TUPE 2014
Richard Arthur
Thompsons Solicitors LLP
Starting Point
‘…..to ensure as far as possible that the contract of employment or
employment relationship continues unchanged with the transferee, in order
to prevent the workers concerned from being placed in a less favourable
position solely as a result of the transfer..”.
CJEU: Case 287/86 Ny Molle Kro, 1987
Sources
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EU Acquired Rights Directive 2001;
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Transfer of Undertakings (Protection of Employment) Regulations 2006
(‘TUPE’);
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Collective Redundancies and Transfer of Undertakings (Protection of
Employment) (Amendment) Regulations 2014 (‘CRATUPE’); and
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BIS Guidance on TUPE, re – published in 2014, available at
www.gov.uk
Overview
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When? Standard Transfers and Service Provision Changes;
Who transfers? Employees ‘permanently assigned’ to the undertaking;
What transfers? All rights (except pensions);
Variations to terms and conditions;
Dismissals;
Insolvency: relaxation of the rules;
Employee Liability Information: (but not to trade union representatives);
Information and Consultation;
Pensions; and
(now) Pre – transfer collective redundancies consultation (under
TULRCA).
2013 BIS Consultation
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‘Gold – plating’, ‘over – regulation’ and ‘business concerns’;
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Objective 1: abolish Service Provision Changes;
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Objective 2: make it easier to harmonise terms and conditions;
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Objective 3: make it easier to dismiss workers (and faster); and
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Objective 4: (in so many words): continue to dismantle collective
bargaining
Changes not made in 2014
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Service Provision Changes retained;
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Harmonisation of terms and conditions still not permitted; and
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Transferor still can’t borrow a transferee’s ‘ETO’ reason
Overview of main 2014 changes
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For Service Provision Changes, activities after the transfer must be
‘fundamentally the same’ as those before the transfer;
Permitting re-negotiation of terms and conditions derived from
collective agreements to take effect one year after the transfer;
Imposing a ‘static’ approach to the transfer of rights derived from
collective agreements;
Removing the concept of variations ‘for a reason connected with the
transfer’;
Extending ETOs to include changes in job location;
Requiring employee liability information to be provided to the transferee
at least 28 days before the transfer; and
Through amendments to TULRCA, permitting the transferee to begin
collective redundancies consultation before the transfer.
When does TUPE apply?
Two types of transfer:
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Standard Transfers; and
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Service Provision Changes
Features common to both:
 Transfer from ‘one person to another’. Shares transfers excluded;
 Apply to public and private, for – profit and not for – profit,
undertakings;
 Capable of applying to transfers from inside to outside the EU; and
 ‘Form’ of the transfer not significant..
When does TUPE apply?
TUPE does not apply to ‘…an administrative reorganisation of public
administrative authorities or the transfer of administrative functions
between public administrative authorities…’
Reg. 3(5)
Source: Henke CJEU 1996
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Seemingly no appetite to extend coverage in the CJEU (see Scattalon);
Query more appetite in the UK (see Law Society of England and Wales
and Adult Learning Inspectorate).
When does TUPE apply?
‘Standard Transfer’:
A transfer ‘from one person to another…..’ of ‘…an economic entity…’
which ‘…retains its identity….’.
Reg. 3(1)(a).
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Provided for in the Directive;
‘Purposive construction’; and
No change in 2014.
When does TUPE apply?
‘Economic entity’ is:
‘…an organised grouping of resources which has the objective of pursuing
an economic activity, whether or not that activity is ancillary or central..’
Reg. 3(2)
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In certain sectors, eg cleaning, an ‘organised grouping of wage earners
…assigned to a common task’ may be sufficient;
But the ‘economic entity’ must not be defined solely by reference to the
activities performed; and
Mrs Schmidt
When does TUPE apply?
‘Retains its identity’:
Factors include:
 type of undertaking;
 assets transferred;
 majority of employees taken on by the transferee;
 customers transferred;
 degree of similarity between the activities; and
 any period of suspension of the activities.
Spijkers CJEU 1986
……….But Mrs Schmidt (again).
When does TUPE apply?
Ayse Suzen CJEU 1997:
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‘Asset – reliant’ undertakings: the decisive factor would be the transfer
of assets; and
‘Labour – intensive’ undertakings: the decisive factor would be whether
the transferee took over ‘a major part in terms of their numbers and
skills of the transferor’s workforce’.
Upshot: much uncertainty.
 Buses in Helsinki; German hospital catering contracts; x – ray
machines at Dusseldorf airport; and
 In the UK: even more uncertainty. ‘Major part of the workforce…?’
When does TUPE apply?
‘Service Provision Changes’:
‘…to give more comprehensive coverage to service contracting
operations, with the aim of improving the operation of the market,
promoting business flexibility and reducing insecurity for
employees affected by such operations..’
