Information and consultation at work: current obligations with business transfers

Section 3 of the Personnel Today Management Resources one stop guide on information and consultation at work. Other sections.

The European Acquired Rights Directive protects the rights of employees on the transfer of a business or part of it, or where a service or function is outsourced to a service provider. It was implemented in the UK by the Transfer of Undertakings (Protection of Employment) Regulations 1981 (TUPE).

Before the introduction of the directive, the purchaser of a business was under no general obligation in relation to the rights of employees in the seller's business. This led to uncertainty for the employees of transferring companies and, in some cases, exposed them to the risk of large-scale unemployment.

One of the purposes of the directive was to eliminate the uncertainty for employees and, in a time of great commercial growth and activity, to provide them with some protection. The introduction of the directive and of TUPE clearly heralded a significant advance for employee rights.

When TUPE applies, the purchaser effectively steps into the shoes of the seller. Most rights and obligations in relation to the employees are transferred to the purchaser of the business. Even prior to the transfer of the business, those employees affected by it are given significant information and consultation rights by TUPE. Long enough before the transfer takes place, employers are required to inform and consult the appropriate representatives of those employees who are affected by the transfer.

Who are appropriate representatives?

TUPE states that where the employer has recognised a trade union in relation to any of the affected employees, the employer must consult the union. If employees are not within a class of employees covered by a trade union recognition arrangement, the appropriate employee representatives will be either representatives elected by the employees themselves for the purpose of the TUPE transfer process or may be an existing body of representatives with a more permanent remit. Such a body would need to have authority from the employees to receive the TUPE information and engage in the TUPE consultation. This authority need not be express - it could be implied from the purposes for which, and the method by which, the representatives were appointed.

Often, it will only be the seller's employees who are likely to be affected by the transfer - perhaps even including those outside the business being transferred (for example, as a result of work re-allocation). However, if there is a real possibility that the purchaser's employees will also be affected by the transfer, or by measures taken in connection with it, the purchaser must also provide specified information to and consult with representatives of its employees or a recognised union.

It is not necessary for there to be an actual transfer for the information provision/ consultation obligation to be enforceable; the fact that a transfer does not ultimately take place does not affect the employer's obligations to inform and consult at the earlier stage.

Information to be provided

The information to be provided to representatives must be in writing and as follows:

If no measures are envisaged, that should be stated. This does not extend to the employer's deliberation in deciding to make the transfer. Nor does it cover measures that are merely being contemplated as possibilities - the employer must have some definite proposal that they have in mind to implement. 'Will' is something more than 'might', but it does not involve absolute certainty: it is enough even if it is uncertain whether the proposal will in fact be implemented

Consultation

The transfer by itself does not give rise to a requirement to consult - only to inform. The obligation to consult arises where it is envisaged that 'measures' will be taken in respect of the employees affected (whether the effect is direct or indirect). However, 'measures' has a wide meaning (see FAQ box on the meaning of measures) and, in practice, the business transfer may involve some change for at least some employees.

The seller need only consult representatives of its own employees about measures it will be taking. Similarly, the purchaser need only consult its employees.

Although, strictly, the seller need not consult on the measures that the purchaser has said it will be taking (these have to be notified as part of the prescribed information), it is recommended that the purchaser should engage in some discussion with the representatives on the purchaser's measures. This is normal practice.

Also, the seller may have given a previous commitment about consultation - for example, when the arrangements for appointing representatives were set up or possibly in a collective agreement.

Another angle is that the representatives may want the seller to go back to the purchaser to clarify points. There is some level of duty on the seller to check this and go back if necessary.

Even if not strictly required, consultation, at least in the sense of holding a meeting to air views, is good practice, and the fact of having gone through this to some extent would probably make it less likely that claims against the seller would arise. Or, put another way, refusal to engage in discussion when requested may precipitate claims.

Where consultation is required under TUPE it must be with a view to seeking agreement to the measures to be taken. The employer must enter into consultations with a receptive mind, consider any representations made by the representatives and genuinely attempt to accommodate the points raised. The employer must reply to those representations, giving reasons if proposals are rejected.

TUPE does not lay down a timetable. The requirement is that the prescribed information must be provided to the employee representatives long enough in advance of the transfer to enable consultation. This is so even if consultation is not needed. In settling the timetable therefore it should be assumed that representatives will want to raise issues and some voluntary consultation should be assumed but this could be short if no measures are envisaged.

Where consultation is necessary, the employer must consult representatives as soon as reasonably practicable after the election. There must be sufficient time to allow representatives to request a discussion on a topic once they have the relevant information. Presenting representatives with a proposal that is already fixed is too late; consultation must be undertaken while the proposals are still capable of being changed.

It is common practice to consult in the period between signing and completion of the deal to transfer the business. This is probably adequate but it has not yet been tested in the tribunals. There is an argument (as yet untested) that the mere fact of selling the business is a measure by the sellers triggering the information and consultation requirements. If this is right, the time for informing and consulting could start before the agreement is signed. Consulting between signing and completion (even if not strictly required as mentioned above) may assist if any such claim was made.

Sanctions for failure to inform/consult

If an employer fails to inform and, where required, consult in accordance with its obligations, the employee representatives or the union (as the case may be) may bring proceedings in an employment tribunal. The affected employees themselves may bring a claim if there are no elected representatives or recognised unions. The complaint must be made within three months of completion of the transfer but it can be brought before the transfer occurs - for example, when the duty to inform/consult arises.

If the tribunal finds the complaint well founded, it is entitled to award compensation as it thinks fair in the circumstances.

The amount of any compensation will take into account the seriousness of the failure to inform or consult and is intended to compensate employees for any loss they have suffered. A purely technical breach of the requirements may therefore lead to minimal - or even nil - compensation. Similarly, if there is no change to terms and working practices, the compensation would probably be low, but some compensation (perhaps a fixed amount per head) is likely if the employer has flagrantly disregarded the regulations.

Compensation can be received by all of the affected employees in respect of whom the employer failed to inform and consult. The maximum award that a tribunal can make is 13 weeks' gross pay for each affected employee. A 'week's pay' for this purpose is uncapped, being the actual week's pay rather than being limited to the statutory maximum (currently £270 per week).

The purchaser may be joined in the proceedings by the seller if the seller alleges that it failed to provide the necessary information about measures envisaged by the purchaser. The employee can enforce a tribunal award if the employer fails to pay the relevant part of it to him.

Special circumstances defence

As with collective redundancies, it is not possible to avoid the information/consultation process unless an employer can show 'special circumstances', which make it not reasonably practical to consult. This is unlikely to include, for example, the simple need to preserve confidentiality. Special circumstances should be 'sudden' and 'unforeseen'. The defence is only available where all such steps to inform and consult as are reasonably practicable in the circumstances are taken (see Section 2 ).

Consultation over a number of jurisdictions

Increasingly, restructuring involves an international dimension with large employers buying and selling businesses in a number of European countries. As the rules on consultation come from Europe, there will be consultation obligations in all European countries that are member states of the European Union (EU), which, as a minimum, have to comply with the Acquired Rights Directive on which TUPE is based.

The obligations in these countries are outside the scope of this guide, but the table below gives a snapshot of the situation in four European countries. As the table illustrates, the obligations vary enormously from country to country, with criminal sanctions in some countries for failure to consult, as many countries have much more onerous requirements than the minimum specified in the Directive. Employers should always seek advice on the relevant rules in each country.

Multi-national companies may also have a EWC or other transnational consultation body in place, which will need to be informed and consulted. See Section 6 on EWCs.

Consultation over a number of jurisdictions