TUPE update


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There hasn't been much new TUPE case law for a while now, but over the past few weeks we've had a couple of interesting decisions which we thought it would be useful to draw your attention to.

Changing terms and conditions

Changes which are agreed by the parties and which are entirely positive are not prevented by TUPE.  In Regent Security Services Ltd v Power the Court of Appeal held that transferring employees could not be deprived of any rights that transferred with them, but that the transferee was unable to avoid being bound by any new more favourable terms it had agreed with the employees.  As a result Mr Power was able to rely on the transferee's increase in his contractual retirement age, which was agreed shortly before the transfer.

However, it will not always be the case that favourable terms agreed prior to the transfer get the green light.   In the recent case of Ferguson and ors v Astrea Asset Management Ltd the Employment Appeal Tribunal (EAT) looked at contract changes beneficial to employees which were made before the transfer and found that they were void as they were made by reason of a TUPE transfer.

Prior to the transfer of an estate management contract from Lancer to a new service provider, Astrea, the claimants, who were directors of Lancer, varied their own contracts to give themselves generous guaranteed bonuses and termination payments.  When Astrea discovered this shortly before the transfer, it refused to allow some of the claimants to transfer and dismissed the others for gross misconduct.  The claimants brought claims against Astrea based on TUPE for unfair dismissal and contractual termination payments. 

At first instance the Employment Judge found that these changes were made "by reason of" the anticipated transfer and had no legitimate commercial purpose for Lancer.  Instead they were designed to compensate the claimants for the loss of Lancer's business; the claimants had dishonestly taken undue advantage of TUPE by awarding themselves remuneration knowing it would be paid at the expense of Astrea.  As a result the changes were void.  The claimants were found to have been unfairly dismissed, and one of them was subjected to a 100% Polkey deduction on his unfair dismissal award.

The EAT agreed with the Employment Judge that, although the changes were beneficial to the claimants, they were void because they had been made by reason of the TUPE transfer.  The claimant who was complicit in making the variations was subjected to a 100% Polkey deduction as his conduct was sufficient to justify dismissal.  The EAT held that the automatic unfairness of the dismissal because of TUPE did not preclude a finding of contributory fault.

The decision in Ferguson shows that, just because changes to a contract are positive, it does not mean that they will not be found to be void.

Employment contract can be transferred to more than one transferee

There has been an interesting decision from the ECJ recently where it was held that, where a contract is fragmented, it is possible for an employee to transfer to more than one transferee on a pro rata basis.  This goes against the EAT's decision in Kimberley Group Housing Ltd v Hambley. 

To briefly recap, in Hambley, the EAT was looking at the transfer of a contract for the provision of accommodation services to asylum seekers from one service provider to two service providers.  Having concluded that there had been a service provision change, the EAT turned its attention to the second question, that is to which of the two new contractors the employee had transferred.  It confirmed that, in situations as here where following a service provision change the activities are carried out by more than one contractor (or subsequent contractor), the assignment test set out by the ECJ in Botsen v Rottersdamsche Droogdok Maatschappij B.V. should be followed to establish which contractor employees transfer. This meant looking at the link between each employee and the activities performed by the new service providers.  The result in this case was that the contactor that took on the greater part of the activities (71%) inherited liability for all of the employees.

Following the ECJ's recent decision in ISS Facility Services NV v Govaerts the decision in Hambley has been thrown into doubt.  Ms Govaerts was employed by ISS Facility Services which was responsible for the cleaning and maintenance of various buildings in the city of Ghent; work which was divided into three lots.  The work went to re-tender and the first and third lots were awarded to Atalian, and the second lot was awarded to Cleaning Masters.  Ms Govaerts was told that she would transfer to Atalian, as Atalian's share (the two lots successfully tendered for) amounted to 85% of the work she carried out for ISS.  Atalian refused to take on Ms Goverts, stating that it did not consider that there had been a business transfer.

Ms Govaerts brought claims against both ISS and Atalian for notice, bonus and accrued holiday pay.  The Belgian court agreed that there had been a transfer under the Acquired Rights Directive, but the question of the effect on Ms Govaerts's contract of employment was referred to the ECJ.

The ECJ held that where a transfer of an undertaking involves more than one transferee the rights and obligations under an employment contract are transferred to each of the transferees, in proportion to the tasks performed under the contract.  It held that a division between transferees could be made even if the contract transferring to one of the transferees only covered a few hours of work.  Finally it held that it was for the national court in question to decide how the contract was to be divided, taking the economic value of the lots to which the worker was assigned into account, or the time which the worker spent on the contract.  In the event that division was impossible the transferees would be responsible for any resulting termination of the worker's contract.

Following the decision in Govaerts it seems that it's possible for an employee who works across more than one part of a business to have their contract divided up between more than one transferee taking the proportions of the time they spend, and the value they add to the different parts of the business, into account.  If this decision is followed in the UK then it potentially makes the obligations of transferees much more complicated as, in some situations, they'll find that they have liability for only part of a worker's contract.

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