cipd employment law seminar

CIPDEmployment LawSeminar

7 March 2013

Employment Update

-Legal Update

-Recent Cases

Emilie Darwin & Kristine Scott

Collective Consultation

• 100+ redundancies - 90 day consultation

• 6 April 2013

• Reduce to 45 days consultation

• Acas non statutory code of practice

Tribunal Update

• Compensation cap now £74,200• Week’s pay £450• Proposed overall 12 month cap to unfair

dismissal compensation• Issue fees in tribunal – July 2013

End of Employment

• Settlement Agreements

• Guideline “tariffs”

• Statutory code of practice

Other legislative changes

• Parental leave increases from 13 to 18 weeks

• Draft subject access code of practice• Protection of Freedoms Act

– DBS– Biometric

On the Horizon

• Proposed new system of shared leave

• Fully flexible maternity/paternity leave

• Time off for fathers at antenatal

appointments

• Proposed extension of flexible working

Case Law Update

Tayeh –v- Barchester Healthcare Ltd [2013]

• Court of Appeal

• Tribunal was not entitled to substitute own view of the seriousness of an employee’s misconduct

Case Law Update

Bray & Others –v- Monarch Personnel Refuelling [2012]

• ET decision

• Agency Workers Regulations 2010

• Pay between assignments complied with Swedish derogation provisions

Case Law Update

Davies –v- Sandwell Metropolitan Borough Council [2013]

• Court of Appeal

• Legitimate to rely on final written warning where issued in good faith

Case Law UpdateEweida & Others –v- UK [2013]

• European Court of Human Rights

• 4 cases brought for UK breach of Article 9 of ECHR (right to manifest religious belief)

• Upheld Ms Eweida’s claim that UK failed to protect her Article 9 right

• Legitimacy and proportionality of uniform policy were key

Case Law Update

Eweida & Others –v- UK [2013]

• Other 3 claims were unsuccessful • Mrs Chaplin was not allowed to wear her necklace

on health and safety grounds• Mr McFarlane refusal to counsel homosexual

couples• Ms Ladele refusal to officiate

Case Law Update

X –v- Mid Sussex CAB [2012]

• Volunteer is not an employee for purposes of discrimination law

• Is there a contract?

Case Law Update

Lloyd –v- BCQ [2012]

• Dismissal of employee receiving PHI benefits

• Wording of contract

Holiday and Sick Pay

NHS Leeds –v- Larner [2012]

• Court of Appeal

• Prevented from taking holiday during sickness absence

Case Law Update

Aderemi –v- London and South Eastern Railway [2012]

• Definition of disability

• Standing for long periods can be day to day activity

• Focus on what employee cannot do

Managing TUPE

Tim Crane, Rachel Roberts and Oliver Daniels

7 March 2013

Programme• General introduction to TUPE including:

– What is TUPE?– What and who transfers?– When does TUPE apply?– TUPE process – information, consultation and

ELI

• Practical application of TUPE

What is TUPE?• The Transfer of Undertakings (Protection of

Employment) Regulations 2006

• Acquired Rights Directive

• TUPE protects employees in the event of a “relevant transfer”

Aim of TUPE• To protect employees when the work they perform

on behalf of one employer is transferred to another employer

• Employees’ rights and liabilities transfer from one employer to another

Effect of TUPE• Automatic transfer of employment

• Continuity of employment preserved

• Automatic unfair dismissal

• Obligations to inform and consult

Dismissals and TUPE

• A dismissal will be automatically unfair if the sole or principal reason for the dismissal is:

– the transfer itself; or

– A reason connected with the transfer which is not an ‘ETO reason’

• ‘ETO reason’ means “an economic, technical or organisational reason entailing changes in the workforce”

Fair or unfair dismissal?• Dismissals in a TUPE context generally fall into

one of three categories:1. Automatically unfair – dismissal due to transfer or

for a reason connected with it and no ETO reason;2. Potentially fair - dismissal for a reason connected

with the transfer but with an ETO reason;3. Potentially fair – dismissal is for a reason not

related to the transfer at all• Affected employees still require the qualifying

period of service of one year (or 2 years from 6 April 2012)

Constructive Dismissal?• Regulation 4(9) – where a relevant

transfer involves or will involve:– a substantial change in working

conditions– to the material detriment of a transferring

employee– that employee may treat the contract as

having been terminated– and shall be treated as having been

dismissed.

