INFORMATION AND CONSULTATION OBLIGATIONS

Transcription

1 INFORMATION AND CONSULTATION OBLIGATIONS 1. INTRODUCTION 1.1 In a situation where there is a transfer of an undertaking, both the transferor and the transferee will have a duty to inform and possibly to consult with representatives of their employees. The obligations are set out in Regulations 10-11A of the Transfer of Undertakings (Protection of Employment) Regulation 1981 TUPE ). These Regulations implement Article 6 of the Acquired Rights Directive 77/187/EEC ( the ARD ). The development of the duty 1.2 TUPE originally required an employer involved in a transfer to consult with representatives of any independent trade union recognised by him to any extent for the purposes of collective bargaining. Therefore, if an employer did not recognise an independent trade union, there was no obligation to inform or consult with appropriate representatives in such circumstances. This was found by the ECJ to be contrary to Article 6 of the ARD in the case of Commission v U.K. Case No C- 382/92 [1994] IRLR 392. The ECJ found that if an employer refused to recognise an independent trade union, then U.K. legislation did not provide for an alternative mechanism of informing and consulting with appropriate representatives. 1.3 As a consequence of this decision, the collective redundancies and Transfer of Undertakings (Protection of Employment) (amendment) Regulations 1995 ( the 1995 Regulations ) extended the obligation to inform and consult to situations where there was no recognised trade union. However, the 1995 Regulations was strongly criticised by trade unions, who argued that the changes to the consultation requirements still did not fully comply with EC law. In particular, the fact that an employer was able to choose which type of representative it wished to inform and consult with was criticised. The option to choose representatives effectively meant that employers could by-pass existing procedures for consulting with representatives from recognised trade unions in favour of consulting with employee representatives who had been elected specifically in relation to a proposed transfer. 1.4 As a consequence of the criticisms of the 1995 Regulations, the current Labour Government introduced the Collective Redundancies and Transfer of Undertakings (Protection of Employment) (Amendment) Regulations 1999 ( the 1999 Regulations ). The main implications of the 1999 Regulations were to remove an employer s option of choosing between trade union representatives and elected representatives in the event that it recognised and independent trade union. In addition, the 1999 Regulations introduced specific requirements for the election of representatives. Other duties/developments 1.5 This paper concentrates on information and consultation obligations under TUPE, as amended by the 1999 Regulations. It does not look at the implications of the Trans- National Information and Consultation of Employees Regulations 1999, which have implemented the European Works Councils Directives (94/45/EC and 97/74/EC). However, a transferor or a transferee which is an undertaking with at least 1,000 employees within the EU and at least 150 employees in each of at least 2 EU member states will be obliged to establish European Works Councils ( EWCs ) with a view to informing and consulting with such EWCs on almost any aspect of their 1

2 business that may affect employees (including the transfer of all or part of an undertaking). 1.6 A further point to note for future reference is the draft EU Directive proposed by the European Commission in November 1998 which would require ongoing employee information and consultation procedures on a range of business issues, including redundancies and transfers. If implemented, this directive would lead to the end of the U.K. preference for the election of temporary employee representatives for the purposes of fulfilling EU consultation requirements. 2. THE DUTY TO INFORM Information required 2.1 Obligations to provide information fall on a transferor and a transferee under Regulation 10 of TUPE. The principle obligation is set out in Regulation 10(2). This requires the disclosure of information by employers to appropriate representatives so as to enable constructive consultation if necessary. The information that is required must include:- the fact that the transfer is to take place; approximately when it is to take place; the reasons for it; the legal, economic and social implications for any affected employees; the measures that the employer envisages it will take in relation to affected employees in connection with the transfer (or if no measures are to be taken then that should be disclosed); and if the employer is the transferor, it must give information concerning measures the transferee envisages that it will take in relation to those people who will become its employees by virtue of the transfer. 2.2 Unlike the requirements of Section 188 of the Trade Union and Labour Relations (Consolidation) Act 1992 ( TULR(C)A ) concerning the provision of information in writing to appropriate representatives concerning collective redundancies, there is no specific requirement that the information required under Regulation 10(2) be given in writing. However, as Regulations 10(4) require such information to be delivered or posted, this must be implied. This was a view taken by the then industrial tribunal in its decision in NALGO v British Waterways Board COIT 11548/88/LN/A. Although there is no requirement to disclose detailed documentation in support of the information required under Regulation 10(2), supporting documentation ought to be provided in the event that consultation is required and would not be meaningful without it. Affected employees 2.3 Regulation 10(1) specifies that affected employees are those people employed by either the transferor or the transferee who may be affected either by the transfer itself or by any measures taken in connection with it. Affected employees may not necessarily be employed in the undertaking (or part of it) that is to be transferred, but may be as much affected by the transfer as those whose employer does change as a result of it. Therefore, the transferor will be obliged to provide information to not 2