DTI June 2005
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Response to the uncertainty generated by Ayse Suzen;
Unique to the UK, permitted, but not required, by the Directive;
Branded ‘unnecessary gold – plating’; and
Earmarked for abolition in the 2013 BIS consultation.
When does TUPE apply?
‘Activities’ cease to be carried out by:
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the client and are carried out by another person (contracting – out);
a contractor and are carried out by another person (second generation
contracting); and
a contractor and are carried out by the client (contracting – in).
‘Common sense and pragmatic approach…’.has been eroded:
 activities sufficiently similar (form and quantity);
 activities not unduly fragmented; and
 must be carried out for the same client.
When does TUPE apply?
Three requirements:
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An ‘…’ organised grouping of employees….which has as its principal purpose
the carrying out of the activities concerned on behalf of the client…’ (and that
means deliberately organised – Eddie Stobarts) ;
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‘..Other than in connection with a single specific event or task of short term
duration…’; and
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Not ‘….supply of goods’.
When does TUPE apply?
Service Provision Changes and the 2013 BIS consultation:
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‘gold – plating’;
‘burdens on business’;
‘case law more settled since Suzen’;
‘new uncertainties over the test of assignment’;
67% of consultees favoured retention;
only change in 2014 is that the activities must be ‘fundamentally the
same’; and
intensified scrutiny of Service Provision Changes – but still performing
a useful function.
Who does TUPE apply to?
Employees ‘..assigned to the organised grouping of resources or
employees..”.
Reg 4(1)
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Also applies to employees who would have been assigned immediately
before the transfer if they had not been dismissed and the sole or
principal reason was the transfer (anti – avoidance); and
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Percentage of working time will not be determinative in isolation (see
Kavanagh v Coral Racing).
Who does TUPE apply to?
Guidance for groups of companies:
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time spent working in the part;
value given to the part;
terms of the contract; and
how the costs of the employee are allocated.
Duncan Webb Offset
For each employee?
Edinburgh Home – Link Partnership
Who does TUPE apply to?
Objection to transfer (Reg 4(7)):
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employment does not transfer if the employee objects;
but the employee is treated as having resigned;
no right to unfair dismissal compensation or redundancy payment;
(unless the employee also claims that the transfer would involve a
‘substantial change’ to her ‘material detriment’); and
Implications for secondment / retention of employment models.
What transfers?
All the rights, powers and duties under or in connection with the contract of
employment (except pensions) (Reg 4(2)), including:
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rates of pay;
entitlements under severance schemes;
statutory liabilities (eg personal injury and sex discrimination);
restrictive covenants and profit share schemes (but note the problem of
‘tailoring’ to the undertaking); and
equal pay.
What transfers?
Rights in relation to collective agreements are not transferred if:
(i) the provision of the collective agreement is agreed after the
date of the transfer; and
(ii) the transferee is not party to the collective bargaining
machinery.
New Reg 4A
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applies to transfers on or after 31 January 2014;
reverses well – established UK case law;
codifies the ‘static’ approach from Alemo – Herron; and
therefore creates a two – tier system of contractual rights.
Variations to terms and conditions
Under TUPE 2006:
‘…any purported variation of the contract shall be void if the sole or
principal reason for the variation is –
(a) the transfer itself; or
(b) a reason connected with the transfer that is not an “economic, technical
or organisational reason entailing changes in the workforce’’ ‘(‘ETO’).
Reg 4(4)
Variations to terms and conditions
Under TUPE 2014:
‘(4)…any purported variation of a contract of employment…..is void if the
sole or principal reason for the variation is the transfer…’.
(5) Paragraph (4) does not prevent a variation of the contract of
employment if –
(a) the sole or principal reason for the variation is [an ETO]
provided that the employer and employee agree that variation; or
(b) the terms of the contract permit the employer to make such a
variation’
New Reg’s 4(4) and (5)
Variations to terms and conditions
Commentary:
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Rationale: to align with the Directive;
Removes the concept of variations for a ‘reason connected with the
transfer’;
But the Directive makes no provision for variations where the reason is
an ETO (see Daddy’s Dance Hall);
Note extended definition of ETO;
Is this compliant with the Directive?
When is the reason for the variation ‘the transfer itself’?
The test of ‘the sole or principal reason for the variation is the transfer’
is a new one (see BIS guidance).
Variations to terms and conditions
Example: The Manchester College v Hazel CA 2013 (Dismissal case)
Reasons: partly to achieve efficiency savings and because business
conditions were difficult, and partly to harmonise 37 sets of terms and
conditions.
CA: reason was refusal to accept harmonisation; therefore no ETO;
therefore automatically unfair.
