| |
Introduction
Provisions relating to
employment rights on the transfer of an undertaking are contained in the
Transfer of Undertakings (Protection of Employment) Regulations 1981 (SI 1794),
as amended by the Transfer of Undertakings (Protection of Employment)
(Amendment) Regulations 1987 (SI 442), the Trade Union Reform and Employment
Rights Act 1993, the Collective Redundancies and Transfer of Undertakings
(Protection of Employment) (Amendment) Regulations 1995 (SI 1995 No. 2587) and
the Collective Redundancies and Transfer of Undertakings (Protection of
Employment) (Amendment) Regulations 1999 (SI 1925). The Government has
consulted on proposals to take advantage of the various new options outlined in
the revised Directive 2001/23/EC. As a consequence, there are expected to be
amendments to the TUPE Regulations, which are likely to come into effect around
the Summer of 2003.
These Regulations
implement the European Community Acquired Rights Directive (77/187/EEC,
as amended by Directive 2001/23/EC). Rights
already conferred by existing employment legislation are not affected by the
Regulations and are explained in other documents in this series. This document
outlines the Regulations and explains how a complaint is handled. It gives
general guidance only and should not be regarded as a complete or authoritative
statement of the law. If, when you have read this document, you have any
questions about the Regulations, you should contact the Advisory,
Conciliation and Arbitration Service (ACAS).
OUTLINE OF
REGULATIONS
Purpose
The Regulations preserve
employees' terms and conditions when a business or undertaking, or part of one,
is transferred to a new employer. Any provision of any agreement (whether a
contract of employment or not) is void so far as it would exclude or limit the
rights granted under the Regulations.
The Regulations have the
effect that:
- Employees employed by
the previous employer when the undertaking changes hands automatically
become employees of the new employer on the same terms and conditions. It is
as if their contracts of employment had originally been made with the new
employer. Thus employees' continuity of employment is preserved, as are
their terms and conditions of employment under their contracts of employment
(except for certain occupational pension rights).
- Representatives of
employees affected have a right to be informed about the transfer. They must
also be consulted about any measures which the old or new employer envisages
taking concerning affected employees.
Transfers
covered by the Regulations
The Regulations apply when
an undertaking or part of an undertaking is transferred from one employer to
another.
Some examples of transfers
are:
- where all or part of a
sole trader's business or partnership is sold or otherwise transferred;
- where a company, or
part of it, is bought or acquired by another, provided this is done by the
second company buying or acquiring the assets and then running the business
and not acquiring the shares only;
- where two companies
cease to exist and combine to form a third;
- where a contract to
provide goods or services is transferred in circumstances which amount to
the transfer of a business or undertaking to a new employer.
The Regulations can apply
regardless of the size of the transferred undertaking. Thus the Regulations
equally apply to the transfer of a large business with many thousand employees
or of a very small one (such as a shop, pub or garage).
The Regulations apply
equally to public or private sector undertakings.
Transfers
not covered by the Regulations
The Regulations do not
apply to the following:
- transfers by share
take-over because, when a company's shares are sold to new shareholders,
there is no transfer of the business - the same company continues to be the
employer;
- 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);
- transfers of a contract
to provide goods or services where this does not involve the transfer of a
business or part of a business;
- transfers of
undertakings situated outside the United Kingdom.
Those provisions of the
Regulations which relate to dismissal of employees because of the transfer, the
duty to inform and consult representatives and the failure to inform and consult
them as required, do not apply to employees who, under their contracts of
employment, normally work outside the United Kingdom.
Employer's
position in a transfer
Under the Regulations,
when an undertaking is transferred the position of the previous employer and the
new employer is as follows:
- The new employer takes
over the contracts of employment of all employees who were employed in the
undertaking immediately before the transfer, or who would have been so
employed if they had not been unfairly dismissed for a reason connected with
the transfer.1
An employer cannot just pick and choose which employees to take on.
- The new employer takes
over all rights and obligations arising from those contracts of employment, except
criminal liabilities and rights and obligations relating to provisions about
benefits for old age, invalidity or survivors in employees' occupational
pension schemes.
- The new employer takes
over any collective agreements made on behalf of the employees and in force
immediately before the transfer (see also Trade
union recognition).
