Employment considerations for RSLs

Sun 27 Jul 2008

RSLs go from strength to strength in terms of size and business progression. The trend for mergers shows no sign of changing, as RSLs seek to fortify their positions in the competitive marketplace. This article examines some of the employment implications around mergers.

Does TUPE actually apply to mergers?

Although there is an academic debate whether a transfer of engagements under section 51 of the Industrial & Provident Societies Act 1965 sidesteps the provisions of the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE), it is far safer to assume that TUPE does apply where the employees’ employer changes following a merger.

The reason for this is very simple - failure to consult properly and fully in accordance with TUPE can lead to an award of 13 weeks’ pay for each employee. A quarter of the annual payroll should be enough incentive to take the right steps. This liability can fall on either or both of the old and new employers.

What traps are there for the unwary?

When planning a merger which results in a change of employer, you need to be aware that:-

• The old employer must consult representatives of “employees affected”: not just those transferring but also those left behind.
  
• The old employer must send specified information to those representatives.
  
• If there are no representatives in place the old employer should organise an election before consultation can start. This needs to be factored into the planning process.
  
• The old employer must, at least two weeks before transfer, send Employer Liability Information (ELI) for all transferring employees to the new employer.  One person should be in charge of obtaining this information and keeping it accurate. If incomplete or inaccurate information is provided, the new employer can sue the old employer for losses which start at £500 for each employee.
  
• The old employer must give reasons for rejecting proposals made by the employee representatives.
  
• The new employer has to give details of “measures” it may take relating to the transferring employees – including redundancies (regardless of how many employees might be made redundant).
  
• “Measures” includes changes to contractual terms and conditions.
  
• The aim of consultation must be to reach agreement with representatives if the old employer has any measures to take in respect of remaining employees or if the new employer has any measures to take in respect of transferring employees.
  
• There is no specific timetable set by the regulations but there must be sufficient time to enable meaningful consultation to take place.

What happens for post-merger redundancies

• If the new employer has redundancy plans at the time of a TUPE transfer then collective consultation should have already begun under TUPE regulations, as the redundancies would be “measures”.
  
• If redundancy plans arise after the merger or if the redundancies have not been agreed pre-transfer, then there is only a requirement on the new employer to consult with representatives if there are 20 or more redundancies in a 90 day period at one establishment.
  
• The law does not define “establishment”. Once again it is better to err on the side of caution to avoid any risk of paying the punitive compensation for non-compliance. The damage for breach here is up to 90 days pay per employee.
  
• The new employer will also have a duty to notify the Department for Business, Enterprise and Regulatory Reform using form HR1.  Notification must be at least 30 days before notices of termination are issued if there are over 20 but less than 100 redundancies, or at least 90 days before notices of termination are issued if there are over 100 redundancies. It is a criminal offence if the new employer fails to notify.  This liability extends both to the organisation and to the officers, including the company secretary.
  
• Collective consultation with representatives is on broadly the same timetable as that for DTI notification. The aim of consultation must be to reach agreement with representatives on ways of avoiding redundancies, reducing the numbers to be dismissed and mitigating the consequences, for example agreeing selection criteria, voluntary redundancy programmes and redundancy packages.
  
• It is important to note that the phrase “redundancies” does not just mean job losses but also includes any proposal to terminate old contracts and issue new ones, even if it is intended that no-one will lose their job.

Author: James Lynas, Employment Consultant.

Article appeared in Inside Housing published 27th June 2008.