TUPE 2014: under the new test, the ‘sole or principal reason’ for the
dismissal may be the transfer itself, in which case there may be no need to
consider an ETO
Variations to terms and conditions
For transfers taking place on or after 31 January 2014, the restrictions on
variations to terms and conditions do not apply to terms derived from
collective agreements if:
(a) the variation takes effect at least one year after the transfer;
and
(b) after the variation, the rights and obligations under the
employee’s contract ‘when considered together’ are no less
favourable than those which applied previously.
New Reg 4(5B)
Variations to terms and conditions
Commentary:
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Not a unilateral right to vary;
Impact of Article 11 ECHR / Wilson and Palmer; and
When considering overall value of rights and obligations, a value
should be ascribed to having terms and conditions determined by
collective bargaining.
Dismissals
Three types of dismissal:
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Actual dismissal;
Constructive dismissal;
Where the transfer ‘involves, or would involve, a substantial change in
working conditions to the material detriment…’ (Reg 4(9)).
Dismissals
Under TUPE 2006, similar to variations to terms and conditions:
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Any dismissal where the sole or principal reason was (i) the transfer
itself; or (ii) a reason connected with the transfer that was not an ETO
was automatically unfair.
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Otherwise, dismissals were potentially fair.
Reg 7(1)
Dismissals
For transfers taking place on or after 31 January 2014:
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the dismissal is automatically unfair if the ‘sole or principal reason for it’
is the transfer; and
the dismissal is not automatically unfair if the ‘sole or principal reason’
for it is an ETO. (new Reg 7).
If the dismissal is for an ETO, the reason will either be redundancy or
some other substantial reason.
Dismissals
Example 1: Spaceright Europe Ltd v Ballavione
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Executive dismissed on the day the company was placed into
administration. No transferee identified. Company then sold one month
later;
EAT: the dismissal was connected with the transfer; no ETO;
automatically unfair dismissal;
Under TUPE 2014, arguably the same result should be achieved
because, under the new test, the ‘sole or principal reason’ would be the
transfer.
Dismissals
Example 2: Kavanagh v Crystal Palace FC
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Cash flow problems at Crystal Palace FC. Administrator ‘mothballed’
the club and sold a number of non – playing staff. Sale later agreed;
CA: the ‘transfer’ itself was not the reason for the dismissals; the ‘sole
or principal reason’ was a reason connected with the transfer; ETO
applied; therefore dismissals fair; and
Under TUPE 2014, if the Tribunal concluded that the sole or principal
reason for the dismissal was the transfer, then the dismissal may be
automatically unfair. If not, the Tribunal would not have to consider the
availability of an ETO.
Dismissals
‘Economic, technical or organisational reason entailing changes in the
workforce’:
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Under TUPE 2006, ‘entailing changes in the workforce’ meant (i) a
change in head count; or (ii) a change in job description (Delabole Slate
and Crawford);and
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TUPE 2014 extends ‘entailing changes in the workforce’ also to include
changes in job location.
Dismissals
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The transferor can’t borrow the transferee’s ETO (Hynd v Armstrong);
and
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Compliance with the Directive?
Insolvency
Two types of insolvency proceedings:
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Insolvency proceedings instituted with a view to the liquidation of the
assets of the transferor and under the supervision of an insolvency
practitioner (‘terminal insolvency proceedings’) (Reg 8(7)); and
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Insolvency proceedings opened in relation to the transferor not with a
view to the liquidation of its assets and under the supervision of an
insolvency practitioner (‘non-terminal insolvency proceedings’) (Reg
8(6))
Insolvency
Terminal insolvency proceedings (compulsory liquidation and creditors’
voluntary liquidation):
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Automatic transfer and protection against dismissal dis – applied; but
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TUPE otherwise continues to apply – eg information and consultation.
Insolvency
Non – terminal insolvency proceedings (voluntary arrangements,
administrative receiverships and administrations):
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the statutory schemes for payment of unpaid redundancy payments,
arrears of pay of up to eight weeks, notice payments, holiday pay and
basic awards are applied; liabilities up to the maxima for those
schemes are not transferred (but liabilities in excess of those maxima
are transferred); and
the transferor or the transferee are not prevented from agreeing to
‘permitted variations’ with the ‘appropriate representatives’.
Insolvency
‘Permitted variations’:
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‘Sole or principal reason’ is the transfer and not an ETO;
Designed to ‘safeguard employment opportunities by ensuring the
survival of the undertaking, business or part…..’;
Where there is a recognised trade union, union representatives are the
‘appropriate representatives’ (Reg 9)
Note that the UK has not to date taken up the option in the Directive of
incorporating anti – avoidance measures concerning insolvency into
TUPE.
