Case ref: 11.6/Feb 06. TUPE Regulations - general application

Summary of case

Two PCS members, Ms X and Ms Y, were employed in a small Government Agency on a succession of fixed term contracts. The project they were working on was to be transferred to another organisation.

Advice requested

Advice was sought on a number of matters relating to the application of TUPE and whether or not either of the individuals transferred with the work to the new organisation.

Key advice provided by Thompsons

In a comprehensive response, the solicitor provided answers to a series of questions posed by both members. The full response was as follows:

Ms X

"Your member's instructions are set out in briefing notes provided by PCS. I have also been provided with copies of various PCS internal e-mails, as background. 

"I have not seen any copies of your member's contracts of employment, or of job descriptions, but I have done my best to advise on the information available. 

"Ms X is employed by the Agency as Project Manager. As I understand it, this project she is working on consists of a Project Manager, a Development Manager and an Administration Officer. The project is due to close in March 2006. Your member has been employed on a series of fixed term contracts. 

"There is a proposal for a new project, to be based at another organisation, and carrying out some of the same work. This organisation will provide advice to employers on equality issues.

"However, your member estimates that it may be doing only something like 25% of the work done under her current project. There has been mention of your member being TUPE transferred to this organisation, although the position of the Development Officer and Administration Officer has not been made clear. 

"Your member has reservations about transferring to work for the new organisation. Your member has also been offered a post with her current employer, on the same grade. The work will be temporary and your member is concerned that she will have less responsibility and will have to report to a Grade 7.

"I have been asked to address various questions as follows: 

"1. At the end of FTA that has lasted approx 10 years - is this compulsory redundancy situation? 

"The end of a fixed term contract is a dismissal in law. As your member appears to have more than one year's continuous service, she has the same statutory right not unfairly dismissed as a permanent employee would have.

"Assuming that she has at least two years continuous service and the reason for dismissal is redundancy, she is entitled to statutory redundancy pay and any contractual entitlement to redundancy pay. (I have assumed that she is not employed under a Fixed Term Contract signed before 1 October 2002 containing a waiver in relation to her entitlement to a redundancy payment). 

"The right to a redundancy payment does not arise if there is a relevant TUPE transfer. At present, it does not appear that the employer is arguing that this is the case and I am not asked to advise on this issue. (On the information available, my view is that TUPE may not apply as it appears that there will not be an entity which retain its identity after the transfer.) 

"2. Required to give 90 days notice for consultation 

i. What does this entail 

ii. How do we ensure there is proper consultation? 

"The statutory duty to carry out collective consultation is only engaged where the employer is proposing to dismiss as redundant, twenty or more employees as one establishment, within a period of 90 days or less. From the information available, it does not appear that this is the case. 

"3. Does this mean the employer needs to enter into consultation with PCS, as their representative union on 31st December 2005? 

"See reply to 2 above. 

"However, in any claim for unfair dismissal, the Tribunal is required to consider the reasonableness of the dismissal as a whole. The question of whether there has been consultation with the Union, is one factor to be considered in assessing the reasonableness of a dismissal. 

"4. What constitutes suitable alternative employment? 

"An employee will lose her entitlement to a redundancy payment if she refuses the offer of an alternative job, or resigns or gives notice during the trial period if:

  • The job was identical to the old one or, if not identical, was suitable employment in relation to that employee and
  • The refusal of the offer or resignation during the trial period was unreasonable.

"It is for the employer to show both that the job offered was suitable and that the employee's refusal of it, was unreasonable.

"This means that an employer is expected to discuss an offer of alternative employment with the employee concerned since, if this is not done, the employer can only guess at the employee's reasons for refusing it. 

"The issues of suitability and reasonableness are questions of fact to be determined by the Tribunal, taking into account all the circumstances. Tribunals can take into account factors such as:

  • Job content, including status
  • Pay, including fringe benefits
  • Hours
  • Workplace
  • Job prospects

"Tribunals have found that a substantial drop in status, such as a Headmaster who was offered a job as one of a mobile pool of Schoolteachers, can make the offer unsuitable. However, in other case, a Quality Control Technician's refusal to accept alternative work as a Machine Operator, on the grounds that he had originally been employed as a Machine Operator and did not want to take a step backwards in status, was held to be unreasonable. 

"On the information available, my view is that this is very much a borderline case as to whether or not the post offered could be considered suitable, on the basis of status. It appears that your member will have less responsibility, but she will still be on the same grade. 

"The fact that the new post is of a temporary nature, does not necessarily make it unsuitable. Refusal of an offer of a temporary post for two months has been held to be reasonable. However, refusal of an offer of work which was expected to last for twelve to eighteen months had been held to be unreasonable. 

