TUPE - employment contract can be divided between transferees

NEWS – 18 September 2020

TUPE – employment contract can be divided between transferees

Shortly before our summer break, a decision was handed down by the ECJ which has added another layer of complexity to TUPE transfers which involve multiple transferees. It is a Belgian case called ISS Facility Services v Govaerts and it deals with who inherits the employees who are assigned to an undertaking which is fragmented upon transfer. It is an issue which neither the Acquired Rights Directive or TUPE deals with – TUPE is of course is the legislation that implements the Directive in Great Britain. The news is that the ECJ has ruled that they can be split across multiple transferees, a decision which has a number of implications for employers in this country and we will come onto that shortly. First the facts of the case very briefly. ISS were responsible for the cleaning and maintenance of certain buildings in Ghent, Belgium. These were divided into three lots. Ms Govaerts was employed by ISS as the project manager for all three lots. Following a tender process, they lost the contact to supply cleaning and maintenance services across all three lots. Lots one and three were awarded to a business called Atalian to which Ms Govaerts was 85% assigned, and lot two was awarded to a business called Cleaning Masters to which she was 15% assigned. As a result of the majority of Ms Govaerts’ work being transferred to Atalian, ISS advised her that her role would be transferred to that company. Atalian disputed that. Ultimately the case was referred to the ECJ for a ruling on the issue of whether her employment could be split between the two transferee contractors. The court said that the rights and obligations arising from the contracts of employment of the individuals assigned can be transferred to each of the transferees in proportion to the tasks performed by the individuals concerned. So what are the implications of that decision for employers over here? To help with that, on the line from Glasgow, Gill Ross:

Gill Ross: "The ISS case is a potentially very significant decision for employers in the UK. It was a Belgian case in this scenario and the European Court of Justice made the decision but it could happen in the UK where you've either got a business transfer which we would call a Type 1 transfer or a service provision change where you've got the transfer of services, either an outsourcing or a re-tendering where there is a new provider coming in. Where either, in a business transfer or a service provision change, you have the services, or the business entity, being split between a number of transferees - so there's not just one party who's taking on the whole business or the whole of the services, it is being split among multiple transferees - that's where this case can play into it because until now, under the UK case law it has been very sensible, very pragmatic, and has provided a lot of certainty to transferees where you have the situation where there are multiple transferees. The leading case on this issue, the Kimberley Group Housing case, held that in a service provision change scenario, each employee can only transfer to one transferee and then liability for the transferring staff goes to the transferee who took  on the greater part of the activities carried out pre-transfer. So you didn't have this scenario, which you had in the ISS decision, where the court was saying actually, you've got three transferees so that person should split their employment contract between three different transferees. In the UK that has never been held to be the right approach. So this decision really sort of undermines all that we have thought in the UK and that is why, as I say, it is significant because it takes away that certainty that parties have where say somebody is taking on 75% of a business entity or services, they would they would assume the employees are coming to them. There are obviously various other tests with TUPE, the entity or the services have to retain that identity post transfer, were the employees are assigned to the part of the business or the services that are transferring, so there are lots of variables, but ultimately we've had that certainty that there would just be one transferee but there are a number of practical issues that are know thrown up by this decision. So how do you split an employee's time? Is it by just a percentage or is it the value that they provide to part of the business or to the services? Another question is what happens if a senior employee is split between two competitors who are taking on services that are outsourced? What about confidentiality? That could be really problematic. If you have a number of staff TUPE-ing could you split the group of employees up rather than individual contracts, the ISS decision seems to indicate that wouldn't be a possibility but, you know, if UK courts decided to adopt the ISS case might that be an approach that would work a bit better than what has been set out in the ISS case? Another issue that we've thought about is does this open the door to more constructive dismissal or material detriment claims under the TUPE regulations because you can argue if there's a significant change in working conditions that you could opt for either of those claims. So if somebody has gone from a full time employment relationship to being split between three or four different employers and having part time employment that is, for many employees, not a good scenario to be in. There is also a question over European versus UK law, does this apply to service provision changes at all, because under the Acquired Rights Directive which governed the ISS case, that only applies to the Type 1 business transfer case so we have that question there and we don't have a decision in the UK on whether they would apply the ISS case. So in terms of what we're advising clients at the moment, be aware of the decision and for the potential for it to be argued. Think about your due diligence. Are employees split between different parts of the business or different parts of the services when things are going to be fragmented. Think about whether you need additional warranties and indemnities, if you are the transferee, to protect you from claims coming in from employees who maybe would argue that TUPE did apply when you are arguing it wouldn't apply. In most scenarios at the moment we are saying that clients should adopt the orthodox UK approach on TUPE in line with existing case law, i.e. where services or a business is split up or fragmented, business as usual, assume that it would be one transferee who would be taking on the bulk of the services or the business and would take on the employee liabilities. But there will be cases where it may be advantageous to our client to rely on ISS or if they're receiving employees we might see the transferor saying actually ISS does apply here and we want you to take on 50% of the employee's time so that they can reduce their liability on outsourcing or selling a business. The unions are alive to this case, obviously they are aware of the decision, and I think we might see unions begin to argue the case where there wouldn't otherwise be a staff transfer. So we're employees would be stranded and be looking at redundancy they might say well actually no they should be split between to two different employers in that scenario. So as I say there are a lot of questions and not so many answers provided by the ISS case at the moment and in the UK I think we're just mindful of the decision, look at each scenario, each transfer, as it comes up and work out the best outcome for our client while being aware that there is this risk that the case could be argued. "

