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TUPE ANDOUTSOURCING
© Bates Wells & Braithwaite 2009
Louise McCartney
Charity Sector Procurement Group
15th June 2011
Transfer of Undertakings (Protection of Employment Regulations) 2006
� What is TUPE?
� When does it apply?
� What does it do?
� What legal obligations does it impose?
� Practical considerations for the
procurement process.
What is TUPE?
� Came into force April 2006
� Regulations available on BIS (formerly
BERR) website (www.bis.gov.uk)
� Purpose of Regulations
Regulations provide for:
� Provision of prescribed information to (and possibly consultation with) appropriate representatives of affected staff
� Provision of ‘Employee Liability Information’by transferor to transferee
� Automatic transfer of employees and the liabilities and responsibilities relating to them
� Protection against dismissal and other detriment connected with transfer
When does it apply?
� Applies when there is a ‘Relevant Transfer’
� Two types of relevant transfer:
� Transfer of an Economic Entity
� Service Provision Change
When does it apply – types of transfer
� ‘Economic entity’ means an “organised grouping of resources which has the objective of pursuing an economic activity”
� A ‘Service Provision Change’ occurs where activities which are undertaken by a person (who has an organised group of employees who are situated in the UK and whose principal purpose is the carrying out those activities) ceases to carry out these activities and they are carried out by someone else instead
Examples where TUPE may apply
� Sale of businesses
� Mergers
� Granting of leases – Resident Caretakers etc
� Franchises, licence concessions and grants
� Contracting out/outsourcing/in-sourcing
Service provision changes include
� Transfer of funding
� Outsourcing services undertaken internally (first generation outsourcing)
� Changing the external contractors engaged to provide the outsourced service (second generation contracting)
� Taking services back in-house (in-sourcing)
What does TUPE do?
� Automatically transfers an employee’s employment from one employer to another
� Transfers rights and liabilities relating to the employment relationship (not criminal liabilities)
� Transfers the whole employment relationship and on the same terms and conditions, as though the employee has always been employed by the Transferee
Overview of legal obligations imposed by TUPE
� Duty to provide prescribed information about the proposed transfer (Reg 13)
� Duty to consult (if proposing measures) (Reg 13)
� Duty to inform about measures (transferee to transferor) (Reg 13)
� Duty to notify Employee Liability Information (Reg 11)
� Duty to invite/arrange election of Appropriate Representatives? (Reg 14)
TUPE obligations – information and consultation
� Obligation on employer of ‘Affected Employees’
� ‘Affected employees’ may be wider than transferring employees
� Obligation therefore applies equally both to transferor and to transferee
� Obligation is to provide information to/consult with ‘Appropriate Representatives’
Information and consultation – Appropriate
Representatives
� Prescribed hierarchy/pecking order
� Trades Union recognised?
� Existing elected or appointed staff reps?
� Invite/arrange elections?
� If affected employees fail to elect within
reasonable time?
Duty to inform (and consult) – when arising?
� Long enough before a relevant transfer to
enable the employer of any affected
employees to consult with the appropriate
representatives of any affected employees
Duty to Inform – Prescribed Information
� The fact that the transfer is to take place
� The date or proposed date of the transfer
� The reasons for it
� The legal, economic and social implications
� The employer of affected employees must inform of any measures he envisages taking in connection with the transfer (and if none, to say so)
� If the employer is the transferor, the measures in connection with the transfer which he envisages the transferee will take (and if none, to say so)
Duty to Inform – Transferee to Transferor
� The transferee shall give the transferor
such information at such time as it will
enable the transferor to perform the duty
imposed on him (Reg 13(4))
Obligation to inform and consult
� Failure to comply – compensation of up to
13 weeks gross uncapped pay
� Todd v. Strain 2011 – 7 weeks awarded
� Separate duties including election of
representatives
Employee Liability Information – Regulation 11
� Transferor to Transferee
� In writing
� At least 14 days before transfer
� Identity and age of the employees
� S1 particulars
� Disciplinaries, grievances, Tribunal claims,
Collective Agreements
� Penalty - £500 per employee – just and equitable
Practical consequences of TUPE for the New Employer
� Takes on responsibility for the employee’s employment
� Obligations and liabilities will have transferred
� Check Employee Liability Information before the transfer
� Obtain warranties/indemnities from previous employer?
� Employee’s continuous service is preserved
Practical consequences - Who and what transfers?
