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New safeguard for staff employment

Changes in company ownership are a growing part of business life as the retail industry consolidates, but any changes can be made much easier for employees if they know where they stand.

The Transfer of Undertakings (Protection of Employment) Regulations 1981, commonly known as the TUPE Regulations, safeguard employees’ rights where a company changes hands between employers, and cover things such as the terms and conditions of their contract.

On April 6, the revised TUPE regulations came into force and there are several areas of the revision that are relevant to the automotive industry.

Broadly speaking, the effect of the regulations is to preserve the continuity of employment and terms and conditions of employees who are transferred.

This means that the new employers automatically take on the existing staff on the same terms and conditions. There is now also scope for both parties to agree to vary the terms and conditions of a contract.

“Although this essentially protects employees, it may also make harmonizing the new combined business more difficult than before,” says Anne-Marie Boyle, employment law partner at legal firm Osborne Clarke.

The exception to this, according to Boyle, is if there is an “economical, technical, or organizational” reason, which would result in a change in either the number or function of the workforce.

The changes also contain specific provisions to protect workers from dismissal before or after a transfer, along with a duty on the old employer to provide information about the workforce to the new owners before the transfer occurs.

This includes employment records, contract details and any information about disciplinary action or grievances taken against or by the employee in the previous two years.

“It’s unlikely that businesses will fall out when one buys the other, but if, say, a contractor has lost out, there may be a temptation to keep information from the new contractor. Under TUPE, they will face financial penalties if they do so,” says Boyle.

Originally a cap of £75,000 liability was discussed, however, this has now been removed, and companies face a minimum liability of £500 per member of staff for whom information has been withheld. With large-scale business transfers, this fine could be significant.

The final point concerns the issue of insolvency. If a company acquires an insolvent business, it is now exempt from liability for the first eight weeks of any back pay an employee may be entitled to, up to six weeks holiday pay owed, plus the period of statutory notice.

The company is now also allowed, subject to consultation, to alter the employee’s terms and conditions, if those changes are aimed at saving the business.

The regulations can apply regardless of the size of any transferred business and so affect the largest dealer groups down to the smallest independent garage.

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