Q&A: Recent developments in TUPE

Recent tribunal cases have continued to highlight the complexity of TUPE (Transfer of Undertakings Protection of Employment) law when it comes to particular issues. In particular the need to consider the risk of equal pay claims when there is a TUPE transfer of staff and the issue of who inherits employee liabilities when there is a transfer of one service provider’s activities to two or more transferees.

Q What is the potential liability of a transferee in respect of equal pay claims?

A A recent tribunal case (Sodexho Limited (1) Gutridge & Others v North Tees and Hartlepool NHS Foundation Trust) has clarified that an employee is able to bring a claim for equal pay based upon a pre-transfer comparison. The employee is able to claim even if the comparator did not transfer to the transferee and even if the transfer took place many years ago.

If the employee can show a continuing breach by the transferee and is successful in an equal pay claim, they would be entitled to an increase in current pay, as well as back pay (for the difference between the employee’s pay and that of the comparator) back to the date the employee transferred to the transferee or for six years from the date of their claim, whichever is the shorter.

However, the employee is not able to recover from the transferee any back pay for the period prior to the transfer date.

Q What is the significance of this for a transferee and how can a transferee help to avoid the risk of such claims?

A A transferee employer may have to deal with equal pay claims for which the transferor was, in fact, responsible. Such claims may not come to light until many years after the transfer has taken place and the transferee is then faced with the difficult task of providing evidence about the pay of people it has never employed.

A profitable contract may easily become significantly less lucrative if a number of the employees of the transferee are able to increase their pay and recover the difference for up to six years before their claim. To reduce the risks, a transferee needs to consider the issue of equal pay in any transfer and as part of the due diligence. The transferee should also consider obtaining suitable indemnities and warranties from any transferor wherever possible in any TUPE transfer and ensure that they are adequate to cover such claims.

Q What are the time limits for employees bringing an equal pay claim where there has been a transfer?

A The six-month time limit to bring an equal pay claim in respect of employment with the transferor runs from the date of the transfer. If there is a continuing breach on the part of the transferee, the six-month time limit to bring a claim runs from the date that employment with the transferee terminates.

Q How does TUPE apply where there is a service provision change and the service is taken on by two or more service providers ( as in Kimberley Group Housing Limited v Hambley & others Angel Services (UK) Limited v Hambley & others)?

A Each service provider will inherit liability for those employees who were wholly or mainly assigned to the part of the transferor’s activities that new service provider has taken over.

Q How do you determine which service provider employee liability should transfer to?

A The essential question to determine is whether an employee is assigned to activities involved in the service provision change and this is a question of fact. There is no exhaustive list of factors which will conclusively determine to which part of the undertaking the individual is assigned, but it is essential for there to be a link between the employee and the work or activities performed.

Factors that may be considered include the amount of time spent on one part of the business or the other, the amount of value given to each part by the employee, the terms of the employment contract showing what the employee could be required to do and how the cost to the employer of the employee’s service has been allocated between the different parts of the business.

Q Can employee liability be split between multiple service providers?

A No, employee liabilities cannot be divided between two or more transferees on a percentage basis and there can be no separation of the contract of employment from the liabilities under it.

Q What happens if the activities of the transferor are split in such a way that none of the new service providers are taking over a clear majority of the employee’s activity?

A In this scenario, the employee would not transfer to any of the new service providers but would remain with the transferor. The transferor would then need to consider whether redundancy or redeployment is necessary for the employee and follow the appropriate procedure.

Q How should the transferor and transferees manage the risks?

A The parties will need to consider as early as possible which transferee will acquire the greater part of the activities to which the employees in question are assigned. The contracts of the employees will most probably be key in helping to determine this issue.

Vanessa Hempstead is a solicitor for Thomas Eggar

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