The Transfer of Undertakings (Protection of Employment) Regulations 2006

Made: 6th February 2006

Laid before Parliament: 7th February 2006

Coming into force: 6th April 2006

The Secretary of State makes the following Regulations in exercise of the powers conferred upon him by section 2(2) of the European Communities Act 1972[^f00001] (being a Minister designated for the purposes of that section in relation to rights and obligations relating to employers and employees on the transfer or merger of undertakings, businesses or parts of businesses[^f00002]) and section 38 of the Employment Relations Act 1999[^f00003].

Citation, commencement and extent

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• (1) These Regulations may be cited as the Transfer of Undertakings (Protection of Employment) Regulations 2006.

• (2) These Regulations shall come into force on 6 April 2006.

• (3) These Regulations shall extend to Northern Ireland, except where otherwise provided.

Interpretation

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• (1) In these Regulations—

• “assigned” means assigned other than on a temporary basis;

• “collective agreement”, “collective bargaining” and “trade union” have the same meanings respectively as in the 1992 Act;

• “contract of employment” means any agreement between an employee and his employer determining the terms and conditions of his employment;

• references to “contractor” in regulation 3 shall include a sub-contractor;

• “employee” means any individual who works for another person whether under a contract of service or apprenticeship or otherwise but does not include anyone who provides services under a contract for services and references to a person’s employer shall be construed accordingly;

• “insolvency practitioner” has the meaning given to the expression by Part XIII of the Insolvency Act 1986[^f00004];

• references to “organised grouping of employees” shall include a single employee;

• “recognised” has the meaning given to the expression by section 178(3) of the 1992 Act;

• “relevant transfer” means a transfer or a service provision change to which these Regulations apply in accordance with regulation 3 and “transferor” and “transferee” shall be construed accordingly and in the case of a service provision change falling within regulation 3(1)(b), “the transferor” means the person who carried out the activities prior to the service provision change and “the transferee” means the person who carries out the activities as a result of the service provision change;

• “the 1992 Act” means the Trade Union and Labour Relations (Consolidation) Act 1992[^f00005];

• “the 1996 Act” means the Employment Rights Act 1996[^f00006];

• “the 1996 Tribunals Act” means the Employment Tribunals Act 1996[^f00007];

• “the 1981 Regulations” means the Transfer of Undertakings (Protection of Employment) Regulations 1981[^f00008].

• (2) For the purposes of these Regulations the representative of a trade union recognised by an employer is an official or other person authorised to carry on collective bargaining with that employer by that trade union.

• (3) In the application of these Regulations to Northern Ireland the Regulations shall have effect as set out in Schedule 1.

A relevant transfer

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• (1) These Regulations apply to—

• (a) a transfer of an undertaking, business or part of an undertaking or business situated immediately before the transfer in the United Kingdom to another person where there is a transfer of an economic entity which retains its identity;

• (b) a service provision change, that is a situation in which—

• (i) activities cease to be carried out by a person (“a client”) on his own behalf and are carried out instead by another person on the client’s behalf (“a contractor”);

• (ii) activities cease to be carried out by a contractor on a client’s behalf (whether or not those activities had previously been carried out by the client on his own behalf) and are carried out instead by another person (“a subsequent contractor”) on the client’s behalf; or

• (iii) activities cease to be carried out by a contractor or a subsequent contractor on a client’s behalf (whether or not those activities had previously been carried out by the client on his own behalf) and are carried out instead by the client on his own behalf,

and in which the conditions set out in paragraph (3) are satisfied.

• (2) In this regulation “economic entity” means an organised grouping of resources which has the objective of pursuing an economic activity, whether or not that activity is central or ancillary.

• (2A) References in paragraph (1)(b) to activities being carried out instead by another person (including the client) are to activities which are fundamentally the same as the activities carried out by the person who has ceased to carry them out.

• (3) The conditions referred to in paragraph (1)(b) are that—

• (a) immediately before the service provision change—

• (i) there is an organised grouping of employees situated in Great Britain which has as its principal purpose the carrying out of the activities concerned on behalf of the client;

• (ii) the client intends that the activities will, following the service provision change, be carried out by the transferee other than in connection with a single specific event or task of short-term duration; and

• (b) the activities concerned do not consist wholly or mainly of the supply of goods for the client’s use.

• (4) Subject to paragraph (1), these Regulations apply to—

• (a) public and private undertakings engaged in economic activities whether or not they are operating for gain;

• (b) a transfer or service provision change howsoever effected notwithstanding—

• (i) that the transfer of an undertaking, business or part of an undertaking or business is governed or effected by the law of a country or territory outside the United Kingdom or that the service provision change is governed or effected by the law of a country or territory outside Great Britain;

• (ii) that the employment of persons employed in the undertaking, business or part transferred or, in the case of a service provision change, persons employed in the organised grouping of employees, is governed by any such law;

• (c) a transfer of an undertaking, business or part of an undertaking or business (which may also be a service provision change) where persons employed in the undertaking, business or part transferred ordinarily work outside the United Kingdom.

• (5) An administrative reorganisation of public administrative authorities or the transfer of administrative functions between public administrative authorities is not a relevant transfer.