- Neither the new
employer nor the previous one may fairly dismiss an employee because of the
transfer or a reason connected with it, unless the reason for the
dismissal is an economic, technical or organisational reason entailing
changes in the workforce. If there is no such reason, the dismissal will be
unfair. If there is such a reason, and it is the cause or main cause of the
dismissal, the dismissal will be fair provided an employment tribunal
decides that the employer acted reasonably in the circumstances in treating
that reason as sufficient to justify dismissal. If, in this case, there is a
redundancy situation, the usual redundancy procedures will apply (see Redundancy).
- The new employer may
not unless the contract of employment so provides unilaterally worsen the
terms and conditions of employment of any transferred employee.
- The previous and new
employers must inform and consult representatives of the employees (see Information
and consultation).
Employees'
position in a transfer
When an undertaking is
transferred the position of the employees of the previous or new employers is as
follows:
- An employee claiming to
have been unfairly dismissed because of a transfer has the right to complain
to an employment tribunal.
- Transferred employees
who find that there has been a fundamental change for the worse in their
terms and conditions of employment as a result of the transfer generally
have the right to terminate their contract and claim unfair dismissal before
an employment tribunal, on the grounds that actions of the employer have
forced them to resign. Employees may not make this type of claim solely on
the grounds that the identity of their employer has changed unless the
circumstances of an individual case change and that change is significant
and to the employee's detriment.
In both the above cases
dismissal because of a relevant transfer will be unfair unless an
employment tribunal decides that an economic, technical or organisational reason
entailing changes in the workforce was the main cause of the dismissal and that
the employer acted reasonably in the circumstances in treating that reason as
sufficient to justify dismissal. Even if the dismissal is considered fair,
employees may still be entitled to a redundancy payment (see Redundancy).
For details of how to
complain to an employment tribunal see Complaining
to an employment tribunal.
- Employees employed in
the undertaking immediately before the transfer (or who would have been
so employed had they not been unfairly dismissed) for a reason connected
with the transfer 1
automatically become employees of the new employer, unless they inform
either the new or the previous employer that they object to being
transferred. In this case the contract of employment with the previous
employer is terminated by the transfer of undertaking but the employee is
not dismissed. The previous employer may re-engage the employee.
An employee's period of
continuous employment is not broken by a transfer, and, for the purposes of
calculating entitlement to statutory employment rights, the date on which the
period of continuous employment started is the date on which the employee
started work with the old employer. This should be stated in the employee's
written statement of terms and conditions; if it is not, or if there is a
dispute over the date on which the period of continuous employment started, the
matter can be referred to an employment tribunal. (For further details, see Written statement of
employment particulars (PL700)).
- Transferred employees
retain all the rights and obligations existing under their contracts of
employment with the previous employer and these are transferred to the new
employer, with the exception that the previous employer's rights and
obligations relating to benefits for old age, invalidity or survivors under
any employees' occupational pension schemes are not transferred. If the new
employer does not provide comparable overall terms and conditions, including
pension arrangements, it is possible that an employee may have a claim for unfair
dismissal, although this has never been tested in the courts.
Occupational pension rights
earned up to the time of the transfer are protected by social security
legislation and pension trust arrangements.
Redundancy
Dismissed employees may be
entitled to redundancy payments. Employers must also ensure that the required
period for consultation with employees' representatives is allowed. More details
are in documents Redundancy
consultation and notification (PL833) and Redundancy
payments (PL808).
Entitlement to redundancy
payments will not be affected by the failure of any claim which an employee may
make for unfair dismissal compensation.
Where there are
redundancies and it is unclear whether the Regulations apply, it will also be
unclear whether the previous or the new employer is responsible for making
redundancy payments. In such cases employees should consider whether to make any
claims against both employers.
Trade
union recognition
If the transferred
undertaking maintains an identity distinct from the remainder of the new
employer's business, the new employer will be considered to recognise an
independent trade union, in respect of employees transferred, to the same extent
that it was recognised by the previous employer. If the undertaking does not
keep its separate identity, the previous trade union recognition lapses, and it
will then be up to the union and the employer to renegotiate recognition.
Information
and consultation
Who must be informed
and consulted?
Where employees who may be
affected by the transfer are represented by an independent trade union
recognised for collective bargaining purposes, the employer must inform and
consult an authorised official of that union. This may be a shop steward or a
district union official or, if appropriate, a national or regional official. The
employer is not required to inform and consult any other employee
representatives in such circumstances, but may do so voluntarily if desired. A
trade union may be recognised for one group of employees, but not for another.
