TUPE

Jeffrey Jupp's TUPE resource

February 10, 2014
by Jeffrey
0 comments

Manchester College v Hazel CA – 5 February 2014

This case concerns harmonisation following a transfer.   In cases of harmonisation the argument often run is that the harmonisation was for reason(s) independent of the transfer.  Usually, that the business was under financial pressure or there were industrial relations issues or a management difficulties arising from having different sets of Ts and Cs.  Crucially in this case it was accepted by the employer in the Tribunal that the harmonisation was connected to the transfer and case was fought on the basis that there was a valid ETO reason.

The Facts

The employer which operated in the education and vocational sector won six contracts for providing educational services in prisons.  In doing so it acquired about 1500 new members of staff.  In January 2010 it decided to implement a process of harmonising 37 different sets of terms and conditions that it had inherited.    This was to be undertaken by dismissal and re-engagement on a new contract which would be standard across the relevant part of the organisation.  The Claimant employees were initially warned that they would be made redundant.   It then became clear they would retain their existing posts but would suffer substantial pay reductions under the new contract and there would be changes to other terms.   They were re-engaged on the new terms under protest.    They commenced ‘ordinary’ unfair dismissal proceedings.

In the Tribunal the judge raised the issue of TUPE and in particular whether the dismissals were because of the transfer itself or a reason connected to the transfer and therefore automatically unfair under Reg 7 unless for an ETO reason.

The Court of Appeal

Liability

The employer lost in the ET, EAT and Court of Appeal on the issue of liability essentially because for an ETO defence to succeed it is a requirement that the dismissal of the particular employee that must entail changes in the workforce.  In this case there were dismissals for redundancies which entailed changes in the workforce but the dismissals of the particular employees did not entail any such change because they were no longer at risk of redundancy when they were dismissed.

In the Court of Appeal Underhill LJ held (para 23) that:

“I accept of course that the proposed harmonisation of terms was in a general sense related to the proposal for redundancies: they were adopted as part of the same package of proposals, and both were intended to contribute to the required costs savings (with the asserted corollary that the achievement of the standardisation of terms would reduce the number of redundancies needed). But the fact that there was a relationship of that kind has no bearing on the statutory question of what was “the sole or principal reason for” the Claimants’ dismissals. It is trite law that for the purpose of sec. 98 of the 1996 Act (and thus also of reg. 7 of TUPE, because that plugs into the general law of unfair dismissal) what matters is the factors that operate on the employer’s mind so as to cause him to dismiss the employee.”

Remedy

The employer appealed on the issue of remedy.  The Tribunal had ordered re-engagement under the new contracts but under the remuneration provided for under the old contract (the employees were content to accept the other changes to terms and conditions).   It was argued in the Court of Appeal that because the employees had worked under the new contract they could not be reinstated under their old contractual terms relating to pay.   This argument was rejected for the reasons that:  (i) it overlooked the fact that the employees had been dismissed and were entitled to the remedies under Part X of the ERA.    (ii)  that the wording of section 115 of the ERA provides for engagement on specified terms from the date specified in the order.

Comment

The employer in this case did not contest that the dismissals were connected to the transfer.  Under the amended regulations in force from 31 January 2014 Reg 7 has been amended so that a dismissal will be unfair if the sole  or principal reason is the transfer itself.   If it is merely connected to the transfer it will not be unfair.   Because of this the concession that was made in this case is unlikely to be made in a future case.  Whether the amendment to Reg 7  is compatible with the Directive and the CJEU case law remains to be seen as case law (but not the Directive Art 4) uses the expression ‘connected to the transfer’ (see in particular Martin v Southbank University para 44)

Link to judgment

 

 

 

January 13, 2014
by Jeffrey
0 comments

TUPE Regulations as amended from 31 January 2014

A complete version of the ‘as amended’ Regulations is available here.  Please note the following:

  • Reg 11(6) in force for transfers on or after 1 May 2014.
  • New Reg 13A and amendments to Reg 15 in force for transfers on or after 31 July 2014.

everything else is in force for transfers (or where appropriate, variations (agreed or taking effect), or notices of dismissal or terminations)  on or after 31 January 2014

 

 

November 29, 2013
by Jeffrey
0 comments

Ward Brothers (Malton) Ltd v Middleton EAT- 29 November 2013

This cases an interesting point on Reg 8(7) and when it is that a ‘transferor is …under the supervision of an insolvency practitioner’. 