Definition of a TUPE transfer• TUPE defines two types of transfer:

– Classic Business Transfer: the transfer of a business or part of a business from one owner to another; and

– a Service Provision Change (“SPC”)

Classic Business Transfer• Classic Business Transfer: the transfer of an

undertaking or part of an undertaking where there is a transfer of an economic entity which retains its identity;

• Economic entity: “An organised grouping of resources which has the objective of pursuing an economic activity, whether or not that activity is central or ancillary”

What is an economic entity?• Business sales/ purchases: assets, goodwill, employees,

premises etc

• Sales of the freehold of a property

• Transfer of a lease

• Change in a franchise

• But NOT sale of shares in a company

Retention of Identity• Relevant factors include:

– Type of undertaking;– Whether tangible assets transfer;– Value of intangible assets;– Whether majority of employees are taken on;– Whether customers are transferred;– Degree of similarity between activities;– Period, if any, for which activities suspended

Service Provision Change• Activities cease to be carried out by a principal on its own

behalf and are carried out instead by a contractor (outsourcing); or

• Activities cease to be carried out by a contractor on the principal’s behalf and are carried out instead by a subsequent contractor (second-generation transfer); or

• Activities cease to be carried out by a contractor or a subsequent contractor on a principal’s behalf and are carried out instead by the principal (in-sourcing)

SPC conditions• Immediately before the SPC there must be “an

organised grouping of employees … which has as its principal purpose the carrying out of the activities concerned on behalf of the client”;

• The relevant activities will be carried out after the transfer other than in connection with a single specific event or task of short-term duration;

• The activities do not consist wholly or mainly of the supply of goods for the client’s use

What transfers?• Virtually everything

• Regulation 4(1): “…any such contract shall have effect after the transfer as if originally made between the person so employed and the transferee”

• Transferee ‘steps into the shoes’ of transferor

What transfers?• All existing rights, duties, liabilities and obligations

• Includes benefits – holiday pay, sick pay, medical and permanent health insurance, company car, bonus, commission, notice, garden leave etc

• Includes terms incorporated under collective agreements

• Accrued liabilities and outstanding claims – e.g. equal pay, discrimination, constructive dismissal claims etc

What doesn’t transfer?• Pensions exception;

– rights under occupational schemes excepted– employee contributions matched to 6% of basic pay

• Insolvency exception (regulation 8)

• Criminal liability for transferor’s actions (e.g. for breach of health and safety legislation);

• Terms that cannot be replicated– e.g. profit share, share option schemes, staff discount;– “scheme of substantial equivalence”

The process

1. What must employers tell staff?

2. When you are required to tell staff?

3. Who is entitled to information and when?

4. Election of representatives

5. Penalties for non-compliance AND

6. Employee liability information (ELI)

What must employers tell staff?

• The fact of proposed transfer and the reason for it

• When the transfer will occur

• Any legal, economic and social implications

• Any action that the employer envisages it will take (or if no measures are envisaged that fact)

• Outgoing employer must also inform of measures the new employer envisages

When will consultation be required?

• Consultation required if “measures” are envisaged

• With a view to seeking agreement to the measures

• Responsibility of the employer of the affected employees

• “envisages” means definite plans or proposals which would not have happened but for the transfer; not mere hopes or possibilities

• No need actually to reach agreement

What are “measures”?• “Any action, step or arrangement” affecting

employees:

– changes to T&Cs and within T&Cs– redundancies– reporting line changes– reorganisations– relocations– pension changes– salary payment dates

Who is entitled to information and when?

• Information in written form to “the appropriate representatives of any affected employees”

• “affected employees” means:

– any transferring employee– any other employee of the transferor or the

transferee who may be affected by the transfer or by measures taken in connection with it

• When? Long enough before the transfer to enable old employer to inform and consult in good time

Who are the appropriate representatives?

• Representatives of a recognised trade union; or

• Where there is no trade union recognition “Employee representatives” who are either;

– Existing employee representatives who;

• were appointed or elected previously for other purposes AND

• have appropriate authority to be informed/consulted in the context of TUPE

– To inform/consult employee representatives elected specifically for the purposes of TUPE

2.

Election of employee representatives

The employer must;• Take reasonably practical steps to ensure

election is fair;• Determine the number of elected representatives

sufficient to represent the interests of all the affected employees;

• Determine whether the representatives should represent all affected employees or particular classes of those employees;

Election of employee representatives

• Ensure candidates are themselves affected employees on the date of the election;

• Ensure no affected employee is unreasonably excluded from standing for election;

• Ensure votes are secret and accurately counted;• Ensure all affected employees are entitled to vote

Roles of representatives• Similar to collective redundancies

• Conduit for information and views

• Need (and have a right to) access to affected employees

• Facilities and accommodation to do their role.

