UK: Tupe Club: Who's Assigned; Information & Consultation And Changing Benefits Post Transfer

In this TUPE podcast, Jane Fielding, Partner in our Employment, Labour & Equalities team and Hannah Swindle, Principal Associate in the team, discuss three of the perennial risk areas on a TUPE Transfer.

  • Who is really assigned?
  • How do you avoid the pitfall of informing and consulting under TUPE?
  • What should you do about benefits that cannot be replicated post transfer?

These issues can give rise to some of the most significant legal and commercial challenges and have a material impact on the negotiation and delivery of a deal.


Siobhan Bishop: Welcome to our TUPE Club podcast. Today, we are going to be looking at who is assigned, avoiding some of the common pitfalls on an information and consultation process and, also, dealing with employee benefits after a transfer.

So, in a nutshell, today we are talking about 'the who and the how' of TUPE. These issues will be really relevant if you are in-house Counsel or if you are a HR professional or, in fact, anybody who is dealing with TUPE on the ground. If you get these issues wrong, it can mean your organisation is exposed to expensive indemnity claims under the contract, penalty awards which can reach up to a quarter of your annual wage bill, and also the ongoing risk of claims for changed benefits.

So in this podcast we will help you manage three of the particular risk areas on a TUPE transfer. Firstly, who is really assigned? Secondly, how do you avoid the pitfalls of information and consultation under TUPE? And thirdly, what exactly should you do about those benefits which cannot be replicated post-transfer?

I would like to introduce Jane Fielding, a partner in the Employment, Labour & Equalities team at Gowling WLG and also Hannah Swindle, a principal associate in our team.

Firstly, Hannah, figuring out who is actually in the scope to transfer is still one of the most difficult issues on the ground. Why is it so important?

Hannah Swindle: Figuring out who is assigned to a transfer is a really important question. It can affect the viability of the deal, making sure you've got the right people, and if you don't get it right the transferor will have increased its liability under the indemnities given in the contract, as there's usually an indemnity against so-called 'unexpected transferring employees' coming across.

Siobhan: Okay, so where do you actually start when deciding if someone is assigned?

Hannah: That's a good question. Where do you start?

People often use time spent as a rule of thumb by looking at whether an employee spends 50% or more of their time on the relevant services or part of the services. Unfortunately, while that may be a useful starting point, it is a common misunderstanding that this is the test for assignment.

In fact, there's no specific percentage of time that an employee must spend. There is no magic number which means that they will be assigned. So assignment is essentially a factual question taking into account a number of factors.

Siobhan: Okay, so what advice do you give to employers on how to get it right?

Hannah: Well, firstly, TUPE is going to apply to employees. So that includes fixed term employees and also, importantly, those temporarily absent. So, for example, it could include employees on maternity leave or sickness absence, provided that it is intended that the employee will return to work at some point.

Secondly, to work out then whether an employee is assigned, it is necessary to look principally at activities that they carry out immediately before the transfer. So, you are going to consider the time they spend on the services, the nature of work that the employee does, what does the employee's contract of employment say about the duties they can be required to do? Do they have responsibilities to other parts of the business and how is their cost allocated? Is it to a particular client contract, for example? What is the value of the work they do and, finally, is there a factual connection to the work in question? In other words, what do they do in actual fact, notwithstanding what it says they do in their contract?

So, once you've decided if someone is assigned then other practical issues arise. For example, do the parties actually want a particular employee to transfer? If not, they are going to have to consider alternative options, such as asking the employee to opt out, moving them onto different duties or making them redundant.

Assignment is a question of fact for the employment tribunal, so the case law is inevitably fact specific, but it does give us an indication and some principles to follow. But this means that it is sometimes hard to determine which way a tribunal would decide, but working through the issues step by step will put you in the best position to seek the protection you need.

Siobhan: Many thanks, Hannah.

So Jane, picking up on the second point we are looking at today, where it is very easy to make a mistake, can you talk about information and consultation process under TUPE and why it is such a big issue?

Jane Fielding: Well, it is important to get this right because the potential penalties of a breach are significant. So it's up to 13 weeks' gross pay per affected employee, so not just the people assigned, but all affected employees.

If you don't do anything to inform and consult, 13 weeks is the starting point and you have to come up with a very good reason to persuade the tribunal to award a lower amount. The process on the face of it seems quite straightforward, but there are a number of technicalities where it is easy to make a mistake so you do have to be on top of the detail of it and plan ahead.

Siobhan: Right, yes, and that really is a very significant penalty. So, how do you avoid those pitfalls and get the process right?

