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