Overlap between TUPE and Collective Redundancies obligations

We are currently seeing an increase in business transactions which are either preceded by or followed with collective redundancies. This month’s newsletter will highlight some keys aspects of the overlap between the information and consultation obligations when transferring a business and when making collective redundancies. We conclude this newsletter by highlighting the new Employment Tribunal compensation limits which came into force on 1 February 2012.

Overlap between TUPE and Collective Redundancies obligations

When a business transfer is coupled with collective redundancies it can cause some uncertainty as businesses are under a legal obligation to inform and consult where there is a ‘transfer of business’ which falls under TUPE (The Transfer of Undertakings (Protection of Employment) Regulations 2006) but also have a separate obligation to inform and consult under TULRCA (The Trade Union and Labour Relations (Consolidation) Act 1992) when making collective redundancies.

TUPE – Transfer of Undertakings (Protection of Employment) Regulations 2006

If a business transfer falls under TUPE, the employees working in the transferring business will transfer automatically to the buyer on their existing employment terms. Any change to their terms of employment will be void if the reason for the change is the transfer itself or a reason connected with the transfer (with some exceptions). Further, dismissing employees following a TUPE transfer could be automatically unfair.

Both the seller and the buyer have an obligation to inform and (if changes are anticipated) consult employees before the transfer takes place. Under TUPE the duty to inform arises when there is a ‘relevant’ transfer. However, the duty to consult is triggered if and when either the seller or buyer is proposing ‘measures’ in connection with the transfer. There is no statutory definition of ‘measures’ but it will include changes to the employment terms and conditions, redundancies and other changes to the working environment.

TULRCA – The Trade Union and Labour Relations (Consolidation) Act 1992

If either the seller or buyer also anticipates making collective redundancies (dismissal of 20 or more employees at one establishment within a period of 90 days or less) that party also has to comply with the information and consultation obligations under TULRCA.

The timing of the obligation to inform and consult in respect of collective redundancies is currently unclear due to conflicting UK and EU case law. In the case of UK Coal Mining Ltd v National Union of Mineworkers EAT/0397/06/RN and EAT/0141/07/RN the UK Employment Appeal Tribunal (‘EAT’) held that the duty to consult arises in respect of the business reason(s) for making redundancies. This decision effectively places a duty on businesses to consult with employees before a business decision is made that could result in redundancies.

However, the European Court of Justice (‘ECJ’) has recently considered this point in a separate case and concluded that the duty to consult in respect of collective redundancies only arises when the business plans or foresees collective redundancies and not necessarily before a strategic or commercial decision been taken that could lead to redundancies. The EAT has come across this same issue in yet another case and has decided to refer the issue to the ECJ for guidance.

Irrespective of the outcome of the EAT’s referral to the ECJ, the fact remains that in practice there is an overlap between the obligations to inform and consult under TUPE and in respect of collective redundancies which causes some practical difficulties as to the timing of the two consultation procedures, which party should be involved and who would be liable.

In practice the overlap between the obligations may be resolved by the buyer and seller cooperating so that the buyer is allowed access to the transferring employees to inform and consult jointly with the seller under both TUPE and TULRCA before the transfer. This approach is still untested in the courts and we recommend that you seek legal advice as to any information and consultation obligations as soon as possible and in any event before the transfer of a business or dismissal of any employees.

Penalty for failure to inform and consult under TUPE (business transfer)

Failure to comply with the TUPE information and consultation obligations can result in a Tribunal award of up to 13 weeks’ gross uncapped pay to each affected employee. The liability to pay the award can be joint and several between the seller and the buyer.

Penalty for failure to inform and consult under TULRCA (collective redundancies)

Failure to comply with the information and consultation obligations under TULRCA when making collective redundancies can make an employer liable to pay a Protective Award of up to 90 days’ actual gross pay to each affected employee.

Employment Tribunal compensation updates

From 1 February 2012 some employment tribunal awards and amounts payable under employment legislation are increased, including the following:

  • The maximum compensatory award for unfair dismissal has increased from £68,400 to £72,300;
  • The maximum basic award for unfair dismissal is now £12,900 taking the total maximum award for unfair dismissal to £85,200;
  • The limit of the amount of a week’s pay for the purposes of calculating payments such as statutory redundancy payments, statutory redundancy payments and the basic award for unfair dismissal was increased from £400 to £430;
  • The minimum amount for unlawful exclusion or expulsion from trade union has increased from £7,600 to £8,100.

These new rates apply where the situation giving rise to compensation/payment occurs on or after 1 February 2012.

If you have any questions on the issues raised in this newsletter or any general employment queries, please do not hesitate to contact us.

The material contained in this newsletter is provided for general purposes only and does not constitute legal or other professional advice. Appropriate legal advice should be sought for specific circumstances and before action is taken.

© , February 2012

Please contact:

Sara Kennedy - Solicitor

DD +44 (0)20 7553 9937

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