Complex TUPE & Redundancy query

[Red4]

Hi,

I'm seeking some advice for a friend on work related issue which involves a few issues which I believe are unfair or illegal?

My friend works for a small private company employing less than 20 staff. The company has experienced financial difficulties so they have appointed an insolvency company to put the company into liquidation.

The company emailed a pack to my friend stating the company is being put into a Creditors Voluntary Liquidation, and advised that their contract was being terminated and how to claim any monies owed.

There has been no formal consultation to staff, just meetings stating how the situation is going

Another company has been involved in trying to take over the business, in what way i'm unsure. But they have stated that staff will be TUPE'd over to the new business.

Yesterday, 26th the new company rung has said the transfer has gone through, and you are now working with us as from today, bearing in mind, my friend has confirmation from previous company director saying their employment ends on the 27th.....so in effect she was working at other business while still employed by the old one.

The new business is further afield, and nothing in her contract (which is very basic) mentioned relocation

I was told on another forum, that TUPE regulations dont apply to terminal insolvency, she has been told by the new company that she is not entitled to any PILON or redundancy

In fact she has not had any notice, no consultation on the reasons behind the so called transfer. It was a case of, you work for us now, take it or leave it. yet she has an insolvency pack stating her employment has been terminated

Apologies for the long post, but there are so many discrepancies in the whole process

Any help or info would be much appreciated

Just to add, my friend does want the job at the new company, but believes they have been very mistreated

[ULA]

TUPE in itself is very complex and adding in a Creditors Voluntary Liquidation (CVL) brings another layer of complexity.

Guidance has been issued on how TUPE 2006 amended in 2014 applies in various types of UK insolvency situations however it expressly (and correctly) states that the guidance is not an authoritative interpretation of TUPE 2006 and that only the tribunals and courts can give such an interpretation. Under these guideline in a CVL situation certain TUPE regulations (namely 4 and 7) do not apply. In summary they are:

1. no transfer of employment under reg 4(1)

2. no transfer of employee liabilities under reg 4(2)

3. no limitation on ability to make transfer-connected variations to terms and conditions under reg 4(4)

4. no rights for employees to object under reg 4(7)

5. no rights for employees to treat themselves as dismissed under reg 4(9)

6. no automatic unfair dismissal for transfer-connected dismissals under reg 7

7. the remainder of TUPE 2006 (eg the obligations to inform and consult with employee representatives) applies to the extent possible given that there is no transfer of employment

The regulations make special provisions for certain debts of the insolvent company not transferring to the new company which include statutory redundancy payments or other sums such as arrears of pay, payment in lieu of notice, holiday pay or a basic award of compensation for unfair dismissal. In effect, payment of statutory redundancy pay and the other debts will be met by the Secretary of State through the National Insurance Fund. Hence the new companies view that they would not be responsible for these payments.

It does sound like this has been a last minute rescue by the new company and often in these situations, although not right, it is often the staff that get overlooked.

Hope this makes some more sense of the situation.

[Red4]

I understand the complexity of it all yes, it's a legal minefield.

My friend has spoken to the IP dealing with the liquidation, and they have advised to claim for redundancy and pilon, plus wages from the last two days at the new company, while they where still employed by the previous company.

A Unison area rep has asked why they never gave 45 days notice of transfer, and also mentioned material detriment in relation to the travelling to new premises ( my friend doesn't drive and that was the reason she took the old job years back, the new location is 5 miles away)

Because local authority have been involved, it seems there have been a few secret handshakes between people.

[ULA]

Still looking at the redundancy and pilon claim and where this should be made some conflicting opinion on this one. So will get back to you.

Under TUPE the regulation 13 states that there is a duty to inform and consult but the timescale is undefined except that it should be “Long enough before a relevant transfer to enable the employer of any affected employees to consult the appropriate representatives of any affected employees”. Where the 45 days mentioned by the Unison rep comes into effect is that before a transferee can dismiss any transferring employees that are surplus to requirements, a fair individual consultation process is required. Where the transferee is looking to dismiss 20 or more employees, this also gives rise to the obligation to begin to collectively consult either 30 days for 20 to 99 dismissals or 45 days for 100 or more dismissals) before such dismissals take effect, these timescales are known as the “Consultation Period”.