• Legal protection (time off and no detriment)

No election?Where the employer invites affected employees to

elect representatives BUT employees fail to do so

within a reasonable time:

• The employer must give to EACH and EVERY affected employee the relevant information concerning the transfer;

• There is no duty to consult (but will in practice)

“Special Circumstances” defence

• Allows the employer to circumvent its obligations to inform and consult where it is not reasonably practicable for the employer to comply.

• Very limited application.

Penalties for non-compliance

• Complaint to Employment Tribunal

• Time limit: 3 months from transfer date

• “Appropriate compensation” – punitive rather than compensatory

• Protective award: up to 13 weeks’ pay for each affected employee

• New employer is jointly and severally liable with former employer

Employee Liability Information (1)

• Regulation 11 – statutory due diligence

• identity and age of all transferring employees

• information contained within section 1 statement

(pay, hours, holiday, sickness, notice, job title etc)

• disciplinary and grievance proceedings

• legal action

• collective agreements

Employee Liability Information (2)

• In writing / readily accessible form

• Not less than 14 days before the transfer date

• Ongoing duty on former employer to notify new employer of any interim changes

• Compensation for failure to comply

• Minimum award ordinarily of £500 per employee

TUPE in practice

Ratatouille• Jean-François is the owner of Ratatouille and

Cassoulet, a pair of high class French restaurants.

• He is approached by Claude, who agrees to purchase the lease, assets and goodwill of Ratatouille.

• Will this sale amount to a TUPE transfer?

• What sort of transfer?

Spic ‘n’ Span• Sushi and Sushi, a top London advertising agency, is

dissatisfied with its office cleaners, Spic ‘n’ Span.

• They are dissatisfied at the standard of cleaning and there has been a recent spate of items going missing from the office.

• Sushi and Sushi decides to terminate the cleaning contract and engage an alternative contractor.

• Will this trigger a TUPE transfer?

Who transfers?• Employees who:

– are assigned to the organised group of resources or employees

– are employed immediately before transfer (or would have been, had they not been unfairly dismissed) and who

– do not object to transferring

Assignment• Employees need to be “assigned” to the organised

grouping which is being transferred

• Only those employees who:

– work in the relevant business; or

– work in the relevant part of the business; or

– work under the relevant contract

will transfer.

C’est la Vie• Claude is no longer interested in an asset purchase.

Instead he wants to buy the company which owns both restaurants.

• Jean-François agrees to sell Claude all shares in C’est la Vie Ltd, the company which owns Ratatouille and Cassoulet.

• Will this share sale amount to a TUPE transfer?

Sausage & Mash• Jean-François accepts a separate offer from

Sausage & Mash to buy the lease, assets and goodwill of Ratatouille.

• Jean-François does not tell his staff about the proposed sale. Instead, a few days before the sale, he tells them that he is letting them go at the end of the week.

• He does not provide Sausage & Mash with any staff information before the sale.

TUPE process• What are the implications of Jean-François’ actions?

• Information and consultation?

• Employee liability information?

Cassoulet• Claude changes his mind again and instead opts to

buy the lease, assets and goodwill of Cassoulet.

• Claude immediately closes Cassoulet for several weeks so that the restaurant can benefit from a refurbishment and refit.

• When it ultimately re-opens, several weeks later, Claude changes the name of the restaurant to Casablanca.

Casablanca• Casablanca is opened with much fanfare as a new

restaurant specialising in North African and Lebanese cuisine.

• The restaurant is reorganised so that there is no longer any waiter and waitress service. Instead, customers help themselves to mezze dishes from the buffet.

• Will this sale amount to a TUPE transfer?

Casablanca• Economic entity?

• Retention of identity?

• Temporary closure of the business?

Retention of identity and SPCs• No express requirement that SPC activities must

retain their identity after the transfer;

• However, “activities” carried out before the transfer must be carried out after the transfer;

• Implicit that activities carried out after the transfer should be clearly identifiable as those which were carried out before the transfer

Food for Thought• Food for Thought has just lost a lucrative contract to provide

a full canteen and catering service at a large car manufacturing plant operated by Puma Motors.

• As part of the contract, Food for Thought provided a staff restaurant, deli-bar facility and four satellite cafes, all of which served hot meals, snacks and beverages.

• The contract will be taken over by a third party, Meals on Wheels, which will provide a substantially reduced service consisting of dry-goods kiosks selling pre-prepared sandwiches, salads and baps.

Food for Thought• Food for Thought employs a number of staff who

work exclusively on the Puma Motors Contract.

• These employees include skilled chefs and other kitchen staff.

• Meals on Wheels will have no requirement for such staff. Instead, it will require unskilled sales assistants to work in the kiosks.

