TUPE:The new UK landscape Eurolegal Conference 4 6 April 2014 Amsterdam

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1 TUPE:The new UK landscape Eurolegal Conference 4 6 April 2014 Amsterdam Rebecca Thornley-Gibson asb law LLP

2 Headlines TUPE related dismissals ETO issues Contractual variations Collective consultation

3 TUPE Dismissals Previous provision: automatically unfair by reason of transfer or connected to transfer that is not an ETO reason entailing changes in the workforce New provision:protection against dismissal where the sole or principal reason for dismissal is the transfer which is not an ETO reason entailing changes in workforce (including change of workplace).

4 TUPE Dismissals Therefore employers can now argue that dismissals(and contract changes) are not prohibited by TUPE if made for reasons other than the transfer even though they might have a connection with the transfer eg harmonisation of terms. In addition new Regulations now state that a substantial reason of a kind such as to justify dismissal may also amount to an ETO reason for dismissal

5 TUPE Dismissals:Hazel v Manchester College 2014 CA Following TUPE transfer new employer tried to cut costs and harmonise 37 sets of terms and conditions Employees refused to accept 10% pay cuts and were dismissed Employees claimed the dismissals were unfair as the sole of principal reason for dismissal was the TUPE transfer Court of Appeal rejected the new employer s claim that the dismissals were ETO entailing a change in the workforce as redundancies would have to have been made if contract variations had not been enforced.

6 TUPE Dismissals:Hazel v Manchester College 2014 CA Therefore dismissals were automatically unfair Possible Hazel would now be decided differently as employers now have a new ETO reason ie a substantial reason of a kind such as to justify dismissal,that they could use in this situation to effect the post transfer changes Post transfer changes may now be easier to justify although caution still needed whilst new Regulations are being interpreted through the courts

7 Change to ETO definition:location changes Dismissals are permitted where an ETO reason exists However the ETO reason must entails changes in the workforce Tapere v South London Maudsley Trust held that changes in location could not be an ETO where there was no change in the number of employees required The new Regulations change this to allow ETOs to extend to a change in location therefore allowing TUPE dismissals where there is the classic location based redundancy post transfer

8 Who s ETO can be relied on:transferor or transferee? The decision of the Court of Session in Hynd v Armstrong [2007] is authority for the proposition that the transferor cannot rely on the transferee s ETO The government has decided not to amend the law so that the transferor can rely on the transferee s ETO Therefore transfer related dismissals with an ETO will still need to be made after the transfer has taken place.

9 Insolvency issues and ETOs Conflicting cases of Spaceright Europe Ltd v Baillavoine and Crystal Palace FC Ltd v Kavanagh. No ETO reason if dismissals made simply to make more attractive to purchaser and not concerned with ongoing conduct of business in hands of transferor: Spaceright But OK if purpose of dismissals are to save costs and keep the business going even if ultimate aim is transfer: Kavanagh

10 Crystal Palace Crystal Palace v. Kavanagh and others [2013] EWCA Civ 1410 Crystal Palace went into Administration on 26 Jan Administrators were looking to sell the club as a going concern and avoid liquidation. Stalled negotiations with eventual sale, to which TUPE applied, on 19 August 2010.

11 Crystal Palace 25 redundancies on 28 May and 31 May 2010 prior to sale Mr. Guilfoyle(the administrator) decided to 'mothball' the Club over the closed season when no matches would be played, in the hope that it might be possible to sell the Club at a future date A list of employees who could be made redundant was produced which would still permit the core operations of the Club to continue during the closed season

12 Crystal Palace Mr. Guilfoyle dismissed the claimants in order to keep the Club alive as a going concern, in the hope that there would be a sale in the future. When he dismissed the claimants a transfer of the Club to CPFC (2010) remained a possibility, but it was no more than that.the reason for the dismissals was not the eventual transfer but a reason connected with the transfer.on this basis an ETO reason was needed to defeat claims of automatically unfair dismissal issued.

13 Crystal Palace At Employment Appeal Tribunal the decision was that there was no ETO reason for the dismissals and as such the dismissals were automatically unfair. The EAT relied on Spaceright Europe v Baillavoine 2012 which had stated that where dismissal is part and parcel of a process with the purpose of selling the business there could be no ETO reason.in contrast where the reason for dismissal is to change the workforce and continue to conduct the business this can be an ETO reason

14 Spaceright decision problems for Crystal Palace However at the Court of Appeal Maurice Kay LJ accepted that there was a tension between TUPE legislation designed to protect employees and insolvency legislation which seeks to encourage the best result for creditors. Maurice Kay LJ was able to find on the facts of the Crystal Palace dismissals that these dismissals were designed to ensure costs were reduced to enable to club to continue to trade and as such this was an economic reason ie an ETO reason,for the dismissals

15 Contractual Variations Basic position changes to terms and conditions will be void if they are made because of the transfer Variations which are merely connected with the transfer will not longer be void eg harmonisation possibilities Variations void if by reason of the transfer unless there is an ETO reason - note that change in workplace is now an ETO reason However reasons closely associated likely to be regarded as by reason of the transfer and as such how significant the changes in TUPE 2012 are remain to be seen

16 Contractual Variations:What is connected with the transfer Taylor v Connex South Eastern New contract presented 2 years post transfer Lost holiday entitlement and enhanced redundancy Connected with transfer Norris v Brown Root Ealing Critical financial situation required cost cutting 2 years post transfer Not connected with transfer

17 Contractual Variations:What is connected with the transfer Smith v Trustees of Brooklands College Part time teaching assistants paid at wrong rate dating back pre transfer HR Director sought to rectify Changes not connected with the transfer Campbell v Martin McColl Harmonisation one year post transfer Changes were connected with the transfer...but there was an ETO although it didn t entail changes in the workforce

18 Collective Consultation Redundancy Collective consultation obligations. 20 or more employees At one establishment in a period of 90 days TUPE information and consultation obligations

19 Microbusinesses Information/Consultation Micro businesses (fewer than 10 employees) excepted from obligation to invite election of employee representatives Exception ceases to apply once employees are invited to elect representatives Must still inform and consult individually though as each employee is treated as an appropriate representative In force from 31 July 2014

20 Redundancy/TUPE Consultation New Regulations address a practical problem faced by the transferee in not allowing consultation pre transfer to count for the purposes of collective consulation. Now consultation by the transferee before the transfer will count toward the minimum consultation periods There is no obligation to allow this to happen Dependent on written notice and cooperation between transferor and transferee to be effective