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ArticlesWhat does the law say about transfers?
The Transfer of Undertakings (Protection of Employment) regulations were updated last year and could be particularly relevant to agencies. The Transfer of Undertakings (Protection of Employment) Regulations 1981 (TUPE) were introduced in the UK to implement EU legislation contained in the Acquired Rights Directive (ARD), which aims to protect the rights of employees on the transfer of a business. They were among the most complicated and controversial regulations to be introduced into UK legislation. TUPE provides that on the transfer of a business, the transferee automatically inherits all rights, liabilities and obligations in relation to the transferring employees. TUPE was updated in 2006 and now expressly covers cases where services are outsourced, insourced or assigned by a client to a new contractor. TUPE had often applied in these cases previously as the test for a ‘transferring business’ under TUPE 1981 could be met where the business in question was a service provider. However, subject to certain exceptions, TUPE will now automatically apply in all service provider transfers. English courts and employment tribunals are required to interpret TUPE to give effect to ARD, and are therefore bound by relevant decisions of the European Court of Justice (ECJ). One such decision has just been made in relation to employment agencies following referral by the German courts: Jouini v Princess Personal Service (Case number C-458/05). Background An employment agency, Mayer & Co, provided temporary workers to a range of clients. Mayer’s directors complied with a request from one of these clients, Industrie Logistik Linz (ILL), to set up a separate business to supply workers to it and created Princess Personal Services (PPS). Over time, more clients of Mayer began contracting with PPS. The employees performing duties in relation to these clients, continued in the same roles, as did the administrative staff who performed most of their duties in relation to the clients contracting with PPS. When Mayer went into bankruptcy, the employees argued that their employment had transferred to PPS as a result of the clients’ contracts transferring, the provision of services under those contracts effectively being an ‘undertaking’ that transferred from Mayer to PPS. They claimed that PPS were therefore liable for their unpaid wages. Decision The ECJ confirmed that the ARD is to be given a wide interpretation to achieve the core aim of protecting employee rights; therefore, the technical concept of a ‘legal transfer’ should be flexible. The level of practical co-operation between PPS and Mayer was enough to show their shared intention to create a transfer that effectively transferred the relevant employees from the employment of Mayer to PPS. The ECJ also decided that where workers are incorporated into clients’ businesses, TUPE can apply, as the business entity which transfers from one agency to another is the group of wage earners specifically assigned to a common task. Impact The above case is of interest in two particular respects. Firstly, it is clear that TUPE may apply where contracts with a client are managed from a separate entity to the one with whom the employees contract. This will mean that those employees can claim employment rights against the company that performs the contract with the client. The second — and potentially more important — issue is that the government is currently planning to provide the same protection to agency workers as that provided to full-time staff. The extent of any such protection is currently unclear, but could include giving agency workers employee status. In which case, TUPE 2006 would also apply to transfer agency staff (including what we now call temporary workers) to the employment of another agency or client in the event that a contract is lost either by way of insourcing or recontracting out.
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