• Will TUPE apply? Who will bear the redundancy costs for the chefs and kitchen staff?

Continuation of activities• Identify activities carried out by original contractor

• Are the activities carried out by the new contractor “fundamentally or essentially the same”?

• Straightforward and common sense application

• No need for a ‘multi-factorial’ approach

Roots Plc• Roots Plc is a national garden centre chain.

• Roots has traditionally engaged Sushi and Sushi to carry out its promotional work.

• Roots terminates its contract with Sushi and Sushi and instead turns to Top Blooms Limited, a niche agency which specialises in providing marketing materials for garden centres.

• Will TUPE apply? What sort of transfer?

Sushi and Sushi• Sushi and Sushi employs a total of 500 staff.

• 30 employees work regularly on the Roots Plc account.

• 10 work exclusively for Roots Plc (Group A).

• 10 work primarily for Roots (Group B).

• The remaining 10 employees’ work is split fairly equally amongst 4 or 5 accounts (Group C).

Sushi and Sushi• 2 employees in Group A are currently on maternity

leave and one is signed off with depression.

• An employee from Group C is temporarily assigned to Group A as maternity cover. He is currently subject to a capability process.

• Sushi and Sushi also engage five contractors, all of whom work exclusively on the Roots account.

• Which, if any, Sushi and Sushi staff will transfer?

Assignment • Generally straightforward - a question of fact

• Excludes temporary assignment

– length of time assigned?

– date set for reassignment?

• Includes those on sick leave and maternity

Assignment• Consider whether there is an organised grouping of

employees or resources

• Consider whether each relevant employee was assigned to that organised grouping

Principal purpose• What is an employee’s “principal purpose”?

– What proportion of time, output, cost?

• Not a simple mathematical equation: proportion of time is indicative rather than determinative

• Not enough that employees carry out the majority of their work for a particular client;

• Is an employee “essentially dedicated” to carrying out the transferring activities?

Spic ‘n’ Span• Continuation of activities

• Organised grouping of employees?– by reference to the requirements of S&S?– identifiable as members of the S&S team?

• Principal purpose? – Are the cleaners essentially dedicated to cleaning for

Sushi and Sushi?

• Dumping and cherry-picking

Transfers to multiple contractors• Activities continue after the transfer but are distributed among

a number of new contractors;

• To which contractor should employees transfer?

• Assignment test

• Is there a link between each employee and the activities performed by the new contractors?

• Or are the activities so fragmented that it is not possible to identify which of the new contractors continues to perform the relevant activities?

Fragmentation• Care Home Limited provides bespoke care services to

vulnerable adults with learning disabilities.

• Care staff are employed on a rota basis and are not assigned to any specific residents.

• The residents are re-housed in their own homes. Each will be looked after by their own dedicated live-in carer.

• Is there a TUPE transfer?

• Would the position be any different if members of staff had previously been assigned to an individual resident?

What transfers?• Sushi and Sushi offer a generous benefits package, which

includes a bonus, share scheme and occupational pension.

• Transferring employees are due sizeable bonus payments later this year. Top Blooms does not offer a comparable bonus scheme.

• In addition, Sushi and Sushi has an on-site gym and subsidised staff canteen in the basement of its plush London office. Top Blooms has no such facilities.

• Does Top Blooms need to replicate these staff benefits for transferring employees?

Location, location, location• Sushi and Sushi is based in London whilst Top

Blooms is based in Cheltenham.

• Can Top Blooms require staff to relocate to Gloucestershire?

• What are the implications of the proposed relocation?

• Objections?

Post-transfer harmonisation• Top Blooms intends to harmonise the contractual

terms of its existing staff and the transferring staff.

• Will this be possible?

• By reason of the transfer?

• For a reason connected to the transfer that is not an ETO reason?

Conclusion and practical tips (1)• Comprehensive due diligence at an early stage – ensure that

you know precisely what and who you will inherit

• Do not forget to include employees on secondment or those who are sick or on maternity or paternity leave

• Be alive to the prospect of dumping or cherry-picking

• Moratorium on movement of employees in/ out of scope

• Collaborate with the buyer or seller

Conclusion and practical tips (2)• Seek early advice on whether TUPE will apply (this will affect

pricing and timing issues)

• Allow sufficient time for information and consultation

• Consider contractual re-allocation of TUPE liabilities

• Seek indemnities/ warranties to cover events which took place prior to transfer date

BIS consultation: watch this space!

• Significant overhaul proposed

• Abolition of SPC transfers

• Harmonisation of T&Cs post-transfer

• Repeal of ELI requirements

• Scrap obligation on micro businesses to inform and consult appropriate representatives

Any Questions?