Reg 8(7) provides:

(7) Regulations 4 and 7 do not apply to any relevant transfer where the transferor is the subject of bankruptcy proceedings or any analogous insolvency proceedings which have been instituted with a view to the liquidation of the assets of the transferor and are under the supervision of an insolvency practitioner

The Facts

B was a haulage company in financial difficulties. HMRC issued a winding up petition. On the Friday before that petition was due to be heard B ceased trading.   On the following Monday W started to perform B’s contracts using B’s employees, save for those who did not wish to work at the lower rates offered.  In the week before ceasing to trade B had been taking advice from an insolvency practitioner (IP).   At issue was whether at this point B was under the supervision of an IP.  If it was Regs 4 and 7 would not apply.   Administrators were formally appointed 10 days after B ceased to trade.

EAT Judgment

The parties both sought to persuade the EAT that it should identify a ‘red line’ at which point a transferor could be said to under the supervision of an IP.   The reason being the same as that in Key2Law LLP v De’Antiquis – namely that is the interests of those involved and their advisors if it can be clearly identified when Reg 8(7) is operative and when it is not.

HHJ Burke QC in reliance on the judgment of Elias P in Secretary of State for Trade & Industry v Slade [2007] IRLR 98 held that there was such a red line; in order for the transferor to be under the supervision of an IP that IP must have been appointed as a liquidator, provisional liquidator or administrative receiver as required by section 388 of the Insolvency Act 1986.

Comment

This decision has the benefit of certainty although as is recognised in the judgment they may still be factual disputes as to the time of the appointment.  For example, as to whether an insolvency practitioner was on the facts, appointed before a formal letter of appointment was provided or even drafted. 

 

Link to judgment

 

 

 

 

 

 

 

November 14, 2013
by Jeffrey
0 comments

Swanbridge Hire & Sales Ltd v Butler EAT – 13 November 2013

The issue in this case principally concerns the meaning of Reg 3(3) and the intention of the client that activities following the transfer will be carried out by the transferee other than in connection with a single specific event or task of short term duration.

The Facts

S subcontracted to K the provision of labour to insulate and clad 5 boilers and pipes at a power station in Pembrokeshire.   S became dissatisfied with K and negotiated with Swanbridge for Swanbridge to take over the insulation of boilers 4 and 5.  K regarded this as a repudiatory breach and withdrew their employees from the site.     On 5 October 2011 S informed K  that the whole contract for all boilers was terminated.  On 6 October K informed Swanbridge TUPE applied and that all of its employees working on the boilers were now employed by Swanbridge.  Swanbridge hired 37 out of 39 of the employees.   The work on all 5 boilers was completed in May/June 2012 and had lasted about 18 months.    B and others brought claims against K for notice pay, outstanding wages, holiday pay and expenses and claims were also brought for protective awards.   K contended that there was a Service Provision Change (SPC) under Reg 3(1)(b)(ii) to Swanbridge.

The ET Judgment

The ET held there was an SPC as the works were lengthy and protracted and could not be regarded as short term.

The EAT Judgment

The EAT held that the ET was required to make findings on the following issues:

(1)  The intention of S at the time of the SPC to Swanbridge.

(2)  Whether the activities to be carried out by Swanbridge were in connection with a single specific event or in connection with a task.  Identifying in each case what was a a task and what was an event.

(3)  Whether that single event or task was of short term duration.

The issue is not whether the client intends the activities to be of a short term duration but whether the intention is that the activities be carried out in a connection with a task or an event of short term duration.   The ET was required to make findings on this issue and in this case had not done so.  Whilst it might in some circumstances, where direct evidence is lacking , be possible to infer the intention from the duration of the task or event, here the ET had impermissibly taken into account the period that the task was being undertaken by K before the transfer.   The ET is required to determine what the client’s intention was at the time of the SPC not at the commencement of the task or event, the undertaking of part of which may predate the SPC.

The EAT also preferred the judgment of Langstaff P in SNR Denton v Kirwan  in which he held that short term duration qualifies both tasks and events over the judgment of Lady Smith in Liddells Coaches v Cook in which she held that it qualified only tasks and not events.

Comment

The issue to focus on in respect of Reg 3(3) is – how long did the client intend that the task or event to take after the SPC?   There will usually be direct evidence of this.  If there is not it is permissible to draw inferences from the length of time the task or event actually took, provided that any time  spent on the event or task before the SPC is ignored.