Employee Liability Information
Information to be provided by the transferor to the transferee (Reg 11):
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age and identity of transferring employees;
particulars of employment under s.1 ERA 1996;
information as to grievance and disciplinaries in the last two years;
possible claims by employees in the last two years; and
applicable collective agreements.
No obligation to make the information available to trade union
representatives.
Information and consultation
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‘Appropriate representatives’ – representatives of the trade union
recognised for the description of ‘affected employees’. Otherwise,
elected ‘employee representatives’; and
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‘Affected employees’ – employees of the transferor or the transferee,
not limited to those who may be transferring, who may be affected by
the transfer or by measures taken in connection with it.
Information and Consultation
‘Long enough before a relevant transfer to enable consultation to take
place, the employer must inform the appropriate representatives of any
affected employees of:
 The fact the transfer is to take place, the date or proposed date and the
reason for it;
 The legal, economic and social implications of the transfer for any
affected employees;
 The measures it envisages it will, in connection with the transfer, take in
relation to affected employees or, if it envisages that no measures will
be taken, that fact; and
 If the employer is the transferor, the measures, in connection with the
transfer, which it envisages the transferee will take in relation to any
affected employees whose employment will transfer, or if it envisages
that no measures will be taken, that fact.’ Reg 13(2)
Information and consultation
That information must now also include ’suitable information relating to the
use of agency workers’:
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the numbers of agency workers working temporarily for and under the
supervision and direction of the employer;
the parts of the employer’s undertaking in which those agency workers
are working; and
the type of work those agency workers are carrying out.
(see UNISON v London Borough of Barnet)
Information and consultation
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An employer which envisages that it will take measures in connection
with the transfer in relation to affected employees must consult the
appropriate representatives with a view to seeking their agreement;
transferee’s obligations end at point of transfer (Amicus);
‘special circumstances’ which make it not reasonably practicable for the
employer to comply with its obligations, provided that it takes all such
steps as are reasonably necessary in the circumstances;
remedy up to 13 weeks’ pay per affected employee;
complaint to the Employment Tribunal within 3 months of the date of
the transfer; and
transferor and transferee may be jointly and severally liable.
Pre – transfer CRD consultation
From 31 January 2014, new section 198A TULRCA so that the transferee
can count pre – transfer collective redundancies consultation for the
purpose of collective redundancies to take effect after the transfer.
Three conditions:
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there is, or is likely to be, a transfer covered by TUPE;
the transferee is proposing to dismiss as redundant 20 or more
employees at one establishment within a period of 90 days or less; and
amongst the transferor’s workforce there is at least one employee who
may be affected by the post – transfer dismissals. (new s.198A
TULRCA).
Transferee’s election requires the agreement of the transferor.
Pre – transfer CRD consultation
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Will still need to be two sets of consultation – under TUPE and
TULRCA;
Difficulties for the ‘appropriate representatives’;
‘Meaningful’ consultation; and
Compliance with the Collective Redundancies Directive (Akavan).
Pensions
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accrued rights protected by sections 69 to 82 of the Pension Schemes
Act 1993 and the Occupational Pension Schemes (Preservation of
Benefit) Regulations 1991;
future service rights: exclusion from transfer of so much of a contract of
employment as relates to an ‘occupational pension scheme’ within the
meaning of the Pension Schemes Act 1993 (and associated rights);
Group Personal Pensions are not ‘occupational pension schemes’, and
so transfer;
benefits which are not benefits for ‘old age, invalidity or survivors’
transfer (Beckmann, Martin);
some protection for future service rights in sections 257 to 259 of the
Pensions Act 2004 and the Transfer of Employment (Pension
Protection) Regulations 2005; and
in the public sector, ‘Fair Deal’
Conclusions
In two fundamental areas, the government’s plans in the 2013 consultation
were thwarted:
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abolition of Service Provision Changes; and
permitting harmonisation of terms and conditions.
But even in these areas, there have been encroachments:
 Intensifying fact – sensitive scrutiny of Service Provision Changes –
dedication to that particular client’s work, whether the activities are
‘fundamentally the same’, fragmentation, quantity of activities; and
 Intensifying fact – sensitive enquiry as to the protections against
variations (and extension of ETOs)
Conclusions
No thwarting of the government’s plans when it came to:
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terms derived from collective agreements – lesser protection than other
terms and conditions; and
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pre-transfer collective redundancies consultation.
Worrying signals form the CJEU in the Alemo – Herron case: statements
that the purpose of the Directive is to ‘strike a fair balance between
workers’ and employees’ interests’. (Echoes of Viking and Laval)
Conclusions
Purpose of Directive:
‘….to ensure, by introducing provisions covering matters such as
protections and safeguards, that employees do not forfeit
essential rights and advantages prior to a change of employer.’
European Commission, 1974