Spring 2021 Employment Law update - Part 4: Focus on TUPE & Tribunals

12 minute read
14 May 2021

In this series of insights, Gowling WLG's Employment, Labour & Equalities team bring you a quick round-up of the need-to-know employment law developments from January to April 2021.

In Part 1, we looked at COVID-19 related developments, in Part 2 equalities issues and in Part 3, the latest developments concerning 'workers' and pay. Here in our final Part 4, we look at the latest on the two Ts: TUPE and tribunals:

  1. Transfers to multiple transferees
  2. Post-transfer change in working conditions limit
  3. Limits on re-engagement orders
  4. Employment tribunals 'roadmap'
  5. Tribunal award limits

1. TUPE: transfer to multiple transferees

When a contract is retendered, services that were originally provided by a single contractor are often divided between two or more new contractors. This can lead to difficult questions about whether the original contractor's employees transfer and if so where? Until recently, tribunals have taken a fairly pragmatic approach, either finding that employees transfer to the contractor that has taken the largest share of the services or that the services are so fragmented that there is no transfer. However, the Employment Appeal Tribunal (EAT) sitting in Scotland has held that employees' contracts can be split so they can potentially transfer to multiple employers, not only on a TUPE transfer but also on a service provision change (SPC) - McTear Contracts Ltd v Bennett.

In summer 2020, the Court of Justice of the European Union (CJEU) was asked to consider whether where an undertaking is transferred to multiple transferees and the employee works across the whole undertaking, their employment is transferred to each transferee pro rata, to the transferee where the employee was principally employed, or whether there is no transfer?

The CJEU ruled that the employment contract of a transferring worker can be split between each of the transferees in proportion to the tasks performed by the worker, provided that such a division is possible and does not adversely affect the worker's rights and working conditions (ISS Facility Services v Govaerts).

Now the EAT in McTear Contracts has held that the same approach also applies in the context of a SPC under TUPE.

In McTear Contracts, the outgoing contractor had a contract replacing kitchens for the whole of the social housing stock of North Lanarkshire Council. Their employees were allocated into two teams that worked independently of each other, but both covered the whole geographical area. When the Council retendered the work, it split the work along geographical lines into two separate contracts, which it awarded to two new contractors. Some of the outgoing contractor's employees were not taken on as the new contractors did not consider that they had been sufficiently assigned to the work in their location. The employees brought claims that they should have transferred.

The tribunal considered that there had been a SPC and allocated each of the employees to the new contractors on the basis of where they had, on a broad-brush approach, done most work. However, the EAT has overturned that finding. Following the CJEUruling in Govaerts, the EAT held it would be undesirable for there to be a different approach depending on whether a tribunal was considering an 'ordinary' business transfer or a SPC. There was no reason in principle why an employee could not have two contracts of employment with different employers after a transfer. The case was remitted for reconsideration in light of Govaerts and the individual position of each employee said to have transferred.

The practical impact of these judgments may be problematic. It will usually be hard to 'split' employees' day to day work between different employers. It is likely that splitting a full-time contract of employment into a number of part-time contracts will be detrimental for the employee. It will be complicated working out how much of the employee's contract will transfer to each of the transferees. Transferees and transferors should however be mindful of these cases when negotiating allocation of liabilities in contractual documents

2. Post-transfer change in working conditions limit

Under TUPE, if a relevant transfer results in a substantial change in working conditions that is to the transferring employee's material detriment, they have the right to treat themselves as having been dismissed (regulation 4(9)) and may bring a claim for automatically unfair dismissal.

Lewis v Dow Silicones UK Limited is a reminder that it is irrelevant that the employer has a contractual right to make the change in question. The EAT has held that even if under the transferred employee's existing contractual terms the employer was entitled to introduce the changes complained of, that is irrelevant to the issue under regulation 4(9) (substantial changes to working conditions to the employee's material detriment).