3 2.4 only employees who will transfer, but also to those who will not transfer, but may be affected by the transfer taking place. Equally, the transferee will be under an obligation to provide information to representatives of its own employees before the transfer if they are likely to be affected by the transfer or by any measures that the transferee envisages it will take. Timing 2.5 Again, unlike the specific requirements of Section 188 of TULRCA in relation to timing, there is no specific deadline before any transfer takes place by when information is to be provided to appropriate representatives as outlined above. The obligation under Regulation 10(2) is to provide information long enough before a transfer to enable consultation to take place. 2.6 There has been some debate on the issue of the timing of the provision of such information, particularly in view of the requirement under Regulation 10(2)(a) that appropriate representatives must be given information about the fact that the relevant transfer is to take place. Obviously, in many cases the parties to a transfer will be negotiating relevant terms until fairly shortly before it actually takes place (with the very real possibility that such negotiations come nothing and the proposed transfer is aborted). 2.7 In the case of NATTKE -v- Rank Leisure Ltd COIT 1388/134 the then Industrial Tribunal concluded that the information obligation was not triggered until the actual transfer had more or less taken place. However, this interpretation means that the regulations relating to consultation are almost meaningless. This loophole was eventually plugged by the EAT in the case of Banking Insurance and Finance Union v Barclays Bank PLC [1987] ICR 495, which held that the duty to inform is triggered where there is a proposed or planned transfer, even if it eventually does not take place. Information to be provided to transferee 2.8 In addition to the obligation of the transferee to provide information to appropriate representatives of its own employees who may be affected by the transfer, the transferee may also have a further duty to provide information. This arises under Regulation 10(3). The transferee is required to give the transferor sufficient information so as to enable the transferor to comply with its obligation under Regulation 10(2) to inform appropriate representatives of its affected employees about measures that the transferee envisages it will take in relation to them after they transfer. The timing of the provision of such information by the transferee must be sufficient to enable the transferor to comply with this obligation. 3. THE DUTY TO CONSULT 3.1 While the duty to provide information applies to every transfer, the duty to consult only arises when measures are envisaged by the transferor or the transferee. Regulation 10(5) specifies that if an employer envisages it will be taking measures in connection with the transfer, it must consult with appropriate representatives of its own employees who will be affected by such measures. Consultation must be undertaken with a view to seeking their agreement to the measures to be taken. Consultation with whom? 3.2 The transferor s obligation to consult will be with appropriate representatives of its own employees in relation to whom it envisages it will be taking measures either before or after the transfer takes place. The transferor is not required to consult with 3