Ethnic pay gap reporting – 25% of large firms now calculating ethnicity pay gap

Ethnic pay gap reporting is back in the news again after a survey by PwC showed that as many as two-thirds of businesses are now collecting ethnicity data on their employees and almost a quarter have actually calculated their ethnicity pay gap. Personnel Today reports on the poll which was of 100 companies that collectively employ more than one million people. A reminder of where we are on this. Back in 2018 Theresa May’s government launched a consultation in 2018, which closed in January 2019, but the new government under Boris Johnson has not yet announced any further steps. The expectation is that his government will, at some point, make annual ethnicity pay reporting mandatory for companies that employ more than 250 people, mirroring the requirements for gender pay. There remains a strong push for this to happen. People Management reports how more than 130,000 people signed a petition earlier this year calling on the government to make this form of reporting mandatory. The CIPD itself, along with the Equality and Human Rights Commission and the TUC are among a number of large organisations backing the demands. Meanwhile, in the absence of any legislation, the rise continues in the number of employers collecting data and reporting on a voluntary basis continues. With her thoughts on that, from Glasgow, Katy Docherty who joined me by video link with this message for HR:

Katy Docherty: "One of the obvious issues with the gender pay gap reporting methodology is that it compares the average woman to the average man, which is all well and good in fairly balanced workplaces where there's a relatively even gender split but in gender-skewed workplaces that can make the statistics themselves skewed. So the headline, for example, for women may look quite good but if there are hardly any women in the in the workplace those figures are going to be skewed and they aren't going to mean as much and that's a potential issue as well for reporting on ethnicity pay gap data. So if for example, you report on white versus non-whites, but you have hardly any people from an ethnic background in your workforce, you're going to have data that's either meaningless or which swings wildly from year to year depending on whether you employ one or two other people from an ethnic minority background. So that's the first thing to bear in mind, that if you don't have a large number of ethnic minority employees in your workforce you're going to end up with potentially skewed figures. Now, one of the other issues with ethnicity pay gap reporting is that a lot of employers simply haven't gathered that data, they don't know about the ethnicity or their workforce. Now they cite various reasons for that, some data protection concerns, or various other HR considerations for gathering that type of data, but the bottom line is that a lot of organisations aren't actually ready to kick start this reporting because that isn't data that they gather. So if this is something that you're looking to do, I think first of all you need to know what data your organisation has and if you don't have the requisite data there's no point in moving forward and trying to publish because the results that you have won't be meaningful. It's something that you should take specific legal advice on as a data gathering exercise before you move on to the gap publication exercise. Now, the final issue that's worth considering is that some organisations don't hold data on all the different ethnic groups and so they have mooted the idea of just reporting on white versus non-white and looking at the pay gap from that perspective, which, you know, might solve some of the problems but what it doesn't do is it doesn't show where there are problem areas or pinch points for specific ethnic groups. So for example, the Office of National Statistics has highlighted that there are 18 different ethnic groups and of those 18 ethnic groups Chinese workers tend to be paid the most, and that includes being paid more than white workers overall but if you were to do the pay gap reporting of whites versus non- whites, the Chinese workers would fall within the non-white category and so they would skew those figures. So these are just some of the potential pitfalls, or certainly considerations, that you have to be aware of.  I think our key message is that this is a good idea to try and get ahead of the regulations coming into force. It's a good idea to try and publish voluntarily but what we want to flag is it is not as straightforward as just copying what you did for the gender pay gap because necessarily you're dealing with very different categories of people and that does lead to the analysis having to be more complex if it's going to be meaningful. So we can help with that, we can help with discussing different ways that you might want to break that data down. The key takeaway message is that this is something that has to have a good bit more thought go into it before you jump in and provide a report that potentially doesn't actually show where your problem areas are, doesn't show where your successes are, and isn't as meaningful.”

E-learning – what courses do have and at what cost?

Finally to our FAQ slot and a question we have been asked by a number of clients recently - what e-learning courses do we have? With many staff still furloughed, e-learning provides a perfect opportunity for both employees and managers to up-skill. The answer is we have 5 e-learning courses – so we have a trio of courses in our Management Essentials series covering Disciplinary & Grievance Hearings, Investigations and Capability plus our pair of courses on Sexual Harassment, one for employees and one for managers. A question we have been asked often in recent weeks is how many employees can access the training and at what cost? The answer is we don’t operate a subscription model. Instead all the modules come with a licence for an unlimited number of users which means hundreds of people can all be trained for a one-off purchase cost, with the option to repeat the training as many times as you like without any further cost. Each of the three Management Essentials modules is priced at £3,500, or if you buy all three modules together, £9,000 and most clients who have purchased so far have opted for that discounted package. As for the Harassment modules they cost £3,750 each. Included for that cost is a degree of tailoring – adding your organisation’s logo throughout and including your organisation’s policies and procedures and any other documentation you'd like to add. If you would like to have a closer look at any of the modules you can, we are offering a free demonstration so please do get in touch if this might be something you want to consider for your staff.

For now from me that’s the news. Good bye.

LINKS

- Link to case report: ISS Facility Services NV v Sonia Govaerts & Atalian NV (ECJ)

https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:62018CJ0344&fro  m=GA