Restructuring, downsizing or merging your company

Inevitably as your business grows and develops, you may wish to acquire other businesses or receive offers from other businesses to purchase all or a part of your business. Equally it may make commercial sense at some stage for you to consider outsourcing various aspects of your business. In all these areas, you will need to give careful consideration to the impact of the Transfer of Undertakings (Protection of Employment) Regulations 1981 (“TUPE”).

TUPE applies when an “undertaking” or “part of an undertaking” is transferred from one employer to another. By way of example, it will apply:

• on the sale or transfer of all or part of a sole trader’s business or partnership;

• on the sale or acquisition of all or part of a company’s business;

• where two companies cease to exist and combine to form a third; and

• where a contract to provide goods or services is transferred in circumstances which amount to the transfer of a business or undertaking to a new employer.

The Regulations apply equally to public and private sector undertakings.

Generally, the effect of the Regulations is that:

• employees employed by the transferor of the undertaking automatically become employees of the transferee and their rights and obligations become enforceable against and by the transferee “as if originally made between the person so employed and the transferee”; and

• representatives of affected employees have the right to be informed about the transfer and to be consulted about any measures which the transferor or transferee envisages taking concerning affected employees.

Duty to inform and consult

There is a duty to inform and consult any employee of the transferor or transferee who may be affected by measures taken in connection with the transfer (whether or not he or she is employed in the undertaking being transferred).

Contracting out of TUPE

Any agreement which purports to exclude or limit the operation of the Regulations or which precludes a person bringing a complaint to an Employment Tribunal will be void.

What can we do for you?

We can provide comprehensive advice on the application of TUPE to your business and any development or outsourcing of any part of it. In the event that you need to consider TUPE, we can advise you about the best strategies to adopt to achieve your business objective. We can help you with any due diligence as a result of employees transferring to you and we can help and advise in relation to any warranties and undertakings that you may want from a potential vendor or service provider.

In the event that employees transfer to you whom you may prefer not to retain, we can help you with the correct processes to follow and where appropriate, assist you in negotiating the termination of such contracts. Dismissing an employee following a transfer or in anticipation of a transfer may be potentially fair for ‘some other substantial reason’ (“SOSR”) following a business reorganisation provided a fair procedure is followed.

Unfortunately you may also face times when business has taken a down turn and you are confronted with the problem of reducing your workforce. In our experience, this is an area where clients do not fully appreciate the correct procedures for selecting people for redundancy and end up inadvertently dismissing employees unfairly.

What is a Redundancy?

A redundancy may arise in a number of circumstances such as when an employer ceases its business in a particular location or, more commonly, where you require fewer individuals to provide a specific type of work.

In order to dismiss an employee “fairly” by reason of redundancy, it is critical that the company adopts a fair procedure. This includes the need to identify the pool for selection and the selection criteria; carry out individual and (where necessary) collective consultation; and assess whether any alternative positions may exist elsewhere within the business.

The purpose of consultation is to give an employee a fair opportunity to explain any factors which may have led to his/her selection and allow the employee to use that opportunity to draw matters to the employer’s attention of which it may not previously have been aware. It also gives the employee an opportunity to consider other vacancies which the employer might not have considered to be acceptable to a particular employee.

Calculating Redundancy Pay

Unless the employer has a contractual redundancy scheme in place, employees with more than two years’ continuous employment at the date of dismissal will be entitled to a statutory redundancy payment. The calculation of this payment will be determined by an individual’s age, length of service and average weekly wage. The average weekly wage is, however, currently capped at a maximum of £270 per week. There is an upper age limit for statutory redundancy payment of 65 and the maximum length of service which may be taken into account is 20 years.

What can we do for you?

In the event that you have to consider redundancies, we can meet with you in order to fully understand your objectives; help you decide on the pool for selection and establish objective criteria for selection. We can then help devise a process that will work for you. In short, we can help you stay on the right side of the law and in doing so avoid unfair dismissal claims. Redundancy is only a potentially fair reason for dismissal. Unless you also adopt a fair procedure, you will inevitably face unfair dismissal claims.

Synergy Employment Law