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Changing the last pay day before a business transfer is a ‘measure’ requiring consultation
Todd v Strain & others UKEATS/0057/10/BI
13 September 2010
The Transfer of Undertakings (Protection of Employment)
Regulations 2006 (TUPE) protect employees in most business
transfers and changes in contractors, so that the employment of
those in the business or of the out-going contractor transfers to
the new owner or contractor.
TUPE also imposes obligations on the outgoing employer to inform
employee representatives about the proposed transfer and, where the
employer envisages that it will take any measures in relation to
employees, to consult with appropriate representatives with a view
to reaching agreement on the measures. These obligations are to be
taken seriously – an employment tribunal can award up to 13 weeks’
pay per employee for a failure to do so.
Outgoing employers in this situation do not often take
‘measures’ in relation to their own employees, or so we thought. In
the recent case of Todd v Strain & others the
Employment Appeal Tribunal (EAT) held that quite minor
administrative matters as a result of employees switching from one
employer’s payroll to another were ‘measures’ within the meaning of
TUPE and so required consultation.
Mrs Todd owned a care home and, on 4 January 2008 sold it to
Care Concern GB in consequence of which the following happened:
- Mrs Todd paid wages for 1 to 3 January shortly after the
transfer, rather than waiting until the end of the month, which
would be the employees’ normal pay-day
- The payment of three days’ wages might attract no, or possibly
an inadequate deduction for tax and national insurance, which would
require adjustment at the end of the month
- Mrs Todd paid a couple of extra hours’ pay reflecting the
holiday entitlement for the 1 to 3 January period, which was then
reclaimed by Care Concern at the end of the month
The EAT found that it was “not at all clear that there was any,
or any but the most trivial, disadvantage to employees” but
nonetheless found that the pay arrangements amounted to a measure
which Mrs Todd should have consulted employee representatives over.
The EAT awarded seven weeks’ pay for each of the 32 employees
(totalling over four years’ pay). This, in the EAT’s view, was
appropriate in view of Mrs Todd’s complete failure to arrange for
the election of employee representatives (although this was
mitigated by the fact that she provided employees with most of the
required information); and her failure to inform and consult about
the revised pay arrangements. It was appropriate to award
compensation for the latter because, it had been found, these
revised arrangements caused the employees to worry.
The result of this case may be that innocuous administrative
arrangements which happen as a result of a transfer such as closing
early the day before the transfer, or arranging a meeting with the
new owners, could be ‘measures’ requiring consultation with
employee representatives.
Practical steps for the outgoing employer
- If in doubt, err on the side of caution. Even very minor
departures from the norm could be measures within the meaning of
TUPE and should be subject to formal consultation with employee
representatives
- Plan ahead – representatives might need to be appointed by way
of an election before consultation can take place
- Consider TUPE indemnities in the contract / sale agreement. If
your bargaining position is strong enough, you may be able to
obtain an indemnity from the other party in respect of awards for
any failure to inform and consult
Practical steps for the incoming employer
- Remember that under TUPE you are liable jointly with the
outgoing employer for their failure to consult transferring
employees, so make detailed enquiries about any measures the
outgoing employer might take, and the extent to which they have
consulted on them
- Again, consider apportioning liabilities under TUPE in the
contract / sale agreement
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