4 3.3 representatives of employees who will be transferring in the event that it is the transferee which is proposing to take measures in relation to them after the transfer. As outlined above, its only obligation in relation to such employees will be to provide information to their appropriate representatives concerning measures that the transferee envisages it will take. 3.4 This obviously creates a void in terms of consultation with appropriate representatives of employees who will transfer and will be affected by measures envisaged by the transferee. Although the transferee will be obliged to consult with appropriate representatives of such employees once a transfer has taken place, Regulation 10(5) does not require them to consult with such representatives prior to the transfer taking place. 3.5 Article 6 of the ARD does not necessarily make such a distinction. It merely provides that where a transferor or transferee envisages measures in relation to his employees, he shall consult the representatives of such employees. Therefore, if the transferor has been provided with information concerning measures that the transferee envisages it will take after the transfer, the transferor could be deemed to envisage those measures and therefore be obliged to consult with appropriate representatives of the employees who will transfer about such measures. This construction is, however, somewhat strained. 3.6 Practically speaking, a transferor may wish to invite a transferee to attend meetings with appropriate representatives of transferring employees before the transfer takes place in order to allow consultation about measures it envisages implementing after the transfer. Even if a transferor does not wish to extend such an invitation to the transferee, the industrial relations benefits of the transferor itself consulting with appropriate representatives concerning measures that the transferee is envisaging are considerable. This is subject, however, to the implications of the decision of the Court of Appeal in the case of University of Oxford v Humphreys and the Associated Examining Board [2000] IRLR 183 (see section 7 below). Measures 3.7 Under Regulation 10(5) there is only a duty to consult where an employer envisages he will take measures. If no measures are proposed, no consultation need take place. This was the decision of the then industrial tribunal in the case of NATTKE v Rank Leisure Ltd and was approved by the High Court in the case of The Institution of Professional Civil Servants - Secretary of State for Defence [1987] IRLR The question therefore arises as to what is meant by the word measures. No definition is given in TUPE. However, measures were described in the abovementioned case of Institution of Professional Civil Servants -v- Secretary of State for Defence as being of the widest import. However, the court went on to qualify this by finding that they must relate to definite plans, which are not merely a possibility. They must also be related to the transfer, which would therefore exclude actions resulting from external factors. The court went on to state that the obligation to consult relates only to the subject matter of the proposed measures, even though the information that is required to be provided under Regulation 10(2) is wider than that. While appropriate representatives may wish to consult about matters other than the proposed measures, there is no legal obligation under Regulation 10(5) on the employer to do so. Nor is there an obligation on the employer to consult with appropriate representatives about the fact that the transfer is to take place or concerning the sufficiency of the reasons for it. This was the conclusion of the court in the above-mentioned case and is also borne out by the language of Regulation 10. 4

5 Purpose of consultation 3.9 Under Regulation 10(5) consultation must be undertaken by an employer with a view to seeking their [the appropriate representatives] agreement to measures to be taken. This does not mean that agreement must be reached. Regulation 10(6) clarifies to an extent the consultation process. It requires that during consultations the employer must consider representations made by appropriate representatives and reply to those representations. If the employer rejects any representations, it must state its reasons for doing so. The consultation obligations under TUPE are less prescriptive than those set out in Section 188 TULR(C)A concerning collective redundancies. Under Section 188, the requirement is that consultation should be undertaken with a view to reaching agreement with the appropriate representative and must include discussion about ways of avoiding dismissals, reducing the number of employees to be dismissed and mitigating the consequences of the dismissal. 4. APPROPRIATE REPRESENTATIVES Who are they? 4.1 Employers are obliged to inform and, in the circumstances outlined above, consult with appropriate representatives of their own employees who may be affected by the transfer or by the measures they will take in connection with it. The term appropriate representatives is defined in Regulation 10(2A). Appropriate representatives are representatives of an independent trade union which is recognised by the employer as far as its affected employees are concerned. Where affected employees are not covered by a trade union recognition agreement, the employer can choose to inform and consult with either:- employees who have been appointed or elected otherwise than for the specific purposes of TUPE by the affected employees but who, given the purpose and method of their appointment or election, have the authority from affected employees to receive information and to be consulted on their behalf; or employees elected by the affected employees for the specific purpose of being given information or being consulted by the employer under TUPE in an election satisfying the requirements of Regulation 10A. 4.2 Employers therefore no longer have the option of choosing whether or not to consult with representatives of a recognised trade union. The only way to avoid this requirement would be to derecognise the union, which, in view of the changes to collective bargaining processes that have just been implemented under the Employment Relations Act 1999 is not a step to be taken lightly. The employer will now only have a choice of appropriate representatives if no union is recognised in respect of affected employees, but such employees are already covered by some elected representatives (for example for consultation in relation to pensions, health and safety, redundancies or under a works council agreement). In such circumstances, the employer can choose between informing and consulting with such representatives or with employees who have been elected by the affected employees for the specific purpose of the requirements of TUPE. Elections 4.3 Where appropriate representatives are to be elected specifically for the purposes of informing and consulting under TUPE, Regulation 10A sets out specific requirements concerning the election of such representatives. These can be summarised as follows:- 5

