LOW PAY UNIT - ADVICE LEAFLET

Change of employer due to take-over or contracting out (TUPE)

If your employer is about to change due to a takeover of the whole or part of your company or through contracting out then the Transfer of Undertakings (Protection of Employment) Regulations 1981 may apply.

The Regulations (known as the TUPE Regulations) are based on the EC Acquired Rights Directive. They apply where a business undertaking or part of an undertaking is transferred from one employer to another. This may be where a new employer buys a factory or shop, or any other business as a going concern.

The TUPE Regulations also apply where an employer, including a local authority, decide that services, e.g. cleaning, catering, security, waste disposal or maintenance services should be done by outside contractors rather than in-house employees. This is known as "contracting out" of services. This amounts to a transfer of undertakings to the contractor.

This has had important consequences, particularly in the privatisation of public services by central government, local authorities and NHS Trusts. It is also relevant to companies which decide to award work to outside contractors.

However, the law does not apply if services are already provided by contractors. In that situation, when the contract comes to an end and the work is awarded to a different contractor, the TUPE Regulations do not apply unless there is a transfer of assets or a transfer of a major part of the workforce.

What should you do if your firm changes hands?

The law in this are is complex, so it is important to get advice either from a trade union (if you are a member), ERAS, an advice agency or a solicitor experienced in employment law. Details of how to contact ERAS are given below.

Information and consultation

Where the existing employer proposes to transfer its business, the employer must give information to representatives elected by the employees and consult with them about any plans which may affect the employees.

The employees are entitled to elect a representative to act on their behalf. The representative can be from a trade union or any other person elected by the employees and recognised by the employer. Your employer must notify you of your right to elect a representative. The employer must do this however many employees are affected by the transfer.

Your employer must give the following information about the transfer:

• the reason for the transfer;
• when it is going to take place;
• what it will mean for the employees, including any proposed plans;
• any measures proposed by the new employer.

Your should enter into genuine consultation with your representatives with a view to seeking an agreement.

Transfer of employment to a new employer

All the people who were employed by the old employer immediately before the transfer, automatically become employees of the new employer. The new employer cannot ask the old employer to sack existing staff just before the transfer. If the new employer refuses to take on the existing staff, they can bring a claim for unfair dismissal if they have one year of continuous service with the old employer.

Continuous service protected

When the transfer of the business takes place, the employees are deemed to have had continuous service with the previous employer. So your length of service for calculating entitlement to claim unfair dismissal, statutory redundancy pay and other rights is counted from the first day of your previous employment.

The new employer is also liable for any other compensation claims, e.g. personal injury, sex/race/disability discrimination which occurred before the transfer.

Pay and conditions protected

Your new employer will have to offer the terms and conditions which applied to your employment with your previous employer. This includes pay and other important conditions such as place of work, job title and job description, holiday and sickness entitlement and hours of work. These should all remain the same.

The new employer cannot impose changes of terms and conditions on you. Any reduction in your pay or change to conditions without agreement would be a breach of contract. Even if you agree to reductions, this would not be binding if the reason for the changes to the contact was the transfer itself.

Pensions are a special case. Unfortunately, the legislation says that pensions do not transfer in the same way, so employees cannot rely on an automatic transfer of pension rights. However, it is generally accepted that, if new employers do not offer a comparable pension, they face possible claims.

Union agreements and recognition

If there is an existing trade union recognition agreement, then the new employer must adhere to this. Employees are entitled to be represented by the union which was recognised by the old employer. If your pay was determined by a collective bargaining agreement, the new employer is bound by its terms. For example, if such an agreement provides for a pay rise every year, you are still entitled to that rise.

Dismissal automatically unfair

An employer cannot get round the TUPE Regulations by dismissing employees shortly before or shortly after the transfer. Such a dismissal is automatically unfair, if the dismissal was for a reason connected with the transfer. Any employee dismissed in this way is entitled to bring a claim for unfair dismissal if s/he has one year of continuous service.

An employer's only defence to a claim for unfair dismissal is that the dismissal was for 'an economic, technical, or organisational reason' entailing changes in the workforce. This has been given a narrow meaning by the courts. Even if the employer can prove this defence, the employer must still have to show that the dismissal was fair in all the circumstances.

What protection does this law give you?

You have the right to:

• consultation with your representatives - union or other;
• transfer of employment to new employer;
• have your service with your previous employer counted as continuous;
• the same pay and conditions as with the previous employer;
• any union agreements and recognition being carried over;
• protection against unfair dismissal

The economic, technical or organisational defence can not be used by an employer if there is no change in the workforce. If you were dismissed and re-employed on worse terms and conditions, it is automatically unfair because it does not involve any change in the nature of the workforce. If a new employer offers terms which are substantially worse than existing terms, you could consider resigning and claiming constructive dismissal. However, you should get expert legal advice before making a claim, as these are difficult cases to prove and win, and the compensation is often inadequate.

Legal Remedies

If your employer does not inform or consult you about a transfer, each employee affected is entitled to make a claim to an Employment Tribunal for up to four weeks pay. The claim must be brought within three months of the transfer.

If your pay is reduced or your contract is changed, you can make a claim to an Employment Tribunal to recover unlawful deductions from your pay. You must make the claim within three months of receiving the last reduced pay packet. You can also obtain a declaration of what your contractual rights should be.

You can also bring a claim in the County Court for breach of contract. The time limit for making this type of claim is six years but it is wise to make your claim as soon as you can.

If you are dismissed or you resign and claim constructive dismissal, you can bring a claim for unfair dismissal. A claim in either of these situations must be lodged with an Employment Tribunal within three months of your leaving date. The claim is usually brought against the new employer, even if s/he has refused to employ you.

Get advice: this is a very complicated area of law and we suggest that you get advice from ERAS, a trade union or a solicitor.

For further information contact:

ERAS
Low Pay Unit
9 Arkwright Road
London NW3 6AB
Advice line: 020 7431 7385

See our links section for other sources of advice.