� Assignment to undertaking or group – how to decide whether an employee is “assigned”
� Group must have “principal purpose”
� All contractual liabilities
� Collective Agreements
� Incorporated terms
� Pensions?
Pensions
� Occupational pensions excluded from
transferring under TUPE
� But some benefits may still transfer (those that
are not ‘old age, invalidity or survivor’s benefits’)
e.g. enhanced redundancy terms or early
retirement entitlements
� Some protection for transferred staff under
Pensions Act 2004
Transfer of terms and conditions
� If the transfer does, or would, result in a
substantial change to their material
detriment the employee is entitled to treat
themselves as dismissed
(Reg 4(9))
� Humphreys v University of Oxford [2000]
� Tapere v Maudesley Trust [2009]
Practical considerations - more than one transferee
� Will TUPE still apply?
� Does the number of transferees matter?
Practical Considerations – ‘Activities’
� OCS Group v. Jones 2009
Contracted out catering services
� Services must be essentially and
fundamentally the same
� If not, likely TUPE will not apply
Service Provision Change – ‘Activities’
� Ward Hadaway Solicitors v. Love 2010
� What is transferring with the change in
contractor? Anything? - WIP
� What are the relevant ‘activities’?
Dismissal
� Dismissal automatically unfair if the sole or
principal reason for it is:
� The transfer itself; or
� A reason connected with it that is not an
‘Economic, Technical or Organisational
reason’ entailing a change in the workforce
Dismissal
� May be possible fairly to dismiss if the sole or
principal reason for it is:
� Unconnected with the transfer; or
� For a reason that is an economic, technical or
organisational reason entailing changes in the
workforce
� Dismissal at request of Transferee?
Varying Terms and Conditions
� Purported variation is void if the sole or
principal reason for it is:
� The transfer itself; or
� A reason connected with it that is not an ETO reason entailing a change in the workforce
Varying Terms and Conditions
� Variation may be effective (provided the
employee consents to it) if the sole or
principal reason for it is:
� Unconnected with the transfer; or
� An ETO reason that entails a change in the
workforce
Common ETO reasons
� Restructuring
� Redundancy
Variation – Employee protection
� Employee protected by Regulations?
� Substantial change to employee’s material
detriment
Tapere v Maudesley Trust [2009]
� Interpreting terms post transfer
� Mobility clauses
� Restrictive covenants
Transfers from the Public Sector
Cabinet Office Statement of Practice/Workforce
Matters
� Pension – Substantially the same – GAD
Certificate - admitted status?
�Two tier workforce?
Preparing for a TUPE Out
� Get ‘Employee Liability Information’
together
� If necessary, invite affected employees to
elect representatives in writing
� If necessary, arrange elections in
accordance with Regulation 14
Election of Representatives
� Arrangements must be fair
� Employer determines number of
representatives and term of office
� Candidates for election must be affected
employees
� Election should be in secret
Information/Consultation Process
� Provide prescribed information in writing to appropriate representatives
� If trade union recognised, to be sent to Head Office
� Consultation (if applicable) ‘in good time’ and ‘with a view to reaching agreement’
� If unrepresented employees fail to elect representatives in a reasonable time prescribed information to be provided direct to affected employees – no consultation required
Measures
� Write to Transferee to obtain details of
measures and ensure updates are given
� Provide to employee representatives in
writing
� No obligation on transferor to consult
about transferee’s measures
� Encourage meetings with Transferee and
affected staff?
What is a ‘measure’?
� “Word of the widest import which includes
any action, step or arrangement over and
above what necessarily occurs as a
consequence of the transfer itself”
� Measures may include:
� Payment date
� Intentions to restructure
� Change of rotas
� Administrative arrangements
Preparation for Transfer In
� If necessary, invite election of appropriate
representatives
� Staff may be ‘affected’, even though not
themselves transferring
Transfers in
� Check employee liability information received
carefully
� Consider whether measures are being
proposed
� Information should be provided to appropriate
representatives and transferor as soon as
possible
Negotiating the transfer?
� Consider potential liabilities
� Indemnities
� Warranties
Practical Tips in Managing TUPE
� Avoiding the pitfalls
� Audit the staff coming in
� Understand the culture of the transferor,
and transferee
� Obtain information on working conditions
Practical Tips
� Think ahead – what working patterns
would suit you best on a transfer out –
assignment or not?
� Preparing to transfer out – keeping the
best, transferring the worst?
� Restructuring to harmonise
� Think of management levels to test
assignment