6 an employer must make such arrangements as are reasonably practicable to ensure that the election is fair; an employer may determine the classes of employees for whom representatives are to be elected, the number of representatives to be elected and their terms of office; candidates for election as employee representatives must be employees affected by the transfer and no affected employee may be unreasonably excluded from standing for election; all affected employees on the date of the election are entitled to vote for appropriate representatives; affected employees may vote for as many candidates as there are representatives to be elected to represent them; as far as reasonably practicable, an employer must ensure that affected employees can vote in secret and that votes are accurately counted; and if a representative, once elected, ceases to act as such, a further election must be held to appoint a replacement where employees would otherwise be unrepresented. 4.4 Under Regulation 10(8), where an employer has invited the affected employees to elect representatives and the invitation was issued long enough before the time when the employer is required to give information under Regulation 10(2) to allow them to elect representatives by them, the employer must provide such information as soon as reasonably practicable after the election of the representatives. However, if after being invited to do so, affected employees fail to elect representatives within a reasonable time, an employer must give to each affected employee the information that they would otherwise give to the appropriate representatives (Regulation 10(8A). Protection of appropriate representatives 4.5 Appropriate representatives are also afforded various protections under TUPE. In particular, the employer must allow appropriate representatives access to the affected employees and must provide such accommodation and facilities as may be appropriate (Regulation 10(6A)). 4.6 In addition to the specific requirement of Regulation 10(6A), affected employees are afforded statutory protection in respect of automatic unfair dismissal and victimisation for acting in their capacity as an appropriate representative or taking part in an election of appropriate representatives under Section 47 and 103 of the Employment Rights Act 1996 ( the ERA ). Appropriate representatives are also entitled to time off work, with pay, in order to train for and undertake their duties as appropriate representatives, in the same way as trade union officials (Sections 61-3 of the ERA). 5. CONSEQUENCES OF FAILURE TO COMPLY Complaints to Employment Tribunal 5.1 In the event that a transferor or transferee fails to comply with its obligations to inform and (where appropriate) consult with appropriate representatives of employees affected by a transfer, affected employees or their representatives may complain to an employment tribunal concerning such failure. The complaint cannot only concern 6

7 a failure to provide information or to consult under Regulations 10(2) and 10(5), it can also arise in circumstances where an employer has not complied with the requirements concerning the election of appropriate representatives. 5.2 Regulation 11(1) clarifies the circumstances in which complaints may be presented to an employment tribunal and by whom: complaints relating to the election of appropriate representatives may be made by any affected employee; complaints relating to appropriate representatives may be made by the representative to whom the failure relates; complaints relating to trade union representatives may be made by the trade union; and, finally, any other complaints may be made by the affected employee concerned. 5.3 There is no remedy for an affected employee to complain that an appropriate representative is not performing properly. The right to bring a complaint is confined to complaints against employers in respect of failure to comply with their duties under Regulations 10 or 10A. Special circumstances 5.4 If a complaint is made to an employment tribunal about a breach of Regulations 10 or 10A, there may be a defence for an employer if it can show that there were special circumstances that rendered it not reasonably practicable for it to perform the duty and that it took all such steps towards its performance as were reasonably practicable in those circumstances (Regulation 11(2)). The Regulations do not define the meaning of special circumstances. Until recently, guidance on the meaning of this term has had to be sought from case law on the meaning of the same term in Section 188(7) of TULR(C)A. In the case of Clarks of Hove Ltd v Baker s Union [1978] IRLR 366, the Court of Appeal found that the circumstances must be special in the sense of being something unforeseen or unexpected (i.e. something out of the ordinary run of.commercial or financial events ). The employer must also, however, show that it was not reasonably practicable for him to comply or fully comply with his obligations because of those circumstances. The EAT decided in the case of the Union of Construction, Allied Trades and Technicians -v- H Rooke and Son Ltd [1978] IRLR 204 that this must be decided by an objective assessment of the situation. 5.5 The recent case of Kerry Foods Ltd -v- Creber [2000] IRLR 10 concerned receivers of a company who dismissed its staff within 7 days of appointment and then transferred the business to Kerry Foods. The EAT criticised the receivers for failing to comply with an obligation to consult with appropriate representatives under TUPE, holding that consultation had been reasonably practicable. The EAT commented that when a receiver is appointed with a view to a sale of a business, if possible, the obligation to consult arises on his appointment however many employees might be involved. It stated that it was of cardinal importance that the receivers consulted the staff at the earliest opportunity. If consultation had been undertaken, for example, the receivers may have found that the staff would have been prepared to forego their wages for a brief period to keep production running and, in the longer term, the staff may have had valid considerations in determining the choice of the purchaser. The appointment of receivers does not appear, therefore, to amount to a special circumstance. 5.6 In a case reported in the Financial Times on 26 th June 1999, the employment tribunal held that the requirements to inform and consult under TUPE and the ARD are overridden by the Listing Rules. It appears that the tribunal took the view that that the need to comply with specific requirements in relation to public announcements of price sensitive information under the Listing Rules was an example of special 7

