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CHAPTER 16 Continuity of employment and transfers of undertakings. Continuity of employment and transfers of undertakings. Concepts of continuity of service – including the effect of the Transfer of Undertakings Regulations 2006 (TUPE) – normal working hours and a week’s pay are important.
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Continuity of employment and transfers of undertakings
Concepts of continuity of service – including the effect of the Transfer of Undertakings Regulations 2006 (TUPE) – normal working hours and a week’s pay are important.
This is because many statutory rights are dependent upon minimum length of service, and payments are related to statutory concepts of normal working hours and a week’s pay.
CONTINUITY OF EMPLOYMENT
It is a statutory concept and the courts will look to see whether there has been a break in service.
Employment is presumed to have been continuous unless the contrary is shown, although this is not so where there is a succession of employers.
A period of continuous employment, which begins with the day on which the employee ‘starts work’, is computed in months – and a week which does not count breaks the period of continuous employment.
Usually when an employee leaves one employer and starts working for another, the period of continuous service is broken.
In certain circumstances a person will be regarded as having been employed by the new employer as from the date his or her previous employment commenced.
There are six main types of case in which employment is deemed to be continuous despite a change of employer:
The Transfer of Undertakings (Protection of Employment) Regulations 2006 replaced the 1981 Regulations and implement the Directive 2001/23/EC.
The intention of the Directive and the TUPE Regulations is to protect the contract of employment and the employment relationship of employees who are transferred from one employer to another.
When a transfer takes place, it is as if the employee’s contract of employment was initially agreed with the transferee employer.
The TUPE Regulations 2006
The TUPE Regulations apply where the transfer is of an undertaking or an economic entity that retains its identity.
Who is to be transferred?
A transfer shall not operate to terminate any contract of employment of any person employed by the transferor and assigned to the ‘organised grouping of resources or employees that is subject to the relevant transfer’.
The 2006 Regulations give added flexibility in varying the contract of employment, but this is mostly flexibility for employers. The issue is important to many employers. Quite apart from the issue of bringing in a workforce with different terms and conditions, there is often a need to reorganise the business to cope with any such transfers.
The 2006 Regulations provide that it is not possible to vary a contract of employment if the sole or main reason was the transfer or any other reason that was not an economic, technical or organisational reason (ETO reason) entailing changes in the workforce. The employer and employee are able, therefore, to agree a variation if it is changed for an ETO reason or ‘a reason unconnected to the transfer’.
The original Directive was silent on the subject of whether an individual employee can decide that he or she does not wish to transfer.
Measures to deal with insolvency were absent from the original Directive. The main problem was that the obligation for the transferee to take over all the debts of the insolvent organisation's employees, and to transfer all those employees at their current terms and conditions, would act as a disincentive to the 'rescue' of such insolvent enterprises.
The 2001 Directive excluded any transfers where the transfer is the subject of bankruptcy proceedings with a view to liquidation of the assets of the transferor.
Member States are also given the option of excluding transfers of liabilities in other types of insolvency proceedings.
Those elements which the government would normally be responsible for under its statutory obligations towards the employees of insolvent employers do not transfer. The debts owed to employees by the transferor, to the limits of its statutory obligations, will be guaranteed by the Secretary of State. This includes some arrears of pay, notice periods, holiday pay and any basic award for unfair dismissal compensation. Other debts owed to employees will transfer.
In addition to this subsidy there is provision for the employer and employee representatives to agree ‘permitted variations’ to their contracts of employment.
Information and consultation
The Regulations contain the obligations to inform and consult employees.
‘Employees in public sector organisations should be treated no less favourably than those in private sector organisations when they are part of an organised grouping of resources that is transferred between employers.’