Jane: Well, the first thing to remember is that the obligations to inform and consult are separate, distinct duties. You have to inform in every case where there is a TUPE transfer but you only to have consult, there's only a duty to consult, if as the employer you envisage taking measures in respect of the affected staff. That's the obligation to consult, but you do always need to factor into your timetable some time for a voluntary consultation even if there are no measures. The idea is that the representatives or the staff may still have questions about what's happening and you need to factor some time for them to ask those questions.

The second thing to mention is that measures, which are the trigger for the duty to consult, does not have a clear definition under TUPE at all, but it has been fleshed out by case law and what the cases tell us is that it is a very low threshold for what constitutes a measure. So, for example, there was a case where in a care home some employees transferred. The only change was to payroll date and, in fact, for some people that meant they were slightly better off from a tax perspective and we are only talking about tiny amounts anyway. But, nonetheless, that was still held to be a measure, even though for some of them it was positive, so it is a low threshold.

There are a number of steps to check before you embark on an information and consultation exercise. So, the first thing to think about is, well, who are you going to be talking to? Have you got the right group of employees, have you defined who is affected? So, case law tell us that that is wider than the people who are assigned, it's not just those who are in scope to transfer but it will obviously include them. It will be people also whose job is potentially in jeopardy because of the proposed transfer. It may mean that the transferor does not have enough work for everybody and there are going to be redundancies so they are affected. Or it could be people who have internal job applications into the part of the business, or the services, which are going to be transferred and those job applications are pending at the time of the transfer. They will want to know whether or not they can still go ahead with those applications or not, so they are affected. But it's not every single person in the organisation, there has to be some sort of link.

The second thing we would always recommend checking is that you are consulting the right representatives of the affected employees. So, unions here have priority. So, if you are an employer that has a recognised union, then they are the people to consult with for the bargaining unit they represent. If they don't represent all the affected employees then you have a choice as an employer. You can either go with representatives who are already in place, on a pre-existing body that has got authority that is wide enough to cover a TUPE transfer, so not the social committee, I would suggest, but maybe another type of body that has slightly weightier responsibilities. And you have got to check that their authority has not expired, that's caught employers out in the past as well. If you don't have pre-existing body or you don't want to use one because you are worried that they don't have a mandate, then you need to invite the affected staff to elect appropriate representatives and there are various requirements for a fair election that are set out in TUPE.

Thirdly, you obviously need to allow enough time at each part of the process, so if you are electing you need to factor that into the timetable. Then, as I mentioned earlier, once you've given the information, as required by TUPE, then you need to allow some time for voluntary consultation even if you don't have an obligation to consult because there are no measures. Again, you need to think about whether the time that you are allowing the representatives to talk to their constituents in the consultation period, whether it's valuable time in the sense of are the employees actually around? So employers have been caught out by attempting to do this over an annual shutdown, for example, where a factory has closed, everybody's on holiday. The rep may be there, but they've got no one to talk to. That's not good enough. It has got to be qualitative time that can be properly used.

The final point to mention on consultation is, it's not a negotiation in the sense that the reps can't veto something; ultimately the employer decides what to do. But it is a kind of enhanced consultation. It's specifically a consultation 'with a view to reaching agreement'. So, as an employer you do need to be keeping a paper trail which shows that you have taken on board comments that the reps have made. It may be that you want to hold a bit of a 'give' up your sleeve so that you can show that you have given something during that conversation. So, you've got to be able to demonstrate a genuine two-way process if you want to be able to avoid the types of award that I mentioned at the start.

Siobhan: Many thanks, Jane, for that step by step guide to avoiding some of those common pitfalls which are very easy to fall into.

Now, Hannah let's talk about the last issue today, which is changing terms and conditions. We know that terms and conditions will transfer under TUPE but in some cases it is just not possible to replicate those exact benefits going forward. So, for example, if an employee is entitled to shares under a share scheme, the new employer cannot replicate that, so what happens then?

Hannah: That's right Siobhan. There are a number of examples where benefits just cannot be replicated post transfer.

As you mentioned, a share scheme for example, or perhaps, a crèche provided by the employer and some bonus schemes. The usual principle will still apply, so the terms transfer and they must be replicated or else it's a breach and the employees could bring a claim. They could bring claims for breach of contract, or perhaps unpaid wages, it all depends on the circumstances. However, as we've said the reality is just that some terms simply cannot be replicated. So, in that case, case law confirms that if it is going to be unjust, absurd or impossible to replicate, then the employer must put into place something of substantial equivalence. Careful planning is going to be needed to implement this.

Siobhan: Thank you Hannah, and that's just another example of why it is so important to start planning early, to make sure you have a smooth transfer. It is really important that these risks are addressed and covered at the planning stage, as we've mentioned, but also in the negotiation and the contract itself.

We hope you've found today's podcast useful and if you have any queries on the topics we've covered today or any other queries generally about TUPE, please do contact Jane Fielding or Hannah Swindle and they would be delighted to help you.

Thank you.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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