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CHAPTER 16 Continuity of employment and transfers of undertakings

CHAPTER 16 Continuity of employment and transfers of undertakings. Continuity of employment and transfers of undertakings. Concepts of continuity of service – including the effect of the Transfer of Undertakings Regulations 2006 (TUPE) – normal working hours and a week’s pay are important.

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CHAPTER 16 Continuity of employment and transfers of undertakings

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  1. CHAPTER 16 Continuity of employment and transfers of undertakings

  2. Continuity of employment and transfers of undertakings Concepts of continuity of service – including the effect of the Transfer of Undertakings Regulations 2006 (TUPE) – normal working hours and a week’s pay are important. This is because many statutory rights are dependent upon minimum length of service, and payments are related to statutory concepts of normal working hours and a week’s pay.

  3. Continuity of employment and transfers of undertakings CONTINUITY OF EMPLOYMENT It is a statutory concept and the courts will look to see whether there has been a break in service. Employment is presumed to have been continuous unless the contrary is shown, although this is not so where there is a succession of employers.

  4. Continuity of employment and transfers of undertakings A period of continuous employment, which begins with the day on which the employee ‘starts work’, is computed in months – and a week which does not count breaks the period of continuous employment.

  5. Continuity of employment and transfers of undertakings Usually when an employee leaves one employer and starts working for another, the period of continuous service is broken. In certain circumstances a person will be regarded as having been employed by the new employer as from the date his or her previous employment commenced.

  6. Continuity of employment and transfers of undertakings There are six main types of case in which employment is deemed to be continuous despite a change of employer: • if there is a transfer of a trade, undertaking, business or part of a business. If the transfer is a relevant transfer for the purposes of the Transfer Regulations 2006, the fact that the employees were dismissed and given redundancy payments at the time of the transfer will not necessarily affect continuity of employment

  7. Continuity of employment and transfers of undertakings • if an Act of Parliament results in one corporate body replacing another as employer • if the employer dies and the employee is then re-employed by the personal representatives or trustees of the deceased • if there is a change in the partners, personal representatives or trustees who employ the individual

  8. Continuity of employment and transfers of undertakings • if the individual is taken into the employment of an associated employer • if the employee is employed by the governors of a school maintained by a local education authority or by the authority itself and he or she is transferred to another school or local education authority.

  9. Continuity of employment and transfers of undertakings TRANSFERS OF UNDERTAKINGS The Transfer of Undertakings (Protection of Employment) Regulations 2006 replaced the 1981 Regulations and implement the Directive 2001/23/EC. The intention of the Directive and the TUPE Regulations is to protect the contract of employment and the employment relationship of employees who are transferred from one employer to another.

  10. Continuity of employment and transfers of undertakings When a transfer takes place, it is as if the employee’s contract of employment was initially agreed with the transferee employer. • All rights contained in the contract of employment, except pension benefits, are transferred, as are all outstanding claims and liabilities of the employer to the employees.

  11. Continuity of employment and transfers of undertakings The TUPE Regulations 2006 The TUPE Regulations apply where the transfer is of an undertaking or an economic entity that retains its identity. • An economic entity is ‘an organised grouping of resources which has the objective of pursuing an economic activity, whether or not that activity is central or ancillary’ (the Süzen test).

  12. Continuity of employment and transfers of undertakings • The Regulations also apply to a service provision change. These are relevant to outsourcing situations and are meant to ensure a wide coverage of the Regulations. • A service provision change takes place when a person (client) first contracts out some part of its activities to a contractor, when such a contract is taken over by another contractor (a so-called second-generation transfer), and when the client takes back the activity in-house from a contractor.

  13. Continuity of employment and transfers of undertakings Who is to be transferred? A transfer shall not operate to terminate any contract of employment of any person employed by the transferor and assigned to the ‘organised grouping of resources or employees that is subject to the relevant transfer’.

  14. Continuity of employment and transfers of undertakings • There is a problem in deciding who is assigned to the part transferred, when only part of an organisation is transferred to a new employer. • A basic working test is to ask whether, if that part of the business had been separately owned before the transfer, the worker would have been employed by the owners of that part or the owners of the remaining part.

  15. Continuity of employment and transfers of undertakings Contract variations The 2006 Regulations give added flexibility in varying the contract of employment, but this is mostly flexibility for employers. The issue is important to many employers. Quite apart from the issue of bringing in a workforce with different terms and conditions, there is often a need to reorganise the business to cope with any such transfers.

  16. Continuity of employment and transfers of undertakings The 2006 Regulations provide that it is not possible to vary a contract of employment if the sole or main reason was the transfer or any other reason that was not an economic, technical or organisational reason (ETO reason) entailing changes in the workforce. The employer and employee are able, therefore, to agree a variation if it is changed for an ETO reason or ‘a reason unconnected to the transfer’.

  17. Continuity of employment and transfers of undertakings Employee choice The original Directive was silent on the subject of whether an individual employee can decide that he or she does not wish to transfer. • The current position is that an employee is not transferred if he or she objects to being transferred. The outcome is that the employee is then in a ‘no man’s land’; he or she has not been transferred, but the transferor cannot be treated as having dismissed the employee.

  18. Continuity of employment and transfers of undertakings Insolvency Measures to deal with insolvency were absent from the original Directive. The main problem was that the obligation for the transferee to take over all the debts of the insolvent organisation's employees, and to transfer all those employees at their current terms and conditions, would act as a disincentive to the 'rescue' of such insolvent enterprises.

  19. Continuity of employment and transfers of undertakings The 2001 Directive excluded any transfers where the transfer is the subject of bankruptcy proceedings with a view to liquidation of the assets of the transferor. Member States are also given the option of excluding transfers of liabilities in other types of insolvency proceedings.

  20. Continuity of employment and transfers of undertakings Those elements which the government would normally be responsible for under its statutory obligations towards the employees of insolvent employers do not transfer. The debts owed to employees by the transferor, to the limits of its statutory obligations, will be guaranteed by the Secretary of State. This includes some arrears of pay, notice periods, holiday pay and any basic award for unfair dismissal compensation. Other debts owed to employees will transfer.

  21. Continuity of employment and transfers of undertakings In addition to this subsidy there is provision for the employer and employee representatives to agree ‘permitted variations’ to their contracts of employment. • Permitted variations are those which are not due to ETO reasons entailing a change in the workforce and are designed to safeguard employment opportunities by ensuring the survival of the undertaking • Note that the phrase ‘employment opportunities’ is used, rather than just ‘employment’. This suggests that the justification for any variations can be argued widely on the basis that the business is rescued or safeguarded, and this will safeguard employment opportunities in the future.

  22. Continuity of employment and transfers of undertakings Information and consultation The Regulations contain the obligations to inform and consult employees. • There is also provision for the notification of employee liability information and a statutory duty for the transferor to pass on to the transferee certain information.

  23. Continuity of employment and transfers of undertakings Public sector ‘Employees in public sector organisations should be treated no less favourably than those in private sector organisations when they are part of an organised grouping of resources that is transferred between employers.’

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