The New TUPE Regulations 2006
New Provisions Relating To The Transfer of the Provision of Services
There is a new definition of “a relevant transfer” in the 2006 Regulations which specifically refers to a change of a service provider. This includes as a transfer:-
“A service provision change, in which activities cease to be carried out by a Contractor on a client’s behalf (whether or not those activities had previously been carried out by the client on his own behalf) and are carried out instead by another person (“the subsequent Contractor”) on the client’s behalf”.
The definition requires that immediately before the change of service provider, there is “an organised grouping of employees situated in Great Britain which has as its principle purpose the carrying out of activities concerned on behalf of the client” and “the client intends that the activities will, following the service provision change, be carried out by the Transferee other than in connection with a single specified event or task of short-term duration”.
Accordingly, one-off arrangements and the services for a short-term duration will not be covered by TUPE 2006. Excluded would be the organisation of an overseas conference or a one-off event. There is now no doubt that a Corporate transferring its business travel accounts to a new TMC will be subject to the new Regulations. The effect will be that employees engaged in the provision of services to the Corporate and employed by the original TMC, will have their employee contracts automatically transferred to the successful TMC. This is also likely to apply where the Corporate switches the account when dissatisfied with the quality of service provided by the original TMC. It is difficult to see how the Corporate would find this acceptable where the team of employees working for the original TMC are moved to the second where there was some criticism of their service quality. There will no doubt be litigation and case law on this point.
Consultation with Employees
The old duty to inform and consult with the employees properly (already enshrined in the 1981 Regulations) is enforced by sanctions where an affected employee can seek redress from either the Transferor or Transferee.
Information Provision
At least two weeks before the actual transfer, the Transferor must provide information to the Transferee relating to the employees – including terms and conditions of employment, details of collective agreements, grievance or disciplinary action and other steps affecting staff in the previous two years and any pending legal claims. From 19th April 2006 there is a minimum statutory penalty of £500.00 per employee to compensate the Transferee if the information is not adequately provided. This is a real sanction where a reluctant Transferor might be disappointed to lose the business and unwilling to countenance the loss of key employees.Dismissals
As with the 1981 Regulations, any dismissal because of the TUPE transfer is automatically unfair unless it is for “economic, technical or organisational reasons entailing changes in the workforce”. If the tests are satisfied dismissal could be for redundancy and must also be reasonable in all the circumstances. Employees who object to being transferred may object but this amounts to a resignation unless there are substantial changes to their conditions of employment. There is limited provision to vary the contract of a transferring employee but not simply to put new employees on the same terms as the old and are only permitted if justified for “economic, technical or organisational reasons”. Permitted variations are more flexible where the Transferor is insolvent.In summary, transfers of business from one TMC to another are likely to involve the transfer of the employees. The new Regulations will involve earlier disclosure of employee records and proper consultation. Timescale is often an issue when services are transferred. The outcome of a tender may be a short period before the commencement of services by the new provider. Where a TMC sells some of its assets by asset sale the transaction is usually kept highly confidential until completion takes place. Only then may consultation with employees start, which might be later than the Regulations provide.
We will have to see how the new Regulations result in a more managed process when business travel services are switched to a new provider.
The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. Piper Smith Watton cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.