Where employees who may be affected by the transfer are not represented by a
trade union as described above, the employer must inform and consult other
appropriate representatives of those employees. These may be either existing
representatives or new ones specially elected for the purpose. It is the
employer's responsibility to ensure that consultation is offered to appropriate
representatives. If they are to be existing representatives, their remit and
method of election or appointment must give them suitable authority from the
employees concerned. It would not, for example, be appropriate to inform and
consult a committee specially established to consider the operation of a staff
canteen about a transfer affecting, say, sales staff; but it may well be
appropriate to inform and consult a fairly elected or appointed committee of
employees, such as a works council, that is regularly informed or consulted more
generally about the business's financial position and personnel matters. If the
representatives are to be specially elected ones, certain election conditions
must be met. These are described below. What
are the election rules applying in cases where employee representatives are to
be specially elected? The
rules are:
- The employer shall make
such arrangements as are reasonably practical to ensure the election is
fair.
- The employer shall
determine the number of representatives to be elected so that there are
sufficient representatives to represent the interests of all the affected
employees, having regard to the number and classes of those employees.
- The employer shall
determine whether the affected employees should be represented either by
representatives of all the affected employees or by representatives of
particular classes of those employees.
- Before the election the
employer shall determine the term of office as employee representatives so
that it is of sufficient length to enable relevant information to be given
and consultations to be completed.
- The candidates for
election as employee representatives are affected employees on the date of
the election.
- No affected employee is
unreasonably excluded from standing for election.
- All affected employees
on the date of the election are entitled to vote for employee
representatives.
- The employees entitled
to vote may vote as many candidates as there are representatives to be
elected to represent them; or, if there are to be representatives for
particular classes of employees, for as many candidates as there are
representatives to be elected to represent their particular class of
employee.
- The election is
conducted so as to secure that:
- so far as reasonably
practicable, those voting do do in secret, and
- the votes given at the
election are accurately counted.
Where an employee
representative is elected in accordance with these rules but subsequently ceases
to act as such and, in consequence, certain employees are no longer represented,
another election should be held satisfying the rules set out at (a), (e), (f)
and (i) above.
The legislation does not
specify how many representatives must be elected or the process by which they
are to be chosen. An employment tribunal may wish to consider, in determining a
claim that the employer has not informed or consulted in accordance with the
requirements, whether the arrangements were such that the purpose of the
legislation could not be met. An employer will therefore need to consider such
matters as whether:
- the arrangements
adequately cover all the categories of employees who may be affected by the
transfer and provide a reasonable balance between the interests of the
different groups;
- the employees have
sufficient time to nominate and consider candidates;
- the employees
(including any who are absent from work for any reason) can freely choose
who to vote for;
- there is any normal
company custom and practice for similar elections and, if so, whether there
are good reasons for departing from it.
What must an employer
do?
First, the employer of any
employee who may be affected must tell their representatives:
- that the transfer is
going to take place, approximately when, and why;
- the legal, economic and
social implications of the transfer for the affected employees;
- whether the employer
envisages taking any action (reorganisation for example) in connection with
the transfer which will affect the employees, and if so, what action is
envisaged;
- where the previous
employer is required to give the information, he or she must disclose
whether the prospective new employer envisages carrying out any action which
will affect the employees, and if so, what. The new employer must give the
previous employer the necessary information so that the previous employer is
able to meet this requirement. The information must be provided long enough
before the transfer to give adequate time for consultation.
Second, if action is
envisaged which will affect the employees, the employer must consult the
representatives of the employees affected about that action. The consultation
must be undertaken with a view to seeking agreement. During these consultations
the employer must consider and respond to any representations made by the
representatives. If the employer rejects these representations he/she must state
the reasons.
If there are special
circumstances which make it not reasonably practicable for an employer to fulfil
any of the information or consultation requirements, he/she must take such steps
to meet the requirements as are reasonably practicable.
Rights of
representatives
Representatives and
candidates for election have certain rights and protections to enable them to
carry out their function properly. The rights and protections of trade union
members, including officials, are in some cases contained in separate provisions
to those of elected representatives but are essentially the same as those of
elected representatives described below. For further details of the rights of
trade union members see Union
membership: rights of members and non-members (PL871).
The employer must allow
access to the affected workforce and to such accommodation and facilities, eg
use of a telephone, as is appropriate. What is "appropriate" will vary
according to circumstances.
The dismissal of an
elected representative will be automatically unfair if the reason, or the main
reason, related to the employee's status or activities as a representative. An
elected representative also has the right not to suffer any detriment short of
dismissal on the grounds of their status or activities. Candidates for election
enjoy the same protection. Where an employment tribunal finds that a dismissal
was unfair, it may order the employer to reinstate or re-engage the employee or
make an appropriate award of compensation (see also Unfairly
dismissed? (PL712)). Where an employment tribunal finds that a representative or
a candidate for election has suffered detriment short of dismissal it may order
that compensation be paid.
