Member Article

On 6 April 2006, new regulations, called the Transfer of Undertakings Protection of Employment - TUPE - Regulations 2006 came into force to replace the well-known 1981 Regulations. These are the Regulations that make provision for protection of employees ? from dismissal and in their terms and conditions - where a business is transferred from one company to another. TUPE 2006 differs in a number of ways from the 1981 Regulations. To put this into context, let's consider the example of a company that has employed a catering contractor to run its staff canteen and then decides to take the service back in-house. TUPE 2006 extends the TUPE Regulations to cover situations where a business engages a contractor to do work on its behalf, or changes the contractor or brings the work in-house ? now called a service-provision change. This means the employees of the catering contractor are protected. Their employment transfers back to the company with their continuous service and employment terms protected. The extension of the service provision changes definition should reduce disputes as to when TUPE applies and creates a more level playing field for contract bidders. The additional certainty as to when TUPE applies is helpful as the consequences that follow are often complex. Another key aspect of TUPE is the obligation to consult with the employees affected. Using the above example, under TUPE 2006 the catering contractor and the company would be jointly liable for any failure to comply with the TUPE obligations to inform and consult with employees. This is a helpful innovation as it provides an incentive to both parties to become involved in the consultation. After consultation and before the transfer of the employees takes place, TUPE 2006 would require the catering contractor to provide certain information to the company. This includes the identity and age of the employees who will transfer, information contained in the employees' written particulars of employment, any disciplinary proceedings and grievances raised or claims made in the last two years. This "employee liability information" should ensure the transferee is aware of any potential liabilities. There are financial penalties for the catering contractor ? a minimum of ?500 per employee where the information is not provided ? if this requirement is not met. This acts as a further incentive to comply with the Regulations. Under TUPE 1981, any changes to employees' terms for a reason connected to the transfer were void, so the company could not decide to vary the terms for the catering staff purely because they are now working in-house. Under TUPE 2006, it will be possible to change employment terms before or after a transfer of the employees where the principal reason for the change is unconnected with the transfer. It would also be possible to change the terms where the reason is connected with the transfer but is for an economic, technical or organisational reason and the employees agree. The extent of this change will only become apparent as case law evolves. To promote a rescue culture, TUPE 2006 contains provisions which would apply if the catering contractor was in financial difficulty and under the supervision of an insolvency practitioner. In these circumstances, if the insolvency practitioner was looking to save the business, they can agree changes to terms of employment with employee representatives. Businesses need to be aware of TUPE, and in particular the 2006 Regulations. Key points to remember are: employees who transfer will be protected; terms and conditions can be varied in limited circumstances; you must consult with employees or risk penalties and you should pass all the necessary information on to the new employer or risk a fine.