7 04 2009

Apart from the post below I haven’t touched upon these regulations, mainly because they are not the most interesting regulations in the world to read.  However, I have been spurred on by posting on the case of Royden & others v Barnetts  (see below) and TUPE comes up quite a few times on the search engines as a keyword.  In future posts I will look at the TUPE issues on the insolvency of the employer as well as the consultation obligations imposed upon employers by TUPE.

So, what do the Transfer of Undertakings (Protection of employment) Regulations 2006 (TUPE) actually do?

It protects those employees where the employing business changes hands, by;

 (1) protecting them from dismissal because of the transfer,

(2) by requiring the employer to inform and consult those employees affected, and

(3) transferring all rights  liabilities and obligations from the transferor company (“oldco”) to the transferee (“newco”).  



There must be more than a transfer of shares.  All employees employed by oldco at the point of transfer automatically move across to newco with the same terms and conditions of employment.  This means that if newco tries to provide amended terms and conditions to transferred staff they will be in breach of contract and may end up facing claims for constructive dismissal.

Furthermore, if newco dismisses transferring staff for a reason connected with the transfer that will be an automatically unfair dismissal , although if newco can argue that there were “economic, technical or organisational” reasons entailing changes in the workforce of either the Transferor or Transferee”  for the dismissal, it won’t be automatically unfair.  It might still be an unfair dismissal if the reason for the dismissal (not being the transfer) was also unfair. 

An ET would look at all the circumstances of the dismissal before making its finding.  In particular the ET will consider whether the employee was likely to have been dismissed even if the transfer had not occurred.  If yes then the dismissal will probably not have been for reason of the transfer, but it might still be unfair (i.e perhaps unfair selection for redundancy, or maybe discriminatory reasons were involved; the list is long).   One of the potentially fair reasons for a dismissal under the Employment Rights Act 1996 is “some other substantial reason” (SOSR).  For an employer to escape liability altogether for the dismissal it will have to show that the reason for dismissal comes within SOSR and that it was reasonable for them to rely upon that as the reason for dismissal. 

If an employee is found to have been unfairly dismissed (whether automatically or not) the maximum amount they can recover from an ET (up to February 2010 anyway) is £66,200 plus a basic award of £350 (or £525 depending on age) per week per year of service.  The employee needs 12 months continuous employment experience with oldco to be able to claim unfair dismissal.

Claims involving TUPE can be complex and if you are concerned about your position or think you might need legal advice do call me on 0207 464 8433 or email me on michaelscutt@dalelangley.co.uk

Will SRP be increased?

18 03 2009

I ask this because a Private Members’ Bill, sponsored by Lindsay Hoyle MP, is currently making its way through Parliament.  Its aim is to increase the level of statutory redundancy pay given to employees with more than two years’ service from the current cap of £350 per week per complete year of service (or £525 per week for workers over 41) in to line with average earnings, as opposed to RPI with which it is currently linked. This would mean an increase in the cap  from £350 to £500/750. The award is made up to a maximum of 20 years’ service. Over the years it has fallen behind inflation and means that the maximum an employee made redundant at the moment  can receive (in the absence of a claim for unfair dismissal or an enhanced redundancy package offered by the employer) is a maximum sum of  £7,000 (for those under 41 at dismissal) or £10,500 for those over 41 (and thus would have to be 61 at dismissal with 20 years service to receive it).  In addition employees are entitled to be given their contractual, or statutory notice, and can be asked to work the notice, be put on garden leave for the duration or be paid in lieu. If an employee has less than two years service with an employer he/she is not entitled to any statutory redundancy payment, only to notice.

The Bill passed through its Second Reading last Friday but stands little chance of becoming law.  The Government and the Tories are against it because of the additional burden it would place on hard-pressed employers. The issue is causing dissension in the Labour ranks with allegations of dirty tricks being made against government whips (see the BBC’s report of the 13th March)  and angry denials from the government. 

Business groups have said that the Bill threatens firms that are already struggling and may put them out of business.  The effect of the increase would be to make the new maximum for workers under 41 from £10,000 to £15,000 for those with 20 years service over 41.  They are significant increases but unlikely, in my view, to topple otherwise surviving businesses over the edge into insolvency.  If it would then it seems probable that the business would be going under sooner or later anyway.  It should be remembered as well that those are the maximum figures and comparatively few people will qualify for the maximums.  

In reality, it means a bigger burden on the tax-payer because if the employer does become insolvent the employee will have to apply to the Redundancy Payments Office (aka the National Insurance Fund) for the payments.

