Relocation and TUPE – it’s complicated. What claims can arise when the move involves collective redundancies? And who picks up the tab? Andrew Secker, Principal Associate for Mills & Reeve LLP, explores the issue.
While I have a soft spot for TUPE, even I admit TUPE did itself no favours when it came to transfers which involved a change in place of work.
Before 31 January 2014, redundancies implemented post transfer following a change in place of work which did not [my emphasis] involve a reduction in the workforce (as often the case) would be deemed to be transfer related. Whilst TUPE allowed an employer to dismiss employees for a reason relating to the transfer if it had an “economic, technical or organisational reason entailing changes in the workforce”, this phrase was interpreted literally. It covered changes to the composition of the workforce, not where the workforce was located.
If the post-transfer change in place of work resulted in the redundancy of any employee with two years’ service, the dismissal would be automatically unfair regardless of the consultation undertaken.
TUPE was never intended to give an employee better rights than he/she enjoyed prior to the transfer. As part of the amendments made to TUPE in January 2014, it was made clear that changing the location of a workforce would constitute a “change in the workforce”.
This and other changes have made it simpler and less risky to deal with transfers involving a change in place of work. Below I explore key questions to address.
Is this a redundancy?
Before treating the change in place of work as a redundancy, it is important to consider both the terms of the transferring employees’ employment contracts and the facts. If there is a contractual right to relocate staff (a mobility clause), it may be possible to rely on this rather than treat this as a redundancy. Doing so may be cheaper and a better tool for retaining transferring employees.
Care needs to be taken as mobility clauses will be interpreted narrowly. These only permit relocations of the type envisaged when the contract was entered into (i.e. when the transferring employee worked for the outgoing employer). The clause must be exercised reasonably, so not to breach the implied term of trust and confidence. This means giving advance warning to staff and discussing the impact of the change with them.
Whose redundancy is it?
The incoming employer will be responsible for the redundancy. Technically, the outgoing employer cannot consult about the redundancies proposed by the incoming employer nor can it affect the dismissals – albeit some do for pragmatic reasons.
How do you consult about the redundancy?
With the permission of the outgoing employer, consultation about the change in place of work can be undertaken before the transfer – even when this triggers collective consultation (where this could result in the dismissal of 20 or more employees working at any one establishment in any period of 90 days).
It can be important for those outsourcing work or bidding for outsourced work to secure agreement to pre-transfer consultation as part of the contractual terms. Pre-transfer consultation can be key in allowing staff concerns that will arise when they are told of the staff transfer (see below) and in reducing the cost of any redundancies.
The change in place of work (and any dismissals) can only take effect after the transfer.
How does this interact with the TUPE information and consultation process?
The two processes are separate – albeit the appropriate representatives of the staff affected by the transfer will be notified of the change in place of work as part of the TUPE information and consultation process.
If the change in place of work involves collective consultation, in practice the incoming employer would look to consult the same representatives engaging with the outgoing employer about the TUPE transfer. Where there is a good relationship between outgoing and incoming employer the two processes could be combined. This can often make sense when the biggest consequence of the transfer is the change in place of work.
What claims can arise?
If there has been a failure to consult about collective redundancies, claims can be brought by or on behalf of the affected employees (not just those who have been made redundant). The maximum award is up to 90 days ‘pay (gross) per employee.
Those employees with two years’ service who are dismissed as redundant could also pursue claims of unfair dismissal in the normal way.
The added layer of complexity in TUPE is that:
In some instances it is possible for employees to argue that the change in place of work is a substantial change in the employee’s working conditions to their material detriment. In this case, employees’ can resign and bring a claim of unfair dismissal under regulation 4(9) of TUPE. The risk and value of these claims is lower now change of location is an ETO reason.
If the incoming employer fails to provide details of its measures, then a claim for a failure to inform and consult about the TUPE transfer can arise. The claim would be brought against the outgoing employer in the first instance, who can apply to join the incoming employer to the proceedings. The maximum award is up to 13 weeks’ pay (gross) per affected employee.
Who picks up the tab?
The incoming employer as the party responsible for the making any redundancies. In practical terms, in both business acquisitions and outsourcings, the cost and risk of the redundancies is often factored into the sale price or contract bid.
Those outsourcing work need to be clear if the new contractor is expected to take the cost and risk as part of the contract or, if not, the extent to which redundancy costs will be refunded as part of the contract terms.