• (6) A relevant transfer—

• (a) may be effected by a series of two or more transactions; and

• (b) may take place whether or not any property is transferred to the transferee by the transferor.

• (7) Where, in consequence (whether directly or indirectly) of the transfer of an undertaking, business or part of an undertaking or business which was situated immediately before the transfer in the United Kingdom, a ship within the meaning of the Merchant Shipping Act 1995[^f00009] registered in the United Kingdom ceases to be so registered, these Regulations shall not affect the right conferred by section 29 of that Act (right of seamen to be discharged when ship ceases to be registered in the United Kingdom) on a seaman employed in the ship.

Effect of relevant transfer on contracts of employment

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• (1) Except where objection is made under paragraph (7), a relevant transfer shall not operate so as to terminate the contract of employment of any person employed by the transferor and assigned to the organised grouping of resources or employees that is subject to the relevant transfer, which would otherwise be terminated by the transfer, but any such contract shall have effect after the transfer as if originally made between the person so employed and the transferee.

• (2) Without prejudice to paragraph (1), but subject to paragraph (6), and regulations 8 and 15(9), on the completion of a relevant transfer—

• (a) all the transferor’s rights, powers, duties and liabilities under or in connection with any such contract shall be transferred by virtue of this regulation to the transferee; and

• (b) any act or omission before the transfer is completed, of or in relation to the transferor in respect of that contract or a person assigned to that organised grouping of resources or employees, shall be deemed to have been an act or omission of or in relation to the transferee.

• (3) Any reference in paragraph (1) to a person employed by the transferor and assigned to the organised grouping of resources or employees that is subject to a relevant transfer, is a reference to a person so employed immediately before the transfer, or who would have been so employed if he had not been dismissed in the circumstances described in regulation 7(1), including, where the transfer is effected by a series of two or more transactions, a person so employed and assigned or who would have been so employed and assigned immediately before any of those transactions.

• (4) Subject to regulation 9, any purported variation of a contract of employment that is, or will be, transferred by paragraph (1), is void if the sole or principal reason for the variation is the transfer.

• (5) Paragraph (4) does not prevent a variation of the contract of employment if—

• (a) the sole or principal reason for the variation is an economic, technical, or organisational reason entailing changes in the workforce, provided that the employer and employee agree that variation; or

• (b) the terms of that contract permit the employer to make such a variation.

• (5A) In paragraph (5), the expression “changes in the workforce” includes a change to the place where employees are employed by the employer to carry on the business of the employer or to carry out work of a particular kind for the employer (and the reference to such a place has the same meaning as in section 139 of the 1996 Act).

• (5B) Paragraph (4) does not apply in respect of a variation of the contract of employment in so far as it varies a term or condition incorporated from a collective agreement, provided that—

• (a) the variation of the contract takes effect on a date more than one year after the date of the transfer; and

• (b) following that variation, the rights and obligations in the employee’s contract, when considered together, are no less favourable to the employee than those which applied immediately before the variation.

• (5C) Paragraphs (5) and (5B) do not affect any rule of law as to whether a contract of employment is effectively varied.

• (6) Paragraph (2) shall not transfer or otherwise affect the liability of any person to be prosecuted for, convicted of and sentenced for any offence.

• (7) Paragraphs (1) and (2) shall not operate to transfer the contract of employment and the rights, powers, duties and liabilities under or in connection with it of an employee who informs the transferor or the transferee that he objects to becoming employed by the transferee.

• (8) Subject to paragraphs (9) and (11), where an employee so objects, the relevant transfer shall operate so as to terminate his contract of employment with the transferor but he shall not be treated, for any purpose, as having been dismissed by the transferor.

• (9) Subject to regulation 9, where a relevant transfer involves or would involve a substantial change in working conditions to the material detriment of a person whose contract of employment is or would be transferred under paragraph (1), such an employee may treat the contract of employment as having been terminated, and the employee shall be treated for any purpose as having been dismissed by the employer.

• (10) No damages shall be payable by an employer as a result of a dismissal falling within paragraph (9) in respect of any failure by the employer to pay wages to an employee in respect of a notice period which the employee has failed to work.

• (11) Paragraphs (1), (7), (8) and (9) are without prejudice to any right of an employee arising apart from these Regulations to terminate his contract of employment without notice in acceptance of a repudiatory breach of contract by his employer.

Effect of relevant transfer on collective agreements

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Where at the time of a relevant transfer there exists a collective agreement made by or on behalf of the transferor with a trade union recognised by the transferor in respect of any employee whose contract of employment is preserved by regulation 4(1) above, then—

• (a) without prejudice to sections 179 and 180 of the 1992 Act (collective agreements presumed to be unenforceable in specified circumstances) that agreement, in its application in relation to the employee, shall, after the transfer, have effect as if made by or on behalf of the transferee with that trade union, and accordingly anything done under or in connection with it, in its application in relation to the employee, by or in relation to the transferor before the transfer, shall, after the transfer, be deemed to have been done by or in relation to the transferee; and

• (b) any order made in respect of that agreement, in its application in relation to the employee, shall, after the transfer, have effect as if the transferee were a party to