An elected representative
also has a right to reasonable time off with pay during normal working hours to
carry out representative duties. Representatives should be paid the appropriate
hourly rate for the period of absence from work. This is arrived at by dividing
the amount of a week's pay by the number of normal working hours in the week.
The method of calculation is similar to that used for computing redundancy
payments (see Redundancy
payments (PL808)).
Complaining
to an employment tribunal
The following may complain
to an employment tribunal:
- an employee who has
been dismissed or who has resigned in circumstances in which they consider
they were entitled to resign because of the consequences of the transfer
(see Employees'
position in a transfer). An employee must complain within three months
of the date when their employment ended. (The method of calculating this
date is explained in Unfairly
dismissed? (PL712)).
- It may be unclear
whether claims should be made against the previous or the new employer. In
such cases, employees should consider whether to claim against both
employers. Certain categories of employees are not entitled to claim unfair
dismissal; a list of these is given in Unfairly
dismissed? (PL712).
- an elected or trade
union representative, if the employer does not comply with the information
or consultation requirements (see Information
and consultation). A representative must complain within three months of
the date of the transfer;
- a representative or
candidate for election who has been dismissed, or suffered detriment short
of dismissal. A complaint must be made within three months of the effective
date of termination (or, in the case of a detriment short of dismissal,
within three months of the action complained of);
- a representative who
has been unreasonably refused time off by an employer, or whose employer has
refused to make the appropriate payment for time off, may also complain to
an employment tribunal. A complaint must be made within three months of the
date on which it is alleged time off should have been allowed or was taken;
- an affected employee
where the employer has not complied with the information or consultation
requirements other than in relation to a recognised trade union or an
elected representative. A complaint must be made within three months of the
date of the transfer.
(In any one of the above
cases the tribunal can extend the time limit if it considers that it was not
reasonably practicable for the complaint to be made within three months.)
- an employee who wishes
to claim a redundancy payment. The application should normally be made
within six months of the dismissal (see document Redundancy
payments (PL808)).
The necessary form IT1, or
ITI (Scot) in Scotland, for application to a tribunal and explanatory leaflet How
to apply to an employment tribunal can be obtained from local Jobcentre Plus
offices.
If a representative
complains to an employment tribunal that an employer has not given information
about action proposed by a prospective new employer, and if the employer wishes
to show that it was "not reasonably practicable" to give that
information because the new employer failed to hand over the necessary
information at the right time, the employer must tell the new employer that he
or she intends to give that reason for non-compliance. The effect of this will
be to make the new employer a party to the tribunal proceedings.
Conciliation
The tribunal will send a
copy of the completed form to a conciliator of the Advisory,
Conciliation and Arbitration Service (ACAS), who will try to promote a
settlement of the complaint without a tribunal hearing.
The services of a
conciliator will also be available in the absence of a formal
complaint, if the employee or either employer requests them. In such a case the
employee or employer can get in touch with a conciliator through an
office of ACAS. Information given to conciliators in the course of
their duties will be treated as confidential. It may not be divulged to the
tribunal without the consent of the person who gave it.
Tribunal
hearing and awards
If no settlement is
reached, the employment tribunal will hear the case. If complaints are upheld,
awards may be made against the previous or new employer, depending on the
circumstances of the transfer.
Unfair dismissal awards -
Employment tribunals may order reinstatement or re-engagement of the dismissed
employee if the complaint is upheld, and/or make an award of compensation.
Further details are in Unfairly
dismissed? (PL712).
Detriment awards - The
employer may be ordered to pay compensation to the person(s) concerned. The
compensation will be whatever amount the tribunal considers just and equitable
in all the circumstances having regard for any loss incurred by the employee.
Information and
consultation awards - The employer who is at fault may be ordered to pay
compensation to each affected employee, up to 13 weeks' pay. If employees are
not paid the compensation, they may present individual complaints to the
tribunal, which may order payment of the amount due to them. These complaints
must be presented within three months from the date of the original award
(although the tribunal may extend the time-limit if it considers that it was not
reasonably practicable for the complaint to be presented within three months).
1
The effect of the Regulations as interpreted by the House of Lords in Litster
and Others v Forth Dry Dock and Engineering Company Limited and Another.
This judgement implied these words into the Regulations.
|
