfer meant that there was no SPC. The EAT held that just because, by reason inadequate performance and under resourcing, certain parts of the service had not been performed or performed adequately was not sufficient to hold that there was not an SPC. The EAT drew an interesting analogy by pointing out that when a canteen changes hands, the work may decline because people may not want to go to the new provider; it does not change the character of the service being provided or of the activities being provided just because on accepting the change not all of the activities can be carried out. The ET made findings of fact and it is not the function of the EAT to second guess this.
July 18, 2013
by Jeffrey
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The Court of Justice of the European Union (‘CJEU’) has handed down judgment in this case today (18 July 2013).
Summary
The CJEU has held where a transferee does not have the right to participate in the negotiating process relating to the collective agreement in question they cannot be bound by any agreement concluded after the date of the transfer. (I.e. a static interpretation on the facts).
The Facts
The employees were originally employed by the London Borough of Lewisham. Their pay was determined by a collective agreement between the employer and the National Joint Council for Local Government (the “NJC”). Following two TUPE transfers, Parkwood became the new employer. Subsequently, a new collective NJC agreement was negotiated without any participation by Parkwood who were not able to participate as they were a private sector employer. The new agreement increased pay scales. Parkwood refused to implement these increases. The employees claimed to be entitled to the new collective agreement. Parkwood won in the ET, lost in the EAT and won in the Court of Appeal. The Supreme Court referred the matter to the CJEU. The Advocate General was of the opinion that a dynamic interpretation is permissible. The CJEU has held it is not.
The CJEU Judgment
The judgment makes a number of important points:
(I) The Directive does not solely have the purpose of safeguarding employees’ rights in the event of a transfer but seeks to ensure a fair balance between the interests of those employees on the one hand and the transferee on the other (Para 25) Werhof makes it clear that the transferee must be in a position to make adjustments and necessary changes to carry on its operations.
(2) Transfers from the public to private sector require significant adjustment and changes given the inevitable difference in the working conditions between the two sectors. A collective agreement negotiated after the transfer in which the private sector employer has played no part limits the ability to make such changes and adjustments.
(3) The Directive must be interpreted in accordance with Charter of Fundamental Rights of the EU. Article 16 of that Charter provides for the freedom to conduct business and encompasses the freedom to contract has to be taken into account. The transferee must be able to assert its interests in the contractual negotiating process to which it is party. In this case it has no means of doing so nor of protecting its interests nor to negotiate working conditions for its own employees with a view to its future economic activity.
Ramifications
(1) The narrow point is clear. If the transferee cannot participate in the negotiating body it cannot be bound by any collective agreement reached after the transfer. If the negotiating process of a collective agreement allows for participation by transferees then a dynamic interpretation is possible.
(2) There are potentially wider ramifications: It is possible to detect a marginal change in emphasis in respect of the interpretation of the Directive from pure protection of workers’ rights to some recognition of the real practical difficulties of transferring from the public to private sectors.
July 15, 2013
by Jeffrey
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The new Tribunal Fees Regime will come into force on the 29th July 2013 for claims issued after that date. This post summarises the effect on TUPE Claims.
There are two particular aspects to the new Fees Regime which need to be considered: (1) The type of claim and (2) The number of Claimants.
Types of Claim
The level of fees will depend on whether the claim is Type A or Type B as defined in draft Employment Tribunals and Employment Appeal Tribunal Fees Order 2013. Type A claims are listed in the regulations. Anything not listed is a Type B claim. I set out below the typical claims under TUPE and whether they are Type A or Type B:
Type A
| Description of claim | Provision identifying the rights of the claimant |
| Reference to determine what particulars ought to be included in a statement of employment particulars or changes to particulars | Sections 1 and 4 ERA |
| Complaint of unauthorised deductions from wages | Section 13 ERA |
Type B
| Description of claim | Provision identifying the rights of the claimant |
| Unfair dismissal where the reason for the dismissal is the transfer or a reason connected to it | Tupe Reg 4(7) |
| Unfair dismissal where there is a substantial change in working conditions to the material detriment of the employee | Tupe Reg4(9) |
| Unfair dismissal where there is an ETO reason (redundancy or SOSR) | Tupe Reg 7(3) |
| Claims for protective awards for a failure to inform and consult (including not complying with the requirements for election of employee representatives) | Tupe Reg 15 |
Number of Claimants
Tupe is one area of employment law where it is common to have multiple claimants. This will make litigating TUPE claims very expensive unless the Claimants are entitled to fee remission.
