The law on staff transfers underwent its greatest change for 25 years when, on 6 April 2006, the Transfer of Undertakings (Protection of Employment) (TUPE) Regulations 2006 came into force, repealing the previous TUPE Regulations 1981. But what lies ahead?
A dispute between advertising agencies McCann Erickson and Euro RSCG may provide the first interpretation of the new rules on outsourcing. In 2006, McCann Erickson lost its Boots Healthcare advertising account to Euro RSCG. A small group of employees dedicated to the advertising account are now reportedly querying their rights to transfer under TUPE. The topicality of the issue is because the government decided last year not to exclude professional services workers from the new rules.
The second issue is whether the new right for employers in the TUPE Regulations 2006 to change terms and conditions of employment on a TUPE transfer will be any use in practice. The new provisions state that an employer and employee may agree a variation of the contract if the sole or principal reason for the variation is a reason connected with the transfer that is an economic, technical or organisational (ETO) reason entailing changes in the workforce. The test is the same as the one currently used to determine whether transfer-connected dismissals are unfair.
London Metropolitan University v Sackur (EAT/0286/ 06) concerned the merger of two universities to form London Metropolitan University. The new university tried to harmonise terms and conditions of employment. After negotiations broke down, the employers imposed the new terms. Staff subsequently claimed unfair dismissal.
The case turned on whether the employer’s actions could be justified on the basis of an ETO reason entailing changes in the workforce. The Employment Appeal Tribunal held that for this to apply there must be a reduction in the number of employees employed or, alternatively, an entire change in their job functions. If, therefore, on a change in terms and conditions of employment there is no workforce reduction but simply a desire on the part of the employer to change the terms and conditions on which existing employees continue to work, there will be no ETO reason entailing a change in the workforce.
In the case of London Metropolitan University, this meant the employer lost the appeal and the employees were unfairly dismissed. It also means that the provisions in new TUPE, which appear to allow employers to change employment terms where there is an ETO reason, will also be useless if the employer cannot, at the same time, establish a workforce reduction. Normally, this will not be the case where the employer’s desire is simply to harmonise terms and conditions of employment. Huge problems for employers in this area therefore lie ahead.
Another topical issue is transnational outsourcing. The application of TUPE to cross-border mergers and acquisitions and to transnational outsourcing was once an interesting discussion point, but not something that troubled us very much in practice. International transfers are, however, much more commonplace now.
At the moment, it is not clear whether TUPE and the Acquired Rights Directive apply to such transfers. One problem is the sheer lack of case law on the subject. An exception is the decision of the German Labour Court in the Englischer Dienst case. An employee was an editor in an internet news service based in Hamburg, Germany. The service was transferred to a company in Cork, Ireland. The German Labour Court considered there was a transfer of an undertaking and it also considered that this could take place even though the transfer was across national boundaries.
A change in the geographical location of the business, especially when it was internet based, did not stop the directive applying. However, the employee chose not to sue the Irish company but only the original German employer. The case, therefore, provides no guidance on whether the German Labour Court would have compelled the Irish firm to re-employ the employee.
By John McMullen, head of employment law, Watson Burton
John McMullen is author of Personnel Today’s One-Stop Guide to Managing Staff Transfers. Click here for a full list of our one-stop guides.