TUPE - pre-transfer beneficial changes to terms and conditions void

NEWS – 2 June 2020  

TUPE – pre-transfer beneficial changes to Ts&Cs void

If you are familiar with TUPE you will know that one of the regulations - regulation 4(4) - states that TUPE-related changes to terms of employment are void in most circumstances.  Now this has long been understood to refer primarily to changes which are detrimental to the employee – that's based on the rationale that such changes run contrary to the overarching principle that employees’ contract terms are to be safeguarded on a business transfer. The EAT has, for the first time, looked at a case where the changes to terms conditions made prior to a TUPE transfer were positively beneficial. The case is called Ferguson v Astrea Asset Management and we have put a copy on our website for you.

The Claimants were 4 directors of a company called Lancer Property Asset Management Limited. Lancer was given a year’s notice of the loss of its only client to Astrea.  Following receipt of that notice, Ferguson and his colleagues amended their own contracts to provide for a guaranteed bonus and generous new contractual termination payments amounting to a month’s salary per year of service, worth well over £1 million.  They also agreed that if for any reason they did not lose the client or any of them did not transfer to Astrea, those changes would fall away and so would not bind Lancer.  There was no suggestion that those changes were not validly made, so the directors assumed that on any normal TUPE principles Astrea would be bound by them. That was their plan. As it turned out, Astrea dismissed the claimants very shortly after its arrival but did not pay the new severance amounts.  The key question therefore - were those self-awarded entitlements binding on it as transferee?  On the one hand, the changes were clearly related to the transfer and so potentially void under Regulation 4(4), but on the other, the changes were beneficial to the employees in question and so on the face of it enforceable by them. Both the Employment Tribunal and the EAT found that contractual variations were void.  With her thoughts on the case, and what it means for employers, on the line from Birmingham, Amy Hextell:

Amy Hextell: “Well I think that the case is a stark example really of the way that TUPE applies quite strictly in relation to changes to terms and conditions of employment which are made by reason of the transfer itself and reminding us of that principle that any changes to terms and conditions which are by reason of the transfer itself will be void. This is the first case to consider whether beneficial changes made before the transfer takes place would be void so it is an unusual case, but we do now have a legally binding decision from the Employment Appeal Tribunal which says that such changes will be void. Now I think it is important to remember that in this case the changes were incredibly significant and they were a deliberate attempt to lumber the transferee company with the enhanced terms. So, it is quite different to a situation where, for example, the owners of business benefit from a regular and scheduled pay review shortly before there is a TUPE transfer, in which case the change would probably be valid because that hasn't been made by reason of the transfer itself. However, for transferring businesses who were involved in business sales or service provision changes where TUPE applies and who are inheriting management teams it is a useful prompt, this case,  to do some proper due diligence. So check when remuneration packages of senior staff were last reviewed and look out for any suggestion that the review might have taken place outside of the norm and for those that are selling a business it is also important to be able to show, if you are making changes to remuneration packages, to be able to demonstrate how those have been arrived at and what performance or market data might have been used to explain any beneficial changes that are made because otherwise you could be in territory where the transferee is saying that those changes are void and they shouldn't have to inherit them. I think the other thing worth noting about this case is that the four individual directors who had artificially increased their remuneration packages in what was a very deliberate attempt to benefit from those better packages after the transfer were also found to have acted in breach of the EU's abuse principle which says that EU law can't be relied on for abuse events. It raises the question if a pay rise or pay increase had been implemented for all of the staff and not just the directors, the chances are that they perhaps wouldn't have been found to have acted in breach of that abuse principle because it wouldn't have been for their own self benefit alone, although TUPE might still have applied so as to make the changes void. So I think that that really this case is an important reminder and demonstrates to us the broad scope of TUPE to prevent changes to terms and conditions and make such changes void where those changes are by reason of the transfer. It's a good reminder of that and also a lesson to any would be unscrupulous business owners because not only did the directors in this case not benefit from their enhanced terms after the transfer, but they also then got dismissed for gross misconduct without any notice and no pay at all. So it's an interesting case.”

Technology sector – is the coronavirus presenting opportunities for tech companies?

It is generally accepted that of all the sectors hit by Coronavirus it is the Tech sector which is best placed to cope, actually giving rise to new streams of work. Personnel Today recently ran an article under the heading “Is the coronavirus presenting opportunities for tech companies?” which it answers with an emphatic yes. It reports that as swathes of businesses look to cut costs and reduce headcount during the crisis, the technology sector is busy hiring. The figures back that up - according to one recruitment firm, permanent job vacancies in the tech sector have increased by 32% in the last quarter and contractor roles by 48%. The sector's leading journal Computer Weekly last week ran a similar article asking the question “Is the Covid-19 crisis halting our progress on diversity in tech?” The point they make is that whilst the government's initiatives to support tech firms during the pandemic are very welcome, they risk entrenching old behaviours that restrict the move towards greater diversity in the sector. They say: “While the industry and government are quite rightly focused on providing immediate support, we risk ignoring, and even exacerbating, one of the sector’s most pervasive issues – diversity and inclusion.” Surprisingly, neither of those two articles mentions neurodiversity in this conversation – the diversity of human brains and minds which results in some individuals having  highly specialised and valuable skills which are well suited to the sector. This is something a number of our Tech clients have already identified as Helen Corden told me:

