New employment regulations published by the Government will help make corporate acquisitions easier, according to a leading Midland employment lawyer.
Tim Lang, partner and head of employment at Black Country law firm George Green, says the new Transfer of Undertakings (Protection of Employment) Regulations 2006 which come into force on April 6, will relieve the financial and legislative burden for existing employees, which is currently loaded on to the buyer of a business.
"The TUPE regulations were first introduced in 1981 to safeguard the employment and pension rights of employees when their employer was taken over, or their jobs transferred, or outsourced," he noted.
"However, the Government has realised that especially when it comes to insolvent businesses, the regulations are in many cases preventing buyers from acquiring the business and saving jobs.
"The new updated regulations will help the transfer of insolvent businesses. At present if a buyer acquires a company out of administration, then the buyer cannot make changes to employment conditions, as under the TUPE regulations all are protected. Now, however, the new owner will be able to agree changes with the workforce which he deems are necessary to ensure the survival of the company.
"Previously a new owner may also have become liable for redundancy, notice and holiday and other payments to employees which were not paid by the previous insolvent owner, effectively taking on their debts. Now, the Secretary of State will meet those statutory payments."
According to Mr Lang, it is not just when it comes to acquiring businesses out of administration that the new TUPE regulations will improve matters, by removing any uncertainty about the employment situation.
"The new regulations impose a duty on vendors to disclose all 'employment liability information' - the identity and age of employees; their statement of terms and conditions of employment; any disciplinary proceedings or grievance issued in the last two years; any court or tribunal cases brought by the employees in the last two years, or any court or tribunal cases which the vendor has reasonable grounds to believe that an employee might bring; and any collective agreement which will have effect after the transfer. If the vendor fails to do this, the purchaser can take the vendor to an employment tribunal, which will make a minimum award of £500 per employee."
According to Mr Lang, the new regulations are an attempt to update and clarify the original 1981 ones, which have been subsequently affected by case law. "This is one of the most complex and uncertain areas of employment law, and they apply to nearly all job transfer situations," he said.
"Many companies have been caught out over the transfer of even just one cleaner.
"These new regulations have been promised for the past five years, so I am pleased that they have finally been published. They will help clear up some doubt about the application of TUPE, but have also opened some new areas of uncertainty, which could affect the provision of professional services such as law, accountancy and property management and consultancy.
"The new regulations make clear that 'service provision changes' - first and subsequent generation contractingout, and contracting-in - are covered by TUPE, when there is an organised grouping of employees whose principal purpose is to carry out the contracted-out activities."