"On the limited information available, I am concerned that your member may struggle to show that the post offered is unsuitable and/or that she reasonably refused it. 

"5. What usually constitutes detrimental or unsuitable alternative employment? 

"Please see the reply to question 4 above. 

"6. Does alternative employment have to be with the same employer, or can they offer employment funded by a different organisation to meet objectives of that organisation? 

"The offer must be made by the employer or by an associated employer. Two employers are associated if one is a company controlled by the other or if both are companies controlled by another employer. (This does not appear to be relevant here.) 

"Therefore, the offer must be by the same employer. However, if the offer is of employment with the same employer, but funded by a different organisation, then this is potentially suitable alternative work. 

"7. Is the employee required to start alternative employment prior to end of existing contract? 

"On the information available, it is not clear when your member's redundancy notice period expires. 

"However, the offer of the new job must be made before the old employment ends and the new job must start, or be due to start, either immediately the old job comes to an end or after an interval of not more than four weeks.

"Therefore, technically, the new job could not start until after your member's notice period has come to an end. However, if the duties clause of her existing contract of employment is suitably widely drafted, then she could be asked to take on some of the duties of the new job before this date. (I would need to see your member's contract of employment to be able to advise further on this point.) 

"8. Is suitable alternative employment subject of negotiation? 

"See the reply to question 4 above. There is no specific statutory provision requiring that negotiation take place, but the employer cannot really be in a position to assess whether or not the employee's refusal is reasonable, unless there is discussion of the employee's concerns. 

"Also, as both sides face a degree of uncertainty with regard to whether or not the Tribunal would decide that there has been an unreasonable refusal of suitable alternative employment, negotiation is in the interests of both sides. 

"9. What happens if individual does not want to accept suitable employment, because it is not the area of work they specialise in or having working knowledge of? On what grounds can they refuse alternative employment? 

"Please see the reply to question 4 above. An unreasonable refusal of suitable alternative employment, means that the employee loses her entitlement to a redundancy payment. 

"10. What happens if, at the end of the four week trial period, the individual is unhappy in the alternative position? 

"If the employee terminates the contract during the trial period, or gives notice during the trial period to terminate it and the contract is then terminated, the employee will be treated as having been dismissed when the original contract came to an end, for the same reason, i.e. redundancy, that the original contract ended. 

"The employee is also treated as having refused the offer of a new job. If the new job is found, by the Tribunal, to have been suitable in relation to the employee and the employee acted unreasonably in leaving it, then she will not be entitled to a redundancy payment. (See the reply to question 4 above)."

Ms Y

"I have been provided with a briefing document on your member's position, together with various e-mails setting out further background. 

"I have not been provided with a copy job description or contract of employment, but have done my best to advise on the information available. 

"In summary, your member is employed by her current employer on an EO Grade (with a temporary promotion to HEO Grade). She works as part of an organisation which appears to do work on equal pay issues.

"This project is due to end in February 2006. The project is staffed by one member of staff employed by the employer (your member) and two members of staff employed by another organisation.

"Your member is on a fixed term contract, which is due to expire in November 2005. She was given notice of redundancy in May 2005. 

"There are proposals to continue the project and I understand that there is a Bill in front of Parliament. The new project is due to start in November 2005 and to run for two years.

"There will be three posts: Project Manager, Development Manager and Administrative Support Officer and all the post holders will be employed by the organisation which employs the other two staff as highlighted in the preceding paragraph. 

"Your member has been told that her contract will be extended to March 2006 and that she will then transfer to the new project and become an employee of the organisation which employs the other two colleagues.

"She us unclear what work she will be doing up until March 2006. She was initially told that she would be made redundant and then later told that she would be slotted into either the Development Manager or Administrative Support post.

"I understand, from the e-mail dated 11th October, that the new organisation may be keen to keep her post as part of the new project.

"I have been asked to advise on the following questions: 

"1. What happens if the entity that was in existence, ends/closes, no longer exists - however there are proposals for another organisation to start a project that will aim to undertake some of the work that the old organisation did. Are all staff eligible to be transferred to the other organisation? 

"The question of whether or not the TUPE Regulations apply, is a notoriously uncertain and difficult one to answer. 

"In essence, there needs to be a stable economic entity, i.e. an organised grouping of persons and as assets enabling (or facilitating) the exercise of an economic activity which pursues a specific objective. 

"The decisive question for establishing the existence of a transfer, is whether the entity in question retains it identity, as indicated, inter-alia, by the fact that its operation is actually continued or resumed. 

"Matters which must be considered include the type of undertaking, whether or not tangible assets are transferred, whether or not the majority of the employees are taken over by the new organisation, the degree of similarity between the activities carried on before and after the transfer and the period, if any, for which they are suspended.

