Introduction
TUPE
TheTransfer of Undertakings (Protection of Employment) Regulations 2006 (as amended) (TUPE), protects employees’ rights when the organisation for which they work, or the service they contribute to the deliveryof, transfers to a new employer. It applies to organisations of all sizes, both public and private sector. More specifically, TUPE applies where:
- a business or undertaking, or part of one, is transferred to a new employer where it retains its identity post-transfer; or
- there is a service provision change involving (a) the initial outsourcing of a service (known as “contracting out”), or (b) a subsequent transfer (second stage contracting) (where a service is “reassigned”), or (c) a service being brought back in-house (where a service is “contracted in” or “insourced”).
In the context of a TUPE transfer, the employer who is transferring the business or service to another is called “the transferor”. The employer who receives the transferred business or service is called “the transferee”.
In order for a service provision change to amount to a TUPE transfer, the following three conditions must be satisfied:
1.there must be an organised grouping of employees situated in Great Britain whose principal purpose is to carry out the activities concerned on behalf of their employer or a particular client. There must be an element of conscious organisation by the employer of the employees into a grouping or team, which has as its principal purpose the carrying out of the relevant activities and it must be organised by reference to the requirements of the employer or client in question;
2.the employer or client (as the case may be) must intend that the activities will, after the change, be carried out by the transferee other than in connection with a single specific event or task of short-term duration; and
3.the activities must not consist wholly or mainly of the supply of goods for the employer/client’s use.
In the context of a service provision change, it can sometimes be difficult to determine whether an employee should transfer, in circumstances where they may be employed not only in the performance of the services that are transferring but also in other parts of the business that are not transferring. In that set of circumstances, a decision has to be made as to where the employee in question predominantly worked. This is done by assessing the facts of each case, but in particular, attention is given to the following:
- the percentage amount of time spent on one part of the business or the other;
- the amount of value given to each part by the employee;
- the terms of any contract of employment or job description; and
- how the cost to the employer of the employee’s services is allocated between the different parts of the business.
The employee will transfer under the service provision change if it can be said that they were part of the organised grouping and predominantly worked on the services that are being transferred. If the services that the employee works on are too fragmented, TUPE will not apply in relation to that particular employee.
TUPE has implications for both the transferor and the transferee.TUPE transfers all ofthe transferor's rights, powers, duties and liabilities under or in connection with the employment contracts of transferring employees to the transferee. Further, any act or omission of the transferor before the transfer is deemed to have been an act or omission of or in relation to the transferee. This means that if a transferor discriminates against an employee who is due to transfer, then potentially any claim arising from that passes to the transferee on transfer. In the same way, if the transferor owes wages to a transferring employee at the time of the transfer, that employee can claim those owed wages from the transferee. As well as protecting transferring employees’ terms and conditions of employment, TUPE preserves their continuity of employment. Any collective agreements in place before the date of the transfer will also apply post-transfer.
In 2014, new Regulations on TUPE came into effect updating the 2006 Regulations. As part of these changes, it will continue to be the case that changes to employees’ terms and conditions, if the sole or principal reason is the transfer, will be void. Previously, changes to terms and conditions for a reason ‘connected to the transfer’ were also invalid, but this has now been removed. However, changes may be valid only in very specific circumstances.
Rights and liabilities relating to the provision of occupational pension schemes which relate to benefits for old age, invalidity or survivors generally do not transfer under TUPE. A transferring employee cannot claim against the transferor for breach of contract or constructive unfair dismissal arising out of a loss or reduction in their rights under an occupational scheme in consequence of the transfer. However, with transfers not involving central or local government (where potentially different pension considerations apply), transferees must offer, as a condition of employment, a “minimum level of pension protection” under TUPE to qualifying employees (any transferring employees who had an actual or contingent right (i.e. was an active member, eligible to be a member or was in a waiting period before becoming eligible to be a member) in relation to an occupational pension scheme with employer contributions immediately prior to the TUPE transfer). Transferees must offer such qualifying employees either:
1.membership of a defined benefit (i.e. final salary) occupational pension scheme, in relation to which the transferee is the employer, which provides for either the value of the benefits to be provided to the member to equal at least 6% of their pensionable pay per year of employment, in addition to any member contributions, and where the member is required to make contributions, for them to contribute at a rate not exceeding 6% of their pensionable pay; or the transferee must match member contributions to the scheme up to a maximum of 6% of basic pay;
2.membership of a money purchase occupational pension scheme, in relation to which the transferee is the employer, to which the employer must match member contributions up to a maximum of 6% of basic pay; or
3.to match member contributions up to 6% of basic pay to a stakeholder pension scheme of which the employee is, or is eligible to become, a member.