On the material detriment issue how easy is it for your friend to travel by public transport the 5 miles? Is there a reasonable way to get to the new location and how long would the travel time be? In 2014 the Employment Appeal Tribunal upheld an Employment Tribunal decision that the addition of between 30-60 minutes additional travelling time each day (albeit in London) following a TUPE transfer was not a substantial change or material detriment under TUPE.

[Red4]

Thanks for getting back to me

I have read the most recent changes in the TUPE regulations, lots to take in!

I have noticed on the Information and consultation rights , change 9, that the company must still inform and consult directly with each employee about the transfer. In the case here, no staff have been consulted. They have just been told we are trying to find a solution, then the local authority got involved. From being told you are transferring, to actually going to the new place of employment was 7 hours!

I read this in the TUPE regulations, which I believe is the case here:

In other insolvency cases TUPE may not apply because the business has gone into insolvent liquidation rather than being sold as a going concern. Liquidation is where the business closes down and assets are sold to pay those who are owed money. This could also apply where an individual employer becomes bankrupt. In these circumstances employees will not transfer. They are instead made redundant and core debts owed to them are paid from the National Insurance Fund. Employees should make claims for monies owed through the IP.

[ULA]

Change 9 that resulted from the TUPE changes in 2014 relates to companies with 10 employees or less. In your opening post you stated there were 20 people in the company therefore they would have been under andobligation to elected representative on behalf of the staff with whom to consult.

There is a relaxation of some of the TUPE rules which would otherwise apply, to make it easier to sell businesses that, at the time of the transfer, are subject to insolvency proceedings under the supervision of an insolvency practitioner. In this instance the employer may try to rely on reg 13(9) which excuses them the duty to inform or consult in accordance with the requirements of TUPE 2006 if there are 'special circumstances' which render it not reasonably practicable to do so. However they do need to take all such steps towards performing that duty as are reasonably practicable in the circumstances.

TUPE 2006 does not define further the meaning of 'special circumstances' and the defence is therefore normally construed narrowly, the employer must be able to show that:

1. They were constrained by some event or occurrence beyond, or substantially beyond, his control, and

2. the occurrence must be sudden, unforeseen or unexpected and out of the ordinary run of commercial or financial events.

Therefore, if it was known that transfer of the business under the CVL was happening and that staff may be transferred to it, then some form of consultation should have taken place. Although a I not sure where a Tribunal complaint on this point would go bearing in mind the company has gone into a CVL so unlikely that if any award was made that it could be paid.

In regard to your point:

“In other insolvency cases TUPE may not apply because the business has gone into insolvent liquidation rather than being sold as a going concern. Liquidation is where the business closes down and assets are sold to pay those who are owed money. This could also apply where an individual employer becomes bankrupt. In these circumstances employees will not transfer. They are instead made redundant and core debts owed to them are paid from the National Insurance Fund. Employees should make claims for monies owed through the IP.”

TUPE 2006 does not specify which insolvency proceedings are covered in each category, however the DTI (now BEIS) has issued guidance on how TUPE 2006 applies in various types of UK insolvency situations. Note this is guidance only and may not be considers useful as was found by the EAT in the Oakland case.

Accordingly, this guidance states that “a transfer of a business by the liquidator in a creditors’ voluntary liquidation would cause the dismissal of those employees who immediately prior to the transfer were employed by the company unless prior to the transfer there is an agreement between the parties (including the employees) that the transferee is to be substituted as their employer. In the absence of any agreement substituting the transferee as their employer, employees whose contracts of employment with the transferee are terminated will be entitled to be paid redundancy payments and arrears of wages etc. from the National Insurance Fund.

[Red4]

Thanks for the informative reply

As I understand it, there was no agreement in place between the employees and both businesses. The initial business was offered a sum to take over the business by the local authority (which the director refused), 10 days before the transfer happened, it was during them 10 days that the new company came in and negotiated to take over. Staff where not told of the transfer until 7 hours before their next shift started at the new business!

They have also been told as pay dates are different, they will have to wait 7 weeks until they are paid

There are so many discrepancies in the whole process.

[ULA]

Had there been a consultation about a transfer to the initial business that had offered to take over the business?

What does your friend want to achieve in regard to their employment?

[Red4]

There was no consultation what so ever

They where told they might be transferring to another company but where not informed properly. It was all done very quickly.

They where eventually told the transfer had gone through on the day, then worked that night shift for the new company.

My friend and other staff believe they are are entitled to pilon and redundancy, and where told this by the insolvency company in a letter that stated their contract of employment had been terminated