Just to recap on that, the RPO pays out the following sums to employees left high and dry by their employer going bust;

1.  Up to eight weeks wages – unpaid wages, contractual benefits like commission and bonus & overtime

2. Up to six weeks accrued holiday pay for the 12 months prior to insolvency

3. Notice monies – for statutory minimum not contractual notice periods

4. A basic award for unfair dismissal (calculated in the same way as for SRP)

In each case a week’s pay is capped at the statutory maximum – i.e the £350/525 discussed above that may (but probably won’t) be increased by Mr Hoyle’s Statutory Redundancy Payment (Amendment) Bill.

It’s a very difficult issue at a time when everyone is struggling.  In the City most businesses pay out enhanced packages, perhaps based on one month’s salary per year, or maybe two weeks’ per year and if the Bill becomes law it will be academic for them, but certainly not for the many smaller businesses being crunched at the moment.

What happens if my employer goes bust? Part 2

19 02 2009

It all depends on what is meant by “going bust” (sorry, typical lawyer’s answer).  There are several ways a company can go bust, i.e become insolvent, and much will depend on whether the company can be rescued or if it is beyond help.  Insolvency practitioners talk about “terminal” and “non-terminal” insolvencies.  Insolvency law is a complex area and what follows is only a “noddy’s guide”.

Terminal insolvencies include where a liquidator or receiver is appointed to wind up the company.  That is a liquidator’s sole job and if he is appointed by the Court or shareholders his appointment will automatically terminate all employment contracts.  Employees will then have to apply to the Redundancy Payments Office for redundancy pay,  unpaid wages etc and take their places in the queue of creditors.   I’ve written in this blog before about the RPO and the less than generous sums paid – see the entry on 18th September last year.

A Receiver appointed by debenture holders is an agent of the company and his appointment doesn’t automatically bring all employees’ employment to an end.  This is the same position as with Adminstrators (appointed by the Court) when a company goes into Administration (as with Lehman Bros for instance).  This is the most common form of insolvency procedure and is designed to try and rescue the company if at all possible – it’s a “non-terminal” insolvency procedure in other words.  The Administrator has 14 days to “adopt” employment contracts.  Those employees who are dismissed may therefore have claims for redundancy pay or unfair dismissal.    

A Receiver is slightly different in that he is appointed either by the Court or debenture holders and his job is to sell assets sufficient to cover the monies lent by the debenture holders (who will have had a fixed or a floating charge over company assets).  If appointed by the Court then employment contracts will be terminated, but not if he is appointed by debenture holders.

So, in other words, unless the insolvency procedure automatically terminates all employment contracts, the position is going to be uncertain.  An employee is going to have to wait to see what steps the Administrator or Adminstrative Receiver is going to take.  They may be taken on or they might be dismissed.  If kept on and the company is rescued, perhaps by another company buying up the remnants of the business, issues may then arise over the transfer  and then there will then issues over whether the TUPE rules apply. 

This is another can of worms and needs to be considered carefully.  A recent case, called Oakland v Wellswood (Yorkshire) Ltd held that the TUPE 2006 regulations do NOT apply where an Administrator of  company which is in administration disposes of the business as a going concern, which is the same position as where a business is disposed of by a liquidator.   Whether TUPE applies or not can be crucial because if it does then an employee’s continuous employment continues thus preserving the right (if accrued) to bring a claim for unfair dismissal.  As ever take legal advice on your situation if in doubt.


I can be contacted on 0207 464 8433 or leave a comment on these pages.

What happens if my employer goes bust?

20 11 2008

What happens if your employer is insolvent? Again, in today’s climate, this is happening all too frequently. If this does happen to you, you should immediately contact your employer’s Insolvency Practitioner for information of what is to happen to the company. You ought to be given forms to make claims for redundancy payments from the HMRC, or alternatively they should advise you if the business or any part of it is to be sold. It is possible for insolvency practitioners to keep employees in employment whilst they make decisions regarding the company’s future.


Please contact me on 0207 464 8433 or email me at www.michaelscutt.co.uk for further advice

Employment and Insolvency

18 09 2008

If you are directly involved in the Lehmans collapse or working for any other business that looks to be on its last legs , do have a look at the Direct Gov website, run by the government, its got lots of interesting information on it.  Follow the link – www.direct.gov/uk/en/employment/index 

You’ll find links there to the Insolvency Service.