Employment Update February 2009: TUPE

19 February 2009

Employment Group

No duty to consult post-transfer

In the recent case of UCATT v Amicus, TGWU & Glasgow City Council the EAT looked at the extent of the duty to consult with affected employees about a TUPE transfer.

TUPE Reg. 13 requires ‘the employer’ (which could be either the transferor or the transferee) to inform ‘affected employees’ of certain matters including any ‘measures’ envisaged in relation to those employees. Such information must be given ‘long enough before a relevant transfer’ to enable consultation to take place. In most cases, the affected employees will all be employees of the transferor. However, there is an obligation on the transferee (set out in Reg. 13(4)) to give the transferor such information (regarding post-transfer employment), as it will enable the transferor to carry out its duty to inform.

In this case, the claimant employees argued that there must also be a duty on the transferee to consult. Furthermore, that duty should not be restricted to a pre-transfer timetable, in contrast to the transferor’s duty, which clearly was.

The employment tribunal, and now the EAT, disagree.

Reg. 13 only applies pre-transfer. At that time the transferee is required to supply information to the transferor, but is only required to consult with any of its own employees who may be ‘affected’ by the transfer, not with the transferor’s employees, even though they will become employees of the transferee as a result of the transfer. Nor does it require the transferee to consult on post-transfer measures once the transfer has taken place. This is simply because TUPE does not contain any such requirement.

Points to note –

  • The judgment in this case fills a gap in the wording of TUPE Reg.13. It confirms that the transferee has only a limited obligation to employees transferring from the transferor - to provide pre-transfer information to the transferor.

  • The EAT’s reasoning was that there are other statutory requirements that deal with employee consultation, particularly where redundancies are contemplated, and these would come into play once the transfer had taken effect.

  • The EAT also argued that it was right that TUPE should not contain any provision for post-transfer consultation between the transferee and its new (recently transferred from the transferor) employees. The central provision of TUPE is that employees should transfer on the same terms and conditions. So, post-transfer, it was not possible to negotiate any change in contract terms as they would automatically be void as being ‘transfer-related’. In fact, it may be possible to introduce ‘measures’ which are not changes in contract terms but great care needs to be taken before any attempt is made to harmonise employee contract terms post-transfer. Please ask us if further advice is required.

What happens to a discretionary bonus scheme on a TUPE transfer?

Small and ors v Boots concerned employees who had been TUPE-transferred over from Boots (which had a discretionary bonus scheme) to Unipart (which did not) and who had then been transferred back to Boots three years later.

The EAT had first to consider whether the fact that a bonus scheme was expressed to be 'discretionary' was determinative of the issue as to whether it was a contractual entitlement or not. The EAT held that it was not.

It also decided that the employment tribunal in this case had failed to look at the employer's 'course of dealings' over the years in relation to payment of bonus, to decide whether it was contractual or not. These issues were remitted to the tribunal to reconsider.

If contractual, the obligation to pay such bonuses might have passed automatically from Boots to Unipart on the first TUPE transfer.

However, the EAT confirmed that, if it transpired that the obligation to pay bonus had not transferred to Unipart under TUPE, the employees had not been entitled to bonus while working for Unipart.  Therefore they could not rely on TUPE to claim bonus from Boots on their return to that employer until they had clocked up enough relevant service with Boots to be entitled to it again.

Points to note –

  • Particularly when economic times are hard, employers should note that they must take care over the wording of any bonus scheme documentation. First, they should consider whether the wording makes it a contractual obligation on them to pay bonus.

  • Merely labelling the right to bonus as ‘discretionary’ may not allow them to simply not pay bonus at all. The wording must make it clear what precisely it is that the employer has discretion over – to pay bonus at all? The method of calculation of the bonus? The threshold which may trigger entitlement to bonus in any one year? We can help you draft appropriate wording.

  • Whatever the documentation says, employees may still have a claim if bonus has, as a matter of fact, been paid consistently and at a consistent rate over a period of years.

  • The issue of whether the right to bonus was a contractual right or not was of particular significance in this case. If it was contractual, the right passed under TUPE. These questions have been remitted for the employment tribunal to decide. However, matters will not stop there. If there was a contractual right AND it was possible for Unipart to apply the terms of the Boots bonus scheme, then the tribunal could deal with the claim as an unlawful deduction from wages. However, if the Boots scheme was impossible for Unipart to apply, then the employees would only be entitled under TUPE to a ‘substantially equivalent scheme’ and would have to bring their claim in the County Court as a breach of contract claim for unquantified bonus (as to which, see below).