8 circumstances excusing a failure to consult in good time. However, it is not clear whether the Tribunal considered Stock Exchange Rule 9.5, which allows the disclosure of price sensitive information by an employer to appropriate representatives. This is also contrary to the October 1999 DTI guidance on redundancy consultation provisions. This states that Stock Exchange Rules do not preclude employee representatives being informed and consulted in advance where collective redundancies are planned in conjunction with a take-over. It would also therefore appear that price sensitivity is not a special circumstance entitling an employer to by-pass requirements to inform and consult under TUPE. Joinder of transferee 5.7 In the event that there is a complaint that a transferor has failed to comply with its obligation to inform appropriate representatives of its affected employees about measures that are envisaged by the transferee, it is a defence for the transferor to say that the information was not provided by the transferee. However, notice must be given by the transferor to the transferee if such a complaint is made. The transferee will then be liable under Regulation 11(3). This was the subject of a recent unreported decision of the Liverpool employment tribunal in the case of Unison -v- P B Kennedy and Dunkin Ltd (1) Unicorn Consultancy Services Ltd (2) (October 21 st 1999). The case is briefly described in the ELA briefing (volume 7 number 2, January 2000). The tribunal appears to have decided that the right to bring a complaint in the employment tribunal is for a failure on the part of the transferor to provide information to affected employees of measures envisaged by the transferee. A complaint cannot be made about a failure to consult on the part of the transferor about such measures. Authority of representatives 5.8 Regulation 11(2A) specifies that if there is a complaint under Regulation 11(1) and the question arises as to whether or not an employee representative is an appropriate representative for the purposes of Regulation 10, the employer must show that the representative had the necessary authority to represent the affected employees. If the complaint relates to a failure relating to the election of appropriate representatives, then the employer must show that the requirements in Regulation 10A concerning the election of such representatives have been satisfied. 6. REMEDIES 6.1 The primary remedy in the event that a complaint is made to an employment tribunal under Regulation 11 is a declaration. In addition, however, the tribunal may order that the employer pays appropriate compensation to such affected employees as it may specify. Appropriate compensation is now limited to 13 weeks pay for each affected employee. The level of the award must be what the tribunal considers is just and equitable having regard to the seriousness of the failure of the employer to comply with his duty. This award may be made in addition to payments made in lieu of notice and other contractual payments or awards that may be made to an affected employee by an employment tribunal (for example as compensation for unfair dismissal). 6.2 In the event that an employment tribunal makes a declaration to the effect that an employer is under an obligation to inform or consult under TUPE and the employer still fails to do so, a further complaint may be made to the tribunal concerning that failure. If the tribunal finds such a complaint well founded, it may order the employer to pay the complainant the amount of compensation which it finds is due to him (Regulation 11(5)). 8

9 6.3 Complaints under Regulations 11(1) and (5) must be presented to an employment tribunal before the end of the period of 3 months beginning with the date on which the relevant transfer is completed (in the case of complaint under Regulation 11(1)) or the date of the tribunal s previous declaration (in the case of a complaint under Regulation 11(5)). Tribunals have a discretion to extend this time limit in cases where they are satisfied that it was not reasonably practicable for a complaint to be presented before the end of the relevant 3 month period. 7. PRACTICAL CONSIDERATIONS 7.1 Based on the assumption that a situation has arisen which will result in a relevant transfer for the purposes of TUPE, there are a number of practical implications for employers of the duties to inform and consult. As has been well documented, the obligations, and therefore the practicalities, arise not only in situations where there is a traditional transfer of business and assets, but also when there is a contracting out of services or a change in the provider of such contracted out services. Timing 7.2 It is of key importance that, as soon as a possible transfer situation is identified, sufficient time is allowed to ensure that the transferor and transferee are in a position to comply with their information and consultation obligations. If the transfer is particularly sensitive, it is recommended that there is a gap between exchange of contracts and completion in order to allow for such compliance. As a rule of thumb, the amount of time that will be required for such compliance must be sufficient to allow for meaningful consultation and dialogue with appropriate representatives. This means that sufficient time must be allowed to enable the appropriate representatives to:- digest and understand information that is provided to them concerning the transfer; discuss this information with the affected employees whom they represent and to formulate representations that such employees may wish to make to the employer about any measures that it may envisage; make representations on behalf of the affected employees about measures that are envisaged; and discuss responses to those representations from the employer with the affected employees and possibly make further representations as a result to the employer. In order for consultations to be meaningful, it is recommended that sufficient time is allowed for there to be at least 2 meetings between the employer and the appropriate representatives. 7.3 If appropriate representatives need to be elected, sufficient time will also need to be allowed to set up and run the elections in accordance with the requirements of Regulation 10A. Overall, however, the scale and the complexity of the transfer is likely to be the major determining factor of the time that will be required to ensure compliance with the information and consultation requirements of TUPE. Identify affected employees and appropriate representatives 7.4 One of the factors in determining the time that will be required to ensure compliance with these obligations is the identity of the affected employees and, therefore, of the appropriate representatives. It should be noted that affected employees will not only 9

