Ask the expert: Practice merger

Q. Due to recent issues trying to recruit new GPs, the partners of my practice have been in discussion with another local practice about the possibility of taking them over and pooling resources. I believe that the two nurses and three receptionists who would move to our practice currently have more generous terms with regard to salaries, sick pay and holidays. Would we be obliged to increase our current staff’s benefits to match their new colleagues? I’m not sure our practice can afford to do so.

A. In short, the current staff’s terms would remain the same and would not need to be harmonised with the incoming staff members. However, the Transfer of Undertakings (Protection of Employees) Regulations (TUPE) will likely apply when two practices merge.

TUPE was introduced in 1981, overhauled in 2006 and then amended 2014 and is a complex and detailed piece of legislation. The main purpose of the regulations is to protect employees where the business (or part of the business) they work in changes hands either through an acquisition, outsourcing or a merger.

When considering if TUPE applies, points to consider include:

• Is there an identifiable economic entity that is capable of being transferred?

• Will the economic entity retain its identity after the transfer in question?

Employers involved in a TUPE situation will either be the transferors (the outgoing employer) or the transferees (the incoming employer).

To ensure that all parties affected by the transfer are aware of the situation, the regulations place certain employer obligations on both parties to inform and consult with representatives of the employees affected.

Employee representatives need to be elected where there is no trade union in place or where there are more than 10 employees affected. Representatives must be elected and cannot be picked by the employer.

The transferor’s obligation is to provide certain information about the employee’s transferring and any associated liabilities, while the transferee’s obligation is to provide information to the transferor to allow them to properly inform and consult. Failure to consult and inform employees can result in tribunal awards of up to 13 weeks’ pay per employee, even if the rest of the employer’s obligations were carried out.

The employer must provide the following information to the representatives:

• That the transfer is taking place

• When the transfer is happening

• Why the transfer is happening

• Any implications for affected employees

• Any measures it envisages will be taken in connection with the transfer.

So that the transferee can consult on any envisaged changes, the transferor needs to provide necessary information, no later than 28 days before the transfer. This is known as employee liability information and includes the following details:

• Identity of the transferring employees

• Their main contractual terms

• Any collective agreements in place

• Any disciplinary or grievance action in the last two years

• Any legal proceedings bought in last two years

• Any claims that the transferor believes an employee may have reasonable grounds to bring.

Failure to comply in providing this information may result in an employment tribunal ordering the transferor to pay the transferee compensation of a minimum of £500 per employee.

The transferee takes over the contracts of all the employees who were employed immediately before the transfer and cannot pick and choose which employees to take on and cannot dismiss employees just because the transfer has occurred.

The transferee takes over all rights and obligations arising from those contracts of employment, except for some pension rights. So, an employee may make a claim to a court or an employment tribunal against the transferee for, say, unfair dismissal even though the dismissal occurred before the transfer took place.

The purpose of the TUPE regulations is to protect employees’ terms and conditions when a transfer takes place and so they restrict the ability of the transferee to vary the employees’ terms and conditions for an indefinite period.

Terms and conditions may only be varied in two situations:

1. Where the changes are unconnected with the transfer, for example where an employee is promoted.

2. Where the reason is connected to the transfer, but is for an economical, technical or organisational reason (an ‘ETO’) entailing changes in the workforce. A change in workforce can include a change in the location of work. An example of an ETO reason might be a restructure.

Terms that have been incorporated from collective agreements may be varied after a year has passed. Due to the complex nature of this issue, where employers are seeking to change the terms and conditions of employees protected by TUPE, legal advice should be sought.

An employee's period of continuous employment is not broken by a transfer.

Employees have the right to object to the automatic transfer of their contract if they inform either the transferor or the transferee of their objection. In this situation the employee is considered to have resigned.

Neither the new employer nor the previous one may fairly dismiss an employee because of the transfer itself or for a reason connected with the transfer. If they do, that dismissal will be automatically unfair except where that reason is an ETO.

Dismissals on the grounds of genuine redundancy are generally permitted by TUPE as they will normally be for an ETO reason. However, advice should always be sought in these situations.

TUPE also applies where there has been a service provision change, such as cleaning or IT support being contracted out. Changing who provides such services by outsourcing, re-tendering or bringing them back in-house are likely to be considered a transfer under the regulations.

When assessing whether there has been a service provision change, such aspects to look at are:

• Identify the activities performed by the transferor

• Consider whether these activities are fundamentally the same post-transfer

• Consider whether, immediately before the transfer, there was an organised grouping of employees which had the principle purpose of carrying out the activities on behalf of the client

• Consider whether short-term contract/provision of goods exception applies

• Consider whether each individual claimant is assigned to the organised grouping.