Helen Corden: “When it comes to recruitment, a lot of organisations are looking at their practices, how they ask for applications, how they carry out the interview process, to really understand whether neurodiverse individuals are disadvantaged by the whole recruitment process. So if we take, for example, to start with, the job advert. If the job advert is general, or if it asks for a specific length of service, for example, that may put people off who are neurodiverse because sometimes they take a literal interpretation and they will look at the job advert and think, well, I just can't do that. Or if you say you need four years experience and they only have three and a half years experience, they won't think, perhaps, well I'll give it a go and see if my skills or qualifications will get me through the process. They will simply not apply for the role. So it's really important to focus initially on the job advert. Secondly, in terms of the application process, a number of organisations are looking at the different methods that they ask people to respond by, whether it is purely just online, Can people make an application by post as well for example, and also looking at, for example, the extent that they focus on spelling or grammatical errors because, again, this could disadvantage individuals who are neurodiverse, for example, in particular with dyslexia, which may manifest itself by not being as accurate in terms of the spelling or grammar that's contained in an application form. Also, when it comes to the interview stage is a traditional interview going to get the best out of a neurodiverse individual? It may be, for example, that they have different interpersonal skills, it may be that they find it uncomfortable to maintain eye contact. So a traditional interview one-on-one may not be the ideal forum in which to get the best out of that individual. So our clients are looking at whether they can introduce practical exercises, for example, whether if somebody has disclosed that they're neurodiverse, whether they can forward the interview questions to them in advance, not to give them an advantage, but to actually give them a fair playing field so that they they're not in a stressful situation in terms of the interview.”

You can see more of that interview with Helen in our Insights programme on this subject which is available now for viewing from our website.

Training – 5 e-learning courses for furloughed staff

Finally training. With many staff furloughed, now is a very good opportunity for them to engage in training and we have been asked by a number of clients for more details about our online courses, our e-learning modules. So what do we have? The answer is we have 5 modules in total, 2 on harassment and 3 which are part of our Management Essentials series and we'll talk you through all of them starting with the Management Essentials series. They cover, as the name suggests, the core areas, as we see it. They are Disciplinary & Grievance Hearings, Investigations and Capability. Each one of those will take the manager around 45 minutes to complete, although you can stop and start the course at any point because it remembers where you were. It is worth emphasising that these are not presentations to sit back and watch, rather they are interactive, with a series of exercises built in to test understanding on the key points. There is also a feature which allows you to study a particular situation, make notes on the screen about how you would handle it, and then you get feedback on how that case should, ideally, have been handled. As you progress through the course there are a series of questions in different formats, with answers that provide feedback on why the answer chosen was, or wasn't correct, and then, at the end, a score. You have scope to decide whether that test needs to be passed in order to say the course has been completed successfully, and what the pass mark should be. Some clients like to set the bar quite and insist managers who fail the test retake it until they pass, but that is very flexible and we set it up to suit the particular client.

 
It is worth saying this e-learning is really quite different from many of the rather dull, compliance-driven models out there on the market. This content reflects what we lawyers think managers need to understand, and we have used professional actors to conduct the various role plays in the courses, and those role plays are ones we have written, based on actual cases we have come across in practice, so they are realistic and reflect what we think should and should not happen in those meetings. So managers are able to actually watch how these meetings are meant to be conducted. We will come back the role plays shortly, and show you the actors.

 
As for cost and access to the training, all of 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 module 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. The modules run on your organisation’s Learning Management System and, as part of the service, we work with you to set it up and test it. Incidentally, don't worry if your LMS is not a modern version – we haven't yet come across one that hasn't been able to run the courses smoothly, and we have worked on a lot of them.

Finally, it's worth saying that part of that price we do add your organisation’s logo throughout, so it is branded to that extent, and we can add your own policies and procedures to the resources tab within the course. If you would like to have a closer look at any of the modules you can – we're offering a free demonstration so please do get in touch. As we said at the start, if you have managers currently furloughed this is a very good time for them to take on this sort of training.

So that’s the Management Essentials trio of modules. We also have a pair of modules on a very hot topic which is sexual harassment – one module for employees and the other for managers. Now you might remember that before Covid-19, so at the end of last year, the government was sending out strong hints about moving towards making it a mandatory requirement for employers to take active steps to prevent harassment in the workplace and we do expect that will be back on the government’s agenda when things get back to normal. Doubtless the adequate training of your staff will be a big part of that.

Both modules are similar in length, at around 45 minutes to complete, and they are interactive so, as with the Management Essentials modules, you have exercises built into them designed to test understanding, and opportunities to make notes and then test knowledge through a series of questions which will then give you a score at the end. That side of things is very flexible, so you set the pass/fail mark and if the individual doesn’t hit the pass mark then they only have to retake the questions that they get wrong. The other reason why that record is important is in the event you ended up in an employment tribunal defending a claim of sex discrimination you would be able to point to those records as part of your reasonable steps defence - and we have seen that happen.

As with all our e-learning, every module comes 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. These two modules cost £3,750 each and are designed to run on your organisation’s Learning Management System – we work with your IT people to help set that up and test it thoroughly before you buy. Included for that cost is a degree of tailoring – adding your organisation’s logo throughout and including your organisation’s own Harassment and Equal Opportunities Policies and any other documentation you'd like to add. If you would like more tailoring than that we can do that for you at additional cost.

Again, 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. As we said, if you have staff currently furloughed this is a very good time for them to take on this sort of training. 

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

LINKS

- Link to case report: Ferguson v Astrea Asset Management Ltd (EAT)

https://www.bailii.org/uk/cases/UKEAT/2020/0139_19_1505.html