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Ask Auntie - TUPE/Collective Redundancies
It’s been a long time since I’ve had to deal with a TUPE transfer but this year our company is going to be acquiring a business and we’re expecting 30 employees in York to transfer to us as a result of TUPE. We won’t need any employees in York as we’ll be able to service all the work from our existing office in London, so it’s likely that we will need to make the employees in York redundant. I realise that the collective redundancy regime will apply but I remember reading something about employers now being able to do collective redundancy consultation before a TUPE transfer. Can you remind me what the position is, please?
Carrying out redundancies in this situation requires careful planning given the need to comply with both TUPE and collective redundancy regime obligations.
Under TUPE, you have a duty to let the seller of the business know that you are likely to need to make redundancies. Whilst you do not have any duty under TUPE to consult with the seller’s employees, in practice they are likely to want to know more about the proposed redundancies once the seller tells them of your intentions (as it is obliged to do).
In the past, situations like this sometimes led to the seller allowing the buyer to consult with the seller’s staff before the TUPE transfer about the proposed redundancies. This enabled the buyer to work through part of its redundancy timetable while the employees were still employed by the seller, obtaining a financial advantage as a result. However, it was unclear whether a Tribunal would consider such consultation to count towards collective redundancy requirements.
In January 2014, the government changed the relevant legislation and it is now possible for consultation undertaken before a TUPE transfer to count towards collective redundancy requirements, but only if certain conditions are met.
The conditions are that:
- There will be a TUPE transfer (or at least it is likely there will be one).
- The transferee (in this case your company) is proposing to dismiss as redundant 20 or more employees at one establishment within a period of 90 days or less.
- One or more of the employees who are to transfer under TUPE may be affected by the proposed redundancies.
- The transferee elects to consult with representatives of the affected employees who are due to transfer.
- The transferor (the seller here) agrees to allow the transferee (your company) to carry out such consultation.
The final condition is key. Pre-transfer consultation is completely voluntary. Both parties have to agree to it. If there is some doubt as to whether the transfer will go ahead, perhaps there is an uncertain condition precedent to the deal, it is highly unlikely that the seller will allow you access to its employees beforehand.
In your situation, if your company has a good relationship with the seller then it may agree to allow you to consult with its employees about the proposed redundancies before the transfer, possibly at the same time as the seller is carrying out its TUPE obligation to inform (and if necessary consult) employee representatives about the TUPE transfer. However, even if the seller does agree, it is still up to the seller how much it chooses to co-operate with you in terms of providing the information you need and facilitating meetings with the employees and so on.
Given that your company will be liable for any breach of the collective redundancy consultation obligations and given that the seller is likely to want to have some control over your dealings with its employees, it is worth agreeing the practicalities with the seller at the outset and then documenting in writing what you have agreed. The written agreement (most likely this would be part of the main asset purchase agreement, but a separate agreement can also be used) could cover what information and assistance will be provided by the seller, the details of the meetings (for example, how many there will be and where they will take place) and any other key practical points that matter to you, as well as who bears liability in respect of any claims arising from such consultation.
Whilst redundancy dismissals should not take place before the transfer, in many business sales it should be possible to start collective redundancy consultation (and therefore get the clock running on the relevant statutory timeframes) before the TUPE transfer.
In contrast, in outsourcing situations the ability to carry out such consultation will be less common because getting an outgoing service provider to co-operate with an incoming one (usually a competitor) is likely to be much more difficult. For this reason some companies are starting to build into their outsourcing agreements an obligation on service providers to co-operate with successor service providers in this respect.