If the TUPE transfer involves the transfer of current or former employees of local or central government and some other public bodies, guidance should be sought from HR. In this respect, you will need to have regard to HM Treasury’s Fair Deal policy, which is a non-statutory policy and sets out how pension issues are dealt with when staff are compulsorily transferred from the public sector to independent providers delivering public services. Regard should also be had to a Cabinet Office Statement of Practice – “Staff Transfers in the Public Sector”.
Please be aware, that some pension schemes provide for age-related benefits (for example, enhanced redundancy entitlement or early retirement benefits, or the right to be considered for early retirement). These benefits will transfer to a transferee as they fall outside of the pension rights exclusion from TUPE (above). These rights are commonly referred to as “Beckmann rights” following a case that dealt with this point. These rights can often be very expensive and transferees will need to ensure that they are aware of such matters when undertaking any due diligence before a TUPE transfer.
It is not possible to contract out of TUPE (indeed, to do so will be null and void), but the commercial risks and liabilities relating to a transfer can, and should,be managed.
In a TUPE situation there are various information and consultation obligations on both the transferor and the transferee in respect of any employees affected by a transfer. It is important that this is understood as this will assist you in determining the type of information you may need to find out as well as helping you to understand some of the standard documents included with this guidance. Briefly:
1.The Transferor must at least 28 days before any transfer send to the Transferee in writing “employee liability information” in relation to those employees it has identified are in scope to transfer to the transferee on the transfer date. That information must include the following:
(a)the identity and age of the employees;
(b) information contained within the statutory written statement of terms and conditions of employment (essentially the terms of their contracts of employment);
(c) information relating to any disciplinary action taken against an employee within the previous 2 years;
(d)information relating to any grievances raised by an employee within the previous 2 years;
(e)information about any legal action brought by an employee against the transferor within the previous 2 years and any potential legal action which the transferor has reasonable grounds to believe may be brought by an employee;
(f)information relating to any collective agreement which will have effect after the transfer; and
(g) information about anyone who would have been employed by the transferor and would have been in-scope to transfer to the transferee if they had not been unfairly dismissed.
2.The Transferee shall notify the Transferor of any measures it intends implementing in relation to the transferring employees after the transfer date. Those measures can include any changes to roles, terms and conditions (if permitted), redundancies, reorganisations etc.
3.Long enough before the transfer date, the transferor must then write to the appropriate representatives of the affected employees. The “appropriate representatives” will be any recognised trade union, or any body of employee representatives elected by the affected employees to represent them in relation to, amongst other things, TUPE. If there are not appropriate representatives, then the Transferor must first write to the affected employees inviting them to elect representatives for the purposes of consulting with them regarding the TUPE transfer. If the affected employees do not elect such representatives, the transferor may proceed to consult directly with the affected employees. The written information that must be provided to the appropriate representatives/affected employees will be:
(a)the fact that a transfer is to take place, the date or proposed date of the transfer, and the reason for the transfer;
(b)the legal, economic and social implications of the transfer for any affected employees. This might include an explanation of the legal effect in relation to the employment contracts, collective agreements and statutory rights, the impact on pay and benefits, and any relocation plans;
(c)information on the number of agency workers engaged, the areas in which they are being used and the type of work carried out by them;
(d)If the employer is the transferor, and it envisages taking any measures in connection with the transfer, it must give information and consult on those measures or if there are none, it must confirm that fact;
(e)If the employer is the transferee, it must indicate any measures it proposes to take on or after the transfer date, or if none confirm that fact.
It is important to comply with all of the above properly as there are potentially serious financial repercussions if there is a failure to do so. The above should also enable you to understand some of the questions that might need to be considered during any TUPE procurement process and why they are being asked.
Procurement
It is important that those who tender to deliver a service are fully aware of any associated TUPE employment liability to allow them to factor this into their bid/pricing. If this information is not fully and accurately disclosed then this may result in tenders that take insufficient account of costs, which might in certain circumstances result in the University being liable for additional costspost contract award.
Pre-Procurement Stage
It is important to consider whether the re-tender of any existing contracts will have any TUPE implications. Using the University’s Contracts Register, Category Managers (contact details provided below) should prompt departments to make such a determination at least 12 months ahead of the expiry of the contract,if this is possible. If this is not possible, then you should seek as much information as you can in order to assist you with dealing with the procurement process. If it is not clear as to whether the re-tendering of an expiring contract has any TUPE implications then, as part of the contract management process,the University should write to the providerto help clarify – see sample letter at Appendix A – please note, this is a sample letter only and the type of letter that you will send will vary dependant on the information you require in order to make a decision as to whether TUPE applies or not – the sample letter should therefore only be used as a guide. Human Resources (contact details provided below) should be engaged at the earliest opportunity where it is understood that a tender / re-tender has any potential TUPE implications.