Link to judgment

 

 

 

 

 

 

November 14, 2013
by Jeffrey
0 comments

Crystal Palace FC Ltd v Kavanagh CA – 13 November 2013

Summary

The Court of Appeal have overturned the judgment of the EAT.

The EAT had held that reason for dismissing the employees for redundancy was so that the liquidator could sell the football club and not for the purpose of continuing the business and this was not a valid ETO reason.  The Court of Appeal disagreed.  It held that the reason for the redundancy dismissals was so that the club could continue to trade during the closed season.   The purpose was to cut the wage bill to avoid the club going into liquidation at the end of the 2009/2010 season and so that it could continue in business through the closed season. The was a valid ETO reason

Facts

CP FC was put into administration in January 2010.   The objective of the administrator was to sell the club as a going concern.   A potential buyer was identified in February 2010 but negotiations stalled because the stadium was owned by another party and the potential buyer wanted to both the club and the stadium.   Because of serious cash flow difficulties, the administrator decided to mothball the club over the closed season with the intention to revive negotiations later.  The club’s administrative staff, which included the Claimants, were made redundant in May 2010.

The ET held that there was an economic, technical or organisational (“ETO”) reason entailing changes in the workforce and therefore the dismissals were not unfair (Reg 7(1)(b)).  The ETO reason was that the the Administrator  “could no longer afford to pay all the Club’s employees and he had to reduce the workforce and wage bill in order to mothball the Club in the hope that a purchaser would be found”.

The EAT judgment

The EAT considered  Spaceright Europe Ltd v Baillavoine  [2011] EWCA Civ 1565 and judgment of Mummery LJ at paragraph 47:

“For an ETO reason to be available, there must be an intention to change the workforce and to continue to conduct the business, as distinct from the purpose of selling it. It is not available in the case of dismissing an employee to enable the administrators to make the business of the company a more attractive proposition to prospective transferees of a going concern.”

The EAT held that this paragraph posits two alternative positions: first, where the reason for a dismissal was the intention to change the workforce and to continue to conduct the business; second, and distinguished from that position, was where the dismissal was part and parcel of a process, with the purpose of selling the business. In the former case, there could be a dismissal for an ETO reason, but in the latter case there could not.

Here the ET had erred in deciding that the reason for the dismissals was that the administrator could no longer afford to pay the employees. The EAT agreed that the administrator wanted to save costs by making redundancies, but this was to preserve the business so that it could be sold in the future. In light of Spaceright this was not an ETO reason and, as such, the dismissals were automatically unfair and liability for those dismissals passed to the purchaser under TUPE.

The Court of Appeal judgment

In their judgments Kay LJ (at §11) and Briggs LJ (at § 18) consider the tension that exists between protecting employees’ rights under TUPE and the policy aims of Schedule B1 of the Insolvency Act 1986 of favouring corporate rescue and achieving a better result for creditors by an administration than would be achieved in liquidation.     Both point out that the mechanism for resolving this tension is Reg 7 which implements Art 4.1 of the Directive.

Kay LJ went onto distinguish, on its facts, Spaceright.   This case was different, due in part, because of the unique features of the financial affairs of failing football clubs.  The main assets being the contracted players and therefore there were stronger reasons then usual for averting liquidation and to continue to trade.

Briggs LJ gave a reminder that that the purpose TUPE is not to place employees in a better position than they would otherwise have been in (a point not infrequently unconsciously overlooked).   Where employees have been dismissed because the money has run out Reg 7 cannot be relied on to improve their position.  Reg 7 ‘unambiguously requires a subjective fact sensitive analysis of the sole or principal reason’ for the dismissal.   If the reason for the dismissal, as here, was to keep the club going until so that it could ultimately be sold that was permissible – the purpose was not to make the club more attractive to sell but was to allow it to continue to trade.

Comment

What this case emphasizes is the need to have a rigorous factual analysis of the reason for the dismissal when consider the ETO exception in Reg 7.    As Briggs LJ (at § 27) points out that where the administrator is seeking to achieve a better result from the company’s creditors as a whole than would be likely if the company were wound up (without first being in administration), (under paragraph 3(a) of Schedule B1 of the Insolvency Act 1986), then he will almost always have the transfer as his ultimate objective.  Everything that he does will be tailored to this achievement.  If that objective, without more, is the sole or principal reason for dismissal then the ETO exception will never, or hardly ever, be made out.  However, if there is another reason then the ETO exception is available.  In this case the reason was that the club could not pay the staff during the closed season and that was an ETO reason.