10 be those who will actually transfer, but also those who are employed by both the transferor and the transferee in other areas of their businesses who may not transfer but whose activities, responsibilities or working arrangements will be influenced by the transfer. 7.5 Once affected employees have been identified, the employer will be in a position to identify whether or not it needs to arrange an election of appropriate representatives. Obviously, if the affected employees are covered by a recognised trade union or another appropriate representative body, elections may not be required. However, if all (or some) of the affected employees do not have the benefit of such representation, they will need to be given the opportunity to elect appropriate representatives. Election of appropriate representatives 7.6 As outlined in paragraph 4.3 above, there are now specific requirements relating to the election of appropriate representatives (Regulation 10A). Employees have the right to bring a complaint against an employer if they believe there has been a failure relating to the election of employee representatives. It is therefore recommended that an employer ensures that there are adequate written records of the election process. Such records will include correspondence with the affected employees inviting nominations, explaining the reasons why elections are required and what the process is and advising them of the outcome. If possible, the ballot should also be secret. Therefore, it is recommended that individual ballot papers and correspondence relating to the election process are kept for at least 3 months after the transfer has taken place (this being the time limit within which complaints to an employment tribunal about a failure in the election process must be made). Information to be provided 7.7 Information must be provided by an employer to appropriate representatives, in accordance with Regulation 10(2), long enough before the transfer to enable meaningful consultation to take place if it is required. This therefore means that the transferor and the transferee need to identify any measures that they will be taking in connection with the transfer at an early stage in the process. 7.8 In order to ensure that the transferor complies with its obligations to provide sufficient information, the transferor should write to the transferee asking for details of any measures the transferee envisages taking on or after the transfer in relation to the transferring employees. The transferee must then identify in sufficient detail the measures (if any) it envisages. This therefore highlights the importance of the transferee undertaking a sufficient due diligence process in relation to the 7.9 transferring employees in order to assess what, if any, measures it may need to take. Consultation 7.10 If an employer is envisaging taking measures, it will need to undertake consultation with the appropriate representatives with a view to seeking their agreement to those measures. There is no obligation for an agreement to be reached. However, the employer must consider any representations that are made by the appropriate representatives and reply to those representations. If the employer rejects any representations, it must give its reasons for doing so. In order to defend any claim that may be made that there has been a failure to consult, the employer should ensure that written records are kept of the consultation process, including (in particular) details of the employer s responses to any representations that may be made and the reasons given for rejecting any of them. 10