For Type A claims the following fees are payable:
| Number of claimants in fee group | |||
| 2‐10 (2 x thesingle fee) | 11‐200 (4 x thesingle fee) | over 200 (6 x thesingle fee) | |
| Issue fee | £320 | £640 | £960 |
| Hearing fee | £460 | £920 | £1380 |
For Type B claims the following fees are payable:
| Number of claimants in fee group | |||
| 2‐10 (2 x thesingle fee) | 11‐200 (4 x thesingle fee) | over 200 (6 x thesingle fee) | |
| Issue fee | £500 | £1000 | £1500 |
| Hearing fee | £1900 | £3800 | £5700 |
Where fees are not paid claims are liable to be struck out. Where a fee in a multiple claim is unpaid, a member of the fee group can, before the date the claim is to be struck out, elect to come out of the fee group and pay the fee as if they were a single claimant.
Employment Appeal Tribunal Fees
In the Employment Appeal Tribunal the fees are £400 to lodge an appeal and £1200 for a full hearing. There appears to be no discount for groups of claimants who appeal with the fee being ‘per appellant’. Therefore if 10 claimants appeal a protective award decision it will cost £4,000 to lodge the appeal and £12,000 for a full hearing (unless any individuals are entitled to a remission).
Links
The Employment Tribunal and Employment Appeal Tribunal Fees Stakeholder Factsheet
Draft Fees Regulations (Not yet in force (15/07/13)
July 4, 2013
by Jeffrey
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4th July 2013
According to the BIS press office there will not now be any announcement on the changes to TUPE tomorrow – this will now be “later this month”. Also according to a report in People Management, yesterday at the CIPD Employment Law conference Jo Swinson the Employment Minister said that ‘revamped’ regulations will be published in September.
Latest Update 5th July 2013: The TUPE changes are to be announced w/c 15th July 2013
July 1, 2013
by Jeffrey
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Mr McCririck is currently suing IMG Media Ltd and Channel 4 for age discrimination. At a PHR an interesting issue arose about his employment status in the context of TUPE. Although an ET decision and therefore of no value as a precedent the issues raised provide an interesting point for discussion.
At the PHR, preliminary issues of Mr McCririck’s employment status and whether his employment had transferred from Highflyer Productions Ltd to IMG Media Ltd, were dealt with. The case for IMG was that Mr McCririck was a self employed contractor and therefore there was no transfer. His case was that he was an employee and that his employment had transferred from Highflyer to IMG. The case against Channel 4 is that it discriminated against Mr McCririck as a contract worker under section 41 of the Equality Act 2010.
Employment Rights Act 1996
Although not in issue in this case it is worth noting that the Employment Rights Act 1996 (ERA) provides the narrowest definition of employee. Under section 230(1) and (2) an employee is someone who has an employment contract, i.e. a contract of service. Section 203(3) makes particular provision for ‘workers’ as including those who work under any other contract whereby the individual undertakes to do or perform personally any work or services for another party to the contract whose status is not by virtue of the contract that of a client or customer of any profession or business undertaking carried on by the individual. However, only ‘employees’ enjoy unfair dismissal rights.
TUPE
Under TUPE by Reg 2(1) an ‘employee’ means any individual who works for another person whether under a contract of service or apprenticeship or otherwise but does not include anyone who provides services under a contract for services and references to a person’s employer shall be construed accordingly.
Equality Act 2010
Under the Equality Act 2010, section 83(2) ‘employment’ means employment under a contract of employment, a contract of apprenticeship or contract personally to do work.