 Link to Judgment

October 3, 2013
by Jeffrey
0 comments

Lorne Stewart Plc v Hyde EAT – 1 October 2013

This case raises two points on Reg 3(1)(b) Service Provision Changes (SPCs). First, If there is no contractual obligation on the contractor to perform particular work for the client before the transfer but that work is nevertheless undertaken, do the employees engaged in that activity transfer if the expectation is that it will continue? Second, does it matter if the activity is not actually being undertaken at the time of the transfer?

 

The Facts

The Claimants H and C worked for Carillion. Carillion had a contract with the Cornwall Council from 2007 until 2011 to provide heating and boiler installation services (‘the contract’). On 1 April 2011 LS took over the contract following a successful tender. Both employees worked principally on the contract. LS took a number of employees from Carillion on the transfer but, having initially told H and C that they would transfer, refused to permit them to do so.

The contract was in the nature of a framework agreement by which the Council could call on services as and when required. There were 5 different categories of work under the contract. Two of these categories were: repairs and renewals in excess of £250; and large scale repairs (‘project work’). Whereas the Council was obliged to give Carillion the other categories of work under the contract it was not obliged to give Carillion the work in these two categories and Carillion was not obliged to accept it if offered. In practice, however, Carillion did receive all such work and did undertake it. The tendered contract was materially the same.

C carried out minor repair work and the replacement of minor equipment which was not within the contract either before or after tender and H performed project work. LS took the view that both H and C were engaged in work that was not work that Carillion were contractually required to perform and nor was it, and therefore H and C did not transfer.

The ET

So far as C was concerned the Tribunal held that this work was work that was anticipated within the contract and therefore C transferred to LS. H was slightly different because large project work was not within the general kind of work undertaken pursuant to the contract. Nevertheless it was work that Carillion had undertaken and it was the expectation of the Council and LS that LS would do so. Therefore H carried on activities which ceased to be carried on Carillion and were instead carried on by LS and he also transferred to LS.

 

The EAT

LS appealed on two grounds: (1) That the Tribunal were wrong to find that activities in which there was no contractual obligation to undertake could transfer, particularly as those activities were not being undertaken at the time of the transfer. (2) that the Tribunal had failed to identify the activities carried on by Carillion which were then carried on by LS which had to be fundamental or essentially the same.

The EAT dismissed the appeal. It restated (yet again!) that Reg 3(1)(b) and (3) do not need judicial construction; they are straightforward words. The questions that have to be asked are most recently summarised in Enterprise Management Services v Connect up Ltd.

 

As to ground (1); The point that there was no contractual obligation to perform the work was not maintained with any force by LS at the EAT but if had been the EAT stated that it would have decided the point against LS. All that mattered was whether as a fact, the work was being done. It was also not in law necessary for C or H or anybody else actually to be carrying out the type of work that was said to have been subject to the service provision change on the day or in the days before the transfer and on the day or during the days after the transfer provided that it had been carried on and was going to be carried on.

As to ground (2) the tribunal had made sufficient findings of fact that both employees had been engaged in work for Carillion before the transfer which was work that it was expected LS would undertake after the transfer.

 

Link to judgment

 

 

 

 

 

September 12, 2013
by Jeffrey
0 comments

Rynda (UK) Ltd v Rhijnsburger EAT – 9 September 2013

The Facts

From May to October 2009 the employee was employed by DJ under a 6 month fixed term contract to manage premises in the Netherlands for one of DJ’s clients.  From October 2009 she took on an associate role for DJ managing a portfolio of Dutch properties and also took on responsibility for the management of the office dealing with German properties for H2O.

From March 2010 after a period illness and when the employee returned to workit was decided she would be confined to the managing the Dutch portfolio.  She was the only employee doing so.  On 1 April 2010 her employment transferred to DJD. At the end of 2010 the Respondent assumed responsibility for managing the Dutch portfolio.

The employee’s employment ended with DJD on 31 December 2010 and began employment with the Respondent on 1 January 2011.

The ET held that the employee, albeit on her own, was an organised grouping that carried out the activity of property management services of the H20 properties in the Netherlands.  This was not the product of accident or happenstance but was the product of a deliberate decision taken by DJD before the transfer there was therefore a service provision change with Reg 3(1)(b).

