Employment Bulletin - March 2006

In this month’s bulletin we:

• provide guidance on the new TUPE Regulations;
• consider the latest developments in DDA case law which will have a profound impact on an employer’s obligation to make reasonable adjustments for disabled employees; and
• look at the consequences of trying to discourage trade union membership.

TUPE GUIDANCE

The Transfer of undertakings (protection of employment) Regulations 2006 (the “Regulations”) will apply to any transfer taking place on or after 6 April 2006. The “employer liability information” obligations (see below) will have effect in respect of transfers taking place on or after 19 April 2006.

When will the Regulations apply?

The Regulations will apply to ‘relevant transfers’. These are defined as:

• Business Transfers occur where there is a transfer of an economic entity from one business or undertaking (or part) to another. An “economic entity” is an “organised grouping of resources which has the object of pursuing an economic activity” (whether ancillary or central).
• Service Provision Changes occur where a service is contracted out or outsourced (such as cleaning or security); an outsourced contract is assigned to a new contractor (for example, following a re-tender); or a service is contracted in (i.e. performed in house when it was previously outsourced).

A Service Provision Change must involve an organised grouping of employees which has as its principal purpose the carrying out of the particular activities being transferred for TUPE to apply.

According to the DTI Guidance on the Regulations, an “organised grouping of employees” can cover just one person. However, this is not expressly stated in the Regulations.

The Regulations will not apply to “one off” contracts of short term duration. No doubt this will cause further litigation in respect of what constitutes “short term duration”.

Changes to Contracts of Employment – some clarification

The new employer can only vary contracts of employment under TUPE if the reason for the variation is unconnected to the transfer or, if connected to the transfer, the reason for the change is an economic, technical or organisational reason (an “ETO”) entailing changes in the workforce (either the number of employees, such as a redundancy, or the function of the employees, which might occur in a restructure).

An important message is that an employer cannot vary contracts of employment in order to harmonise terms and conditions with other members of staff.

Under ordinary legal principals, any changes cannot be unilaterally imposed on the employees by the employer.

Employee Liability Information

The new Regulations oblige the transferor to provide certain information to the transferee, including:

• the identity of the employees who will transfer;
• the age of the employees;
• information contained in the employees’ statement of particulars (such as hours, pay, continuity of service, sick pay and holidays);
• details of any disciplinary action taken within the preceding two years where the statutory dispute resolution procedures apply (so warnings will not be covered);
• details of any statutory grievances;
• details of any legal actions taken by the employees in the previous 2 years or of potential legal action.

This information should be provided at least 2 weeks prior to the transfer or as soon as reasonably practicable if it is not reasonably practicable for the transferor to provide the information in time.

Where there is a breach of the Regulations, the transferee will be able to claim from the transferor a minimum of £500 for each employee in respect of whom the information has not been provided (or was defective), unless this would be unjust or inequitable.

The central lesson is to ensure that any due diligence material is organised well in advance of the deal completing.

Insolvent Businesses

Changes have been introduced to make it easier for transfers to take place where the transferor is insolvent. These changes include the non-transference of debts in respect of redundancy payments, arrears of pay, pay in lieu of notice, and holiday pay.

In addition, it will be possible for the transferee to vary the contracts of employment (which would include decreasing pay) provided any variations are made with the intention of safeguarding employment.

In order to be valid, any such variation must be agreed with any trade union recognised for collective bargaining purposes. Where no union is recognised, it must be agreed by employee representatives, subject to additional safeguards.

DISABILITY DISCRIMINATION: REASONABLE ADJUSTMENTS

Where the arrangements an employer has in place, put a disabled employee at a particular disadvantage, the employer is obliged to make reasonable adjustments. Such adjustments may include altering the hours, place of work, duties or, even, the job of the disabled employee. In the case of Archibold v Fife Council, it was held that transferring a disabled employee to a higher graded position (without the requirement to undertake a competitive interview) could constitute a reasonable adjustment.

However, the onus on employers could be even greater following the case of Southampton City College v Randall which involved a business restructure and the dismissal of a lecturer whose voice had broken down, the Tribunal found that it would have been possible for the employer, due to the restructure, to “devise a job” which would take account of the effects of the employee’s disability “but harness the benefits of his long career and successful record, provided that the Claimant would fit in with the new “ethos” which [the employer] was pursuing”.

The Employment Appeal Tribunal agreed and stated that job creation is not excluded as a reasonable adjustment under the Disability Discrimination Act 1995.

This is a far reaching decision. It means that if the circumstances permit, employers should look at job creation rather than adjustments to the employee’s actual job or a transfer to another existing vacancy.

TRADE UNION MEMBERSHIP

The supermarket, Asda, has been ordered to pay employees compensation after a Tribunal found that it had unlawfully offered them a financial inducement (a 10% pay increase) to leave the GMB. The supermarket was ordered to pay £2,500 to each employee making a total liability of £850,000.

This emphasises the importance of employers respecting trade union rights and membership. Employers seeking to pursue a commercial option by taking such steps should proceed with caution.

MORE INFORMATION?

If you would like further information on the new TUPE Regulations or any other employment issue, please contact a member of the Employment Unit.

The Employment Training Unit provides bespoke training on all employment issues in a practical and comprehensive format. Again, please contact a member of the unit for further details.

If you are interested in any of the above or would like training on any other employment issue, please contact a member of the Employment Unit on 0191 233 9700.

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