11 7.11 There is some debate concerning whether or not it is advisable either to allow the transferee to consult with appropriate representatives of transferring employees before the transfer (or for the transferor to do so) about measures that the transferee envisages it will take in relation to transferring employees. From an industrial relations perspective, there are certainly benefits in doing so, although there is no specific legal requirement. However, the recent decision of the Court of Appeal in the University of Oxford v Humphreys and the Associated Examining Board (see above) means that the transferor could open up a can of worms if it takes this approach Mr. Humphreys objected to the transfer of his employment from the University of Oxford to the Associated Examining Board on the basis that the transfer would involve a significant change in his working conditions to his detriment. When the transfer took place, Mr. Humphreys successfully claimed that he had been constructively dismissed by the University. The Court of Appeal concluded that where a transfer of an undertaking will involve a substantial and detrimental change to an employee s terms and conditions of employment, the employee is entitled to treat his contract as terminated by the employer and to seek compensation. In such circumstances, the employee will have objected to the transfer under Regulations 5(4A) and 5(5) and therefore the rights and liabilities under his contact do not pass to the transferee under TUPE. Any action for breach of contract, and therefore constructive dismissal, will rest with the transferor Therefore, there is a risk that, by encouraging consultation about measures that the transferee envisages, the transferor may open itself up to such claims. This has obvious implications as far as the negotiation of the terms of a transfer are concerned. The transferor will need to do all it can to try and ensure that the transferee honours existing terms and conditions of employment of transferring employees and, if possible, accepts liability for any claims that may be brought against the transferor as a result of any measures it may envisage. Negotiations of the terms of a transfer 7.14 In negotiating the terms of the transfer, the transferor and the transferee will be keen to ensure that they minimise risks of liability resulting from each other s actions before and after the transfer. Therefore, it is recommended that there should be mirror indemnities in a transfer agreement whereby the transferor will agree to indemnify the transferee in relation to any failures to comply with Regulations 10 to 11A and vice versa This is particularly so in view of the decision of the EAT in the case of Kerry Foods Ltd v Creber and others (see above). In this case, the EAT concluded that liability for a transferor s failure to consult is a liability which passes across to the transferee under Regulation 5(2). It went on to comment that the duty to consult is a right which arises from the individual contracts between each worker and his employer The transferor may also wish to seek an indemnity from a transferee if the transferee is envisaging measures in relation to possible claims for constructive dismissal that may be brought by employees who would potentially transfer, but who object to the transfer on the basis that the transfer will involve a substantial and detrimental change in their terms and conditions of employment A final practical point on this issue relates to the negotiation of outsourcing arrangements. The transferor and transferee (i.e. the new contractor) will be obliged to inform and, possibly, consult with appropriate representatives of employees who are affected by the transfer. In the case of a new contractor, affected employees are 11

12 likely to include existing employees who will be taking on additional duties as a result of the outsourcing arrangements. In circumstances where there is a change in contractor, there is unlikely to be a direct contractual relationship between the first and second generation contractors. It is therefore important that the original transferor ensures that the original contractor and any subsequent contractors are obliged to provide information to subsequent contractors and to comply with their obligations to inform and consult with affected employees under TUPE. 8. CONCLUSIONS 8.1 Information and consultation obligations under TUPE have undergone a number of changes over the years in order to bring them into line with the requirements of the ARD. However, as highlighted in the article by Mark Hall and Paul Edwards in the Industrial Law Journal (Volume 48 No 4), entitled Reforming the Statutory Redundancy Consultation Procedure, these obligations form part of a range of ad hoc, issue-specific employee representation mechanisms which now feature in U.K. law. It is questionable whether this approach is efficient and cost effective. 8.2 As indicated above, the European Commission proposed a directive in November 1998 on national information and consultation procedures. This is aimed specifically at replacing such ad hoc consultation arrangements with on-going mechanisms to promote effective consultation. The Commission argued that the absence of a general framework for information and consultation nationally results in the provisions of the [collective redundancies and transfer of undertakings] directives having a limited impact. The preventive approach on which they are based is difficult to implement in the context of information and consultation procedures that are isolated, fragmented and limited to cases of imminent collective redundancies and transfers of undertakings, and would be consolidated by the definition of more general and permanent information and consultation procedures (European Commission consultation document, quoted in European Works Councils Bulletin 10 (July/August 1997), page 5). 8.3 The U.K. Government opposes such an extension of consultation requirements and legislation if any, is unlikely in the near future. However, the expanding range of matters on which consultation with elected employee representatives is required may lead employers to conclude that it is more cost effective and efficient to deal with such issues via permanent consultative bodies. However, if employers conclude that they do not wish to set up permanent consultative bodies it is at the very least recommended that they establish set procedures for electing representatives in such circumstances. Mark Hunt Partner, Employment Department DISCLAIMER: This booklet does not contain legal advice or provide a thorough and complete analysis of the law, and no liability is accepted in connection with it. Some provisions of the law are not covered. The purpose of this booklet is to provide a basic summary of selected main provisions and their effects and to offer some general practical guidance for the setting up, operation and termination of agency relationships. Specific legal advice should be taken in relation to the facts of any given case. 12