"Even where assets are owned and are required to run the undertaking, the fact that they do not pass, does not preclude a transfer. 

"Therefore, on the limited information available, it appears that it is possible that the TUPE Regulations will apply to this situation. 

"However, if the new organisation is effectively only part of the undertaking that was formerly the project and your member was not employed in that part of the organisation, but was employed in a distinctly separate part, then TUPE may not apply to your member.

"However, from the limited information available, it does not seem that the project your member was engaged on was divided into identifiable parts. 

"2. Is an employee able to receive redundancy payment and then apply for a post in the new organisation: 

"Assuming that TUPE applies, (and your member was not employed in a distinct part of the undertaking which did not transfer) then there is no entitlement to a redundancy payment. The entitlement is to transfer to the new organisation on the same contractual terms and conditions. 

"If TUPE does not apply, then your member is entitled to a redundancy payment, but has no entitlement to a post in the new organisation. She could accept a redundancy payment and apply for a post in the new organisation but she would have no greater rights than any other external candidate. 

"3. What is the situation if the work that is being transferred does not include the work that an individual employee was doing in the "old" organisation. Can they still be transferred and on what terms? 

"If the work your member was doing in the former project could be regarded as a separate entity in itself and did not transfer to the new project, then TUPE would not apply to your member. However, as stated above, this does not appear to be the case.

"I understand that your member's role was Project Finance and Equal Funding Requirements. This appears to be an integral part of the work the project was doing and not a discreet entity in itself. From the limited information available, the new project appears to be carrying out the same function as the project but its staffing is structured in a different way. 

"Therefore, my view is that it is likely that TUPE applies and your member's right is to be transferred to the new employer on her existing contractual terms and conditions. 

"4. If they are being told they will be offered a new post in the new "entity", with a new employer and this job is not what they have done previously, or want to do in the future - if they refuse, do they forfeit their right to redundancy? 

"I have assumed, in answering this question, that TUPE does apply. 

"Your member's employment would transfer on her existing contractual terms and conditions. I have not seen her terms and conditions. The answer to this question would depend on whether or not the new job was within the scope of the duties clause in her existing contract of employment. If it was, then there would be no breach of contract. Your member would, therefore, have no right to a redundancy payment. 

"If the new job was clearly outside the terms of your member's existing contract, then her post would be redundant. In theory, this could be an automatically unfair dismissal, but the new employer would probably have a defence on the basis that the reason for the dismissal was an economic, technical or organisational reason entailing changes in the workforce of the transferee. 

"As in any redundancy situation, the new employer would have a duty to consult with your member and consider whether there were any other suitable posts within the organisation. As explained above, if your member unreasonably refused an offer of a suitable alternative post, then she would lose her right to a redundancy payment. 

"5. On what grounds can an individual refuse to transfer into a new organisation? 

"Technically, an employee can object to becoming employed by the transferee. 

"However, this is effectively an empty right. The effect of such an objection is that the employee is treated as not having been dismissed by the transferor and, consequently, has no right to a redundancy payment or to claim unfair dismissal. Therefore, I would not recommend that your members take this course of action under any circumstances. 

"6. How long does TUPE apply once in a new post with new employer? 

"Again, this is an area where the law is very unclear and confusing. 

"TUPE provides that an employee who is subject to a TUPE transfer is entitled to retain the same contractual terms and conditions. However, this does not mean that the new terms and conditions are set in stone for ever. 

"The employee's terms and conditions can be varied after the transfer, but only if the transfer is not the reason for the variation. It is likely that, where the new employer simply wishes to bring the terms and conditions of the new employee it has inherited under TUPE into line with the terms and conditions of its own employees, then such a variation would be unlawful and ineffective. 

"7. Are pension and future redundancy rights affected? 

"The TUPE Regulations do not apply to Occupational Pension Schemes, but do apply to the benefits of an Occupational Pension Scheme which do not relate to benefits for old age, invalidity or survivors. Case Law has established that this can potentially include the right to early retirement in a redundancy situation, if this is written into the employee's contract of employment. 

"This is likely to mean that your member's Pension Scheme with the Equal Opportunities Commission would be frozen with effect from the date of the transfer. Your member should be offered access to any Pension Scheme operated by the organisation she moves to after the transfer. 

"Your member's contractual right to redundancy pay would be protected, subject to the reply to paragraph 6 above."

Legal department comment

The above comments deal with a number of questions around application of the TUPE regulations which may be relevant when work is being transferred from one organisation to another. The PCS Policy and Research Department at PCS HQ are also on hand to provide advice on TUPE related matters. 

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