In this case, following a TUPE transfer, the transferee introduced new job responsibilities and changed how its standby and call out arrangements worked. The transferred employee resigned and brought an unfair dismissal claim. He argued that the new arrangements were a fundamental breach of contract and a substantial change in working conditions that were to his material detriment. The employment tribunal found he had not been dismissed and his claim failed.

On appeal, the EAT found that the changes were not a fundamental breach of contract because they could be made within the express terms of his existing contract. However, something does not stop being a change just because an employer has a right to introduce it. In this case the new requirement of rostered instead of voluntary overtime and additional safety responsibilities was clearly a substantial change. The transferred employee was entitled to treat his contract of employment as terminated and his unfair dismissal claim was remitted back to the tribunal for further consideration.

This case illustrates the difference between what amounts to a fundamental breach of contract for the purposes of unfair constructive dismissal and what amounts to a 'substantial change to working conditions to the material detriment of [the employee]' for the purposes of reg 4(9).

3. ­Limits on re-engagement orders

If the tribunal finds that the employee was unfairly dismissed, in most cases the remedy sought is financial compensation. However, alternative remedies are available:

  1. Reinstatement (to the same position the employee held before the dismissal); or
  2. Re-engagement (to a different job with the same or an associated employer).

A tribunal will consider what the claimant's wishes are, whether it is practicable for the employer to comply with any re-engagement or reinstatement order, and whether it is just and equitable in all the circumstances to make either order. The tribunal, in particular, will take into account whether there has been a breakdown of trust and confidence between the claimant and the employer rendering an order not reasonably practicable.

Recently in Kelly v PGA European Tour, the Court of Appeal confirmed that a breakdown of trust and confidence is relevant not just in misconduct cases but also where an employer doubts an employee's capability.

In this case, a tribunal ordered that an unfairly dismissed Marketing Director be re-engaged as a Commercial Director, China despite the fact:

  • he could not speak Mandarin, which was an essential requirement for the role;
  • the employer had legitimate and rational concerns that he was not capable of performing a senior leadership role to the required standard; and
  • he had damaged trust and confidence by covertly recording several meetings in the run-up to his dismissal.

The Court of Appeal did not agree and ruled that if an employer genuinely and rationally believes that an employee is not capable of performing a role or that their conduct has led to a breakdown in trust and confidence, this will make it impracticable for that employee to be re-engaged. It is the employer's beliefs that are relevant in this regard.

In addition, the Court of Appeal also held that, in assessing the possibility of re-engagement, an employment tribunal is not required to consider vacancies in potentially comparable or suitable employment that had arisen since dismissal but had been filled prior to the remedies hearing.

4. Employment tribunals 'roadmap'

On 31 March 2021, the Presidents of the Employment Tribunals in England and Wales and in Scotland published a new 'road map' for employment tribunal proceedings in 2021/22. The road map sets out the default arrangements for the listing of new cases, with the majority of hearings continuing to be conducted remotely. The road map also sets out the launch of a 'virtual region' in April 2021, which will remotely hear cases generated in any of the ten current regions in England and Wales.

On the issue of a 'return to normal' following the greatly increased reliance on remote hearings during the COVID-19 pandemic, the Presidents state their view that, in general terms, justice is best experienced in a face-to-face environment. However, given the increase in caseload (which began before the pandemic), tribunals cannot simply revert to holding final hearings exclusively on a face-to-face basis, and so video hearings will remain essential for at least two years.

5. Tribunal award limits

From 6 April 2021, tribunal award limits increased including:

  • a week's pay - £544 (previously £538).
  • maximum basic award/statutory redundancy payment - £16,320 (previously £16,140).
  • maximum compensatory award - the lower of £89,493 (previously £88,519) or 52 weeks' pay.
  • Maximum basic award for certain unfair dismissals (including health and safety dismissals) - £6,634 (previously £6,562).

Note: The new rates apply where the 'appropriate date' occurs on or after 6 April 2021 (e.g. for unfair dismissal the effective date of termination) not the date of the corresponding tribunal hearing.

If you have any questions relating to this insight, or employment law in general, contact Anna Fletcher or Connie Cliff.

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