McCririck has a contract with Highflyer to personally do work – he could not substitute another person to do it. He did not have a contract of service. Nevertheless he was integrated into the Highflyer operation. He was in a subordinate position and was not an independent contractor operating his own business. The ET considered a number of authorities in the discrimination context, including Allonby v Accrington and Rossendale College ECJ C- 256/01 and Jivraj v Hashwani [2011] UKSC 40 and held that he was therefore ‘in employment’ for the purposes of section 83 of the Equality Act 2010.
So far as TUPE was concerned, on behalf McCririck it was argued that the words ‘or otherwise’ in Reg 2(1) were intended to ensure that TUPE applied to ‘workers’ as well as employees. This argument was accepted by the ET for three reasons: (1) The Directive is widely drawn. The wording of Art 2.1 is not apt to restrict its scope to contracts of service or apprenticeship only. Those ‘employed’ as ‘workers’ are also protected under our domestic law. The Regulations must be read compatibly with the Directive. (2) The wording of Reg 2(1) justifies and dictates the interpretation that TUPE applies to ‘workers’ as well as to those employed under contracts of service or apprenticeship as indicated by the words ‘or otherwise’. The term ‘contract for services’, in context, must be read as confined to the case of an independent contractor in business on his own account. (3) The purpose of TUPE is such that there could be no good reason for imagining that Parliament could have intended to exclude ‘workers’. There would be no rational basis for doing so given that business transfers affect all those ‘employed’. TUPE could not operate effectively if every transfer required a laborious enquiry into whether staff members were employed under contracts of service or were workers.
It is difficult, as indeed the very eminent counsel for the Respondents found, to discern what could be meant by the expression ‘or otherwise’ in Reg 2(1) other than to encompass the residual category of workers. The words are unnecessary if TUPE is confined to those employed under a contract of service. Indeed, although not cited in the case some support for this view can be garnered from Governing Body of Clifton Middle School v Askew in which it was held that it was only necessary for them to be some contractual relationship between the person subject to the transfer and the transferor. It was not necessary for it to be a contract of service.
This decision is a reminder of another interesting issue under TUPE. What if a worker is dismissed because of the transfer or a reason related to the transfer, does the worker enjoy the right to claim unfair dismissal under Part X of the ERA? The answer is almost certainly no.
Although, Reg 7(1) provides that right to any ‘employee’ as now defined to include ‘worker’, Part X of the ERA only gives unfair dismissal rights to the narrow category of employees – those employed under a contract of service and not those providing work under a contract for services. Furthermore, Reg 7(6) excludes the application of the right to claim unfair dismissal under Reg 7(1) where that right is excluded by any provision under the 1996 Act. Thus, for example, if the employee does not have sufficient qualifying service and is dismissed because of the transfer he will not be able to bring an unfair dismissal claim. Similarly a worker dismissed because of the transfer will have no right to being an unfair dismissal complaint because he or she is not an ‘employee’.
There is therefore a residual category of people who will enjoy the general protection of TUPE but will not be able to bring an unfair dismissal claim. This category of employees will not be wholly without protection. For example, if there is an attempt to harmonise terms and conditions following a transfer and for reasons related to the transfer,whilst this residual category of workers would not be able to resign and claim unfair (constructive) dismissal, nevertheless they may, depending on the circumstances, have the right to apply for a declaration to the effect that they have the right to be employed on their existing terms and conditions.
June 26, 2013
by Jeffrey
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This authority simply confirms that where an ET makes an award of compensation against the transferor and transferee for a failure to consult it has no power to apportion liability between them under Reg 15(9) (Todd v Strain applied).
The Facts
The employee transferred from N to CW on 31 August 2011. N failed to inform and consult or elect an employee representative before the transfer. N became insolvent after the transfer. The ET apportioned liability for the award so that CW was ordered to pay all the compensation to the employee for the failure to consult.
The EAT
Held that there was no power to apportion the award and that this was a matter for the civil courts under the Civil Liability (Contribution) Act 1978. (However, note that on this point this appears difficult in light of paragraph 24 of Brennan v Sunderland City Council [2012] ICR 1183).
Note there is an error in the official transcript which refers to Reg 59 of TUPE rather than Reg 15(9)
June 25, 2013
by Jeffrey
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BIS are expecting to announce the Government’s response to the TUPE consultation on 5th July.