The full Procurement Strategy template prompts consideration of any TUPE implications. In identifying all University staff involved in the procurement exercise/project, including those on the tender evaluation panel, the requirement for any HR expertise should be established.
At the pre-procurement stage, where the procurement strategy is being developed, the following details should be established and information collated:
•Anonymised Lists of employees potentially affected by the transfer (i.e. all those who carry out the services or who are part of the business or undertaking that is going to be transferred or who are otherwise affected by it), and the names and contact details of relevant union officials or employee representatives
•Precisely what is being transferred / contracted-out
•Who will be transferring the service (the transferor)
•Which employees will likely be employed by the transferor in the service immediately before it is transferred (or, where the transfer is effected by a series of two or more transactions, employees who immediately before the transfer are employed by the transferor and assigned to the organised grouping of resources or employees). If employees work in a number of areas, obtain evidence to establish whether they are predominantly employed in the service that is to transfer.
•All affected employees — any employees of the transferor or transferee (whether or not employed in the undertaking or the part of the undertaking to be transferred) who may be affected by the transfer or may be affected by measures taken in connection with it
•Any independent trade unions that are recognised by the transferor/transferee in respect of the affected employees
•Any existing employee representatives elected by the affected employees whose remit gives them sufficient authority to act as 'appropriate representatives' or any employee representatives elected specifically for the purposes of consultation and receiving information
•If known at this point, any measures we envisage taking in connection with the transfer in relation to the affected employees and the likely effect of such measures. Measures include plans or proposals that we foresee, and have in mind to implement, including any material change in existing work practice or working conditions or redundancies (whether voluntary or compulsory). If these are not known at this stage then information should be given as soon as firm details are established and can be communicated in a meaningful way.
•The pension schemes that any employees are in together with contact details of the relevant pension administrators.
•Details of any outstanding disciplinary or grievance issues or any employee claims
Second stage contracting
Where the University is to invite tenders for a service that is already being delivered by an external provider, it will need to obtain and disclose to potential tenderers the current provider’s Provisional Staff List. The required content of the Provisional Staff List is shown at Appendix C. This is an anonymised list of all of the provider’s employees (exit employees) that would potentially be subject to a TUPE transfer should a new provider be appointed – see Appendix C.
A Provisional Staff List of identified exit employees should be obtained from the provider6-12 months prior to the expiry date of the contract (whether the initial or extended contract period). The University should write to the provider to gain this list - see sample letter at Appendix B. The provider should respond within 20 days of the request being made, as stipulated in the University’s standard Terms & Conditions (Appendix D). This list should be reviewed regularly and updated where there are any changes.
If the University gives notice to the provider of early termination in accordance with the terms and conditions of the contract, then the Provisional Staff List of identified exit employees must be requested at the same time as issuing the termination notice, and the provider should be requested to respond within 20 days of the request being made, as stipulated in the University’s standard Terms & Conditions (Appendix D).
Following the completion of the tendering process, if the contract is awarded to a new provider then formal notification with full due diligence informationfor the employees to be transferred must be provided by the outgoing contractor to a new provider 28 days before the transfer takes place, as stipulated in the University’s standard Terms & Conditions (Appendix D) and TUPE (known as “Employee Liability Information” – see above). This is the Final Staff List, and its required content is shown at Appendix C.
Initial outsourcing
Where the University is to undertake a tendering process to appoint an external provider to deliver a service which is currently delivered in-house, this may result inUniversity employees being transferred to the external provider under the TUPE Regulations. The University will need to formulate,and disclose to potential tenderers,the Provisional Staff List.It will also be responsible for producing the Final Staff List to be issued to the new provider. The University will be obliged to send to any transferee, in these circumstances, the Employee Liability Information in accordance with TUPE (see above) no later than 28 days before the date of the transfer. It will also need to abide by the inform and consult obligations as set out in this guidance.
The University Standard Terms & Conditions (Appendix D) seeks to cover the position in the event that the initial purchase of the services from a contractor amounts in itself to a service provision change pursuant to the TUPE Regulations. Of course, if it does not then that part of the Standard Terms & Conditions will not apply to the initial purchase of services, although TUPE may well be relevant if the University at a later date seeks to take back the services in-house or to contract with another contractor for the provision of such services.