This is the first issue of an occasional e-newsletter, under the Fox Williams hrlaw banner, highlighting developments in TUPE for senior executives, HR professionals and others who have to deal with TUPE in practice, whether that be on outsourcing, service provision changes or acquisitions.

Continuing pay differentials after a transfer
If an equal pay claim exists at the date of the transfer, that will be inherited by the buyer under the normal TUPE provisions.  The buyer will also have to deal with those pay  differentials promptly.

But if, to take an example from the recent tribunal case of Buchanan v Skills Development Scotland, employees in the target business have themselves transferred in from different employers, is the position different? Here there was a pay differential between the female claimants and their male comparator.  He initially had the right to contractual pay increases and these had to be honoured.  This in itself did not give rise to an equal pay claim.

However the employer, under no legal obligation, continued to increase the male comparator's pay once his contractual entitlement had ceased, thus maintaining the pay differential.  The tribunal concluded that TUPE was not the cause of the pay differential once his right to contractual pay increases had ceased.

TUPE can therefore operate as a defence to an equal pay claim, but probably only for a limited period.  In the absence of a contractual obligation, the safest option for employers is to freeze the pay of those on better terms. This can cause difficulties if there was a practice of awarding, for example, inflation-linked pay rises.  A failure to continue to do so might give rise to a claim in this case from the comparator.  Short of increasing or levelling up a claimant's salary, it seems an employer in this situation is in an almost impossible position.

Due diligence enquiries on the part of the buyer of a business or an incoming contractor in receipt of employee liability information often reveals obvious differences in the salaries of male and female employees performing the same roles.  One of the first points we encourage clients to investigate is the reason for these differences, as they can indicate potential equal pay problems.

Consultation: a common misconception
A common misconception concerning the information and consultation obligations in TUPE is that consultation must always take place before a transfer.  This isn’t the case.  Usually, it is the buyer of a business that envisages “measures”, such as pension changes or a change of location, which are the trigger point for the consultation obligations in regulation 13.  However, all that the buyer has to do is inform the seller of its “measures”, who in turn informs the affected emplyees.  There is no obligation on the buyer to consult after the transfer has taken place.

The wide scope of the information and consultation obligation, and its effect on a seller, was illustrated recently when a seller was ordered to pay 7 weeks' pay to affected employees for a failure to inform and consult about certain measures that it, the seller, envisaged in connection with the transfer.  These were not matters of any great significance, amounting to the way in which the seller would make payments to staff who worked in the days leading up to the transfer, including a change to their normal payment date.  They were essentially administrative arrangements.  However, they did represent a departure from what would otherwise have occurred, and the tribunal considered that they triggered the seller's obligation to inform and consult.  Originally, the tribunal ordered 13 weeks' pay, the maximum, as a protective award, but this was reduced on appeal to 7 weeks.  The buyer was also held to be liable, under the joint and several liability provisions of regulation 15, for the compensation, even though it had not been at fault.

The decision shows the dangers for buyers (or new service providers, who will usually not have the benefit of indemnity protection).  Even small administrative changes, other than those that are an inevitable consequence of a transfer, will, it seems, trigger the consultation obligations.

White collar TUPE
Solicitors do not enjoy making the legal headlines but because the loss of a client could amount to a service provision change under TUPE, this may become a more regular occurrence.

One firm that won a client contract from another firm faced claims from former solicitors at the outgoing firm, their principal work being for the client. They argued that their employment should have transferred to the new provider under TUPE.

What happened was that there was no immediate cessation of activities for the client following the change of firm.  Run-off work continued to be carried out by the outgoing firm, and that was enough to keep the whole team fully occupied for a number of months.  Nothing actually transferred to the new provider.  New cases were simply allocated to the new provider rather than the outgoing firm, which had no contractual entitlement to be given new work.

Because of this, the EAT concluded that the there was no service provision change.  However, if there had been a handover of existing matters and only a few of the existing files had been retained by the outgoing firm, the ruling almost certainly would have been different.

New service providers seeking to avoid TUPE may be able to utilise this decision to their benefit.  However, leaving run off work with an outgoing provider may not always sit happily with a client that has made a decision to change firms, particularly if this decision was driven in part by concerns over service levels.

Collective agreements
Collective agreements incorporated into contracts have proved to be a difficult area under TUPE.  The old law was that if the collective agreement was incorporated properly into the contact then the buyer of a business was bound by the future effects of that collective agreement, such as salary increases, even if the buyer was unable to influence future negotiations.

Gradually, this problem area is being whittled away.  Recent cases have determined that the buyer is not bound by future changes agreed to the collective agreement or pursuant to the collective agreement, eg future salary increases.  In addition, future legislation that impacts on the collective agreement, in one case in question rendering its performance unlawful, would also come to the benefit of the buyer and allow it to extricate itself from the collective agreement.

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