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INSTITUTE OF EMPLOYMENT RIGHTS

PENSIONS AND TUPE

Richard Arthur

Thompsons Solicitors

24 February 2009

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PARTICULAR PROBLEMS

• Changes to terms and conditions;

• The Werhof case;

• Retention of Employment Model;

• Information and Consultation; and

• Pensions.

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CHANGES TO TERMS AND CONDITIONS

• If the sole or principal reason for the variation is (1) the transfer itself or (2) a reason connected with the transfer that is not an ETO reason, the variation is void;

• ETO reason “…..entailing changes in the workforce”;

• Change in headcount or job description;• Variations permitted where the reason is

connected with the transfer, and is an ETO reason;

• Does that comply with the ARD?

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CHANGES TO TERMS AND CONDITIONS

London Metropolitan University v Sackur and others:

• two universities merged in August 2002;

• In 2004, the merged universities terminated contracts and sought to harmonise terms and conditions;

• Were the dismissals transfer-connected?

• Was there an ETO reason?

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CHANGES TO TERMS AND CONDITIONS

ET:

• dismissals were transfer-connected despite the two year gap between the transfer and the dismissals; and

• No ETO reason because the reason was to harmonise (no change in the workforce).

EAT agreed.

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CHANGES TO TERMS AND CONDITIONS

Power v Regent Security Services Ltd:• Pre-transfer contractual retirement age of 60;• Post-transfer, employer and employee agree to

retirement age of 65;• Transferee sought to retire employee at 60; and• Transferee argued change to 65 was transfer-

connected, no ETO, and therefore void.

EAT: “…No reason why the employee should not hold the transferee to the new term…”.

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The Werhof Case

• W’s rate of pay determined by collective agreement between trade union and employer’s federation;

• Employment transfers;• Transferee not party to bargaining machinery;• Transferee concludes new agreement with Works

Council; • Trade union concludes new agreement with employer’s

federation;• W argues that his pay should be determined in

accordance with the new agreement between the trade union and the employer’s federation.

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The Werhof case

ECJ:

• “Static” interpretation:

• Only the agreement in force at the date of transfer transfers;

• (Also employer’s rights under Article 10 ECHR);

• W could not rely on the new agreement.

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The Werhof Case

• Appears to undermine transfer of collectively agreed pay;

• But, in Werhof, there were two separate agreements;

• Entitlement to subsequent NJC awards should still transfer:

• Hughes v Aramark;

• Alemmo-Herron v Parkwood Leisure Ltd.

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The Retention of Employment Model

• To allow staff who would otherwise transfer in PFI/PPP schemes to remain employed in the NHS;

• Originally intended for non-supervisory staff in catering, cleaning, laundering, security and portering;

• Advantages: job security and pensions;• Employee objects to transfer and enters

secondment arrangement.

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The Retention of Employment Model

The Celtec case:• Transfer of vocational training to TEC’s in

1990;• Civil servants continue to be employed by

Department of Employment until 1993, working under secondment for TEC’s;

• Became employees of TEC’s in 1993;• Q: What was the date of transfer of

employment?

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The Retention of Employment Model

Answer (House of Lords):

• If employee not given option of transfer, but is instead offered opportunity of secondment, she hasn’t objected to the transfer of her own free will;

• It follows that her employment transfers at the start of the secondment.

Q: Does this cast doubt on the ROE Model?

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The Retention of Employment Model

Answer: Probably not, provided that four conditions are satisfied:

• Employee given free choice as to whether to transfer;

• Employee freely decides not to transfer;• Employee objects to transferring

(preferably in writing); and• Employee enters into new contract

permitting secondment.

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The Retention of Employment Model

• The Department of Health agrees that ROE survives Celtec;

• Subsequent EAT decision in Capita Health Solutions v (1) BBC and (2) McLean can be distinguished.

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Information and Consultation

• “Long enough before the transfer to enable consultation to take place…”;

• Fact of transfer, date and reasons;• Legal, economic and social implications

for affected employees;• “Measures” old employer envisages it will

take; and• “Measures” old employer envisages new

employer will take

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Information and Consultation

• “Affected employees”-any employee who may be affected by the transfer, regardless of whether they actually transfer;

• Election of employee representatives;

• “Measures”: any changes to existing working practices or arrangements.

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Information and Consultation

• Obligation to consult only where employer envisages taking “measures”;

• Employer must consider union’s representations and reply to them;

• With a view to reaching agreement;

• Up to 13 weeks’ pay per affected employee;and

• Award is punitive.

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Pensions: The Basics

Past Service and Future Service:• No contractual right to future service benefits as

pre-transfer;• Past Service: Pension Schemes Act 1993 and

Preservation Regulations;• Future Service: Sections 257 and 258 Pensions

Act 2008 and Transfer of Employment (Pension Protection) Regulations 2005;

• Public Sector: Best Value Authorities Staff Transfers (Pensions) Direction 2007 and Cabinet Office Statement of Practice 2005.

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Pensions: Past Service

PSA 1993 and Preservation Regulations apply to “early-leavers”:

• Money purchase scheme: accrued value;• Final salary scheme:

(i) <3 months: refund of contributions;

(ii) >3 months, <2 years: refund of contributions or “cash transfer value”; and

(iii) >2 years: deferred pension or “cash equivalent transfer value”.

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Pensions: Compulsory Transfers

Can be forced upon active, deferred and pensioner members on reorganisation or business transfer where:

1. Transferor scheme trustees consent; and2. Transferor scheme actuary certifies credits in

transferee scheme as no less favourable (GN16 Certificate).(Actuarial Standards Board: only “exceptionally” will a transfer from a db to a dc scheme satisfy the Preservation Regulations).

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Pensions: Future Service

Pensions Act 2004 and Transfer of Employment (Pension Protection) Regulations 2005:

• DB scheme meeting defined standards; or• DC scheme (matching employer contributions up

to 6% of pay); or• Stakeholder scheme (effectively a personal

pension).

Employer gets to choose which, regardless of transferor scheme.

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Pensions: Public Sector Transfers

Pensions Direction 2007 and Cabinet Office Guidance 2005:

• Future Service: contracting public authority must ensure that contract provides for “broadly comparable” pension;

• GAD: in the opinion of a qualified actuary, no identifiable member will suffer material detriment;

• DC scheme can not be broadly comparable with a DB scheme;

• GAD Passport Scheme in local government discontinued;

• Enforcement: Section 101 Local Government Act 2003; non-local government-more difficult.