 

The EAT

The EAT upheld the decision following the reasoning in the Court of Session decision in CEVA Freight (UK) Ltd v Seawell Ltd . and Eddie Stobart Ltd v Moreman.  It held that the ET had correctly focussed on whether the employee had become part of an organised grouping by a process of conscious organisation rather than accident or happenstance.

It rejected the Respondent’s argument that the ET had focussed on the work actually done rather than the question of whether the Respondent had deliberately organised the employee into a grouping to work exclusively on the Dutch portfolio.

Other arguments including;  that the period of the employees employment with DJD which commenced in April 2010 was a temporary arrangement and therefore the employee was not ‘assigned’ within the meaning of Reg 2 which (where ‘assigned’ is defined as meaning ‘assigned other than on a temporary basis’) were rejected.

Link to Judgment

September 5, 2013
by Jeffrey
0 comments

Government’s Response to TUPE Consultation – 5 September 2013

The Government’s proposals have been published and they not nearly as radical as had been anticipated by some, and feared by others. The big news is that Service Provision changes will remain albeit in a modified form to reflect the development of case law. A number of the proposed changes are (perhaps surprisingly) sensible and practical for both employers and employees. The main changes proposed with observations beneath are:

(1) Allowing renegotiation of terms derived from collective agreements one year after the transfer, even though the reason for seeking to change them is the transfer, provided that overall the change is no less favourable to the employee. Any change which does not satisfy this requirement will be void.

This proposal brings TUPE in line with Art 3(3) of the Directive in that it permits changes to collective agreements after 1 year. However, it provides greater protection to employees than the Directive for two reasons. First, by imposing the requirement that the overall change must not be less favourable to employees. There is no such requirement in the Directive. Secondly, by requiring any change is to be the product of negotiation.

(2) Providing expressly for a static approach to the transfer of terms derived from collective agreements.

This change reflects the recent CJEU decision in Parkwood Leisure v Alemo-Herron.

(3) Providing that changes in the location of the workforce following a transfer can be within the scope of economic, technical or organisational reasons entailing changes in the workforce, thereby preventing genuine place of work redundancies from being automatically unfair.

This removes the anomaly that dismissals where the workplace closes and the workforce are moved to a new location can be a fair redundancy (assuming proper consultation etc.) but not an ETO reason.

(4) Amending Reg 4 and Reg 7 to bring them closer to the language of the Acquired Rights Directive.

The final wording has not been finalised but is likely to refer to the ‘transfer itself’ rather than ‘a reason connected to the transfer’. There is also likely to be a provision which expressly makes it clear that unilateral variations will be permissible if they are allowed for in the contract. An example given is the mobility clause; however, it is also likely to apply to Bateman v Asda Stores types of unilateral variations.

(5) Amending the SPC provisions to reflect the approach set out in the case law, namely that for there to be an SPC, the activities carried on after the change in service provision must be “fundamentally or essentially the same” as those carried on before it.

This change simply reflects current case law and deals expressly with the ‘fragmentation’ issues that arise. I.e. there will be no SPC if the service is fragmented or changed substantially following transfer. (see most recently Enterprise Management Services Ltd v Connect-Up Ltd)

 (6) Amending the Trade Union and Labour Relations (Consolidation) Act 1992 to make it clear in statute that consultation which begins pre-transfer can count for the purposes of complying with the collective redundancy rules, provided that the transferor and transferee can agree and where the transferee has carried out meaningful consultation.

This is a sensible and practical measure.

(7) Allowing micro businesses (i.e. those with 10 or fewer employees) to inform and consult directly affected employees when there is no recognised independent union, nor any existing appropriate representatives.

This is an entirely sensible proposal which is permitted by Art 7(5) of theDirective. Holding elections where there are 10 or fewer than 10 employees is probably an unnecessary burden in most cases. It also only applies where there is no union presence. Where there is then negotiations will be with the union representatives.

(8) Extending the time before the transfer when about employee liability information must be given to the transferee to 28 days.

Given that original proposal was to repeal the ELI requirements completely (which would have been disastrous, particularly in SPC cases) this proposal is not only a surprise but actually addresses the real problem with ELI and that is that is often given far too late. The current Reg 11(6) exception will be retained (where special circumstances make it not reasonably practical to comply with the 28 day deadline it must be provided as soon as reasonably practical thereafter.

As yet no date has been set for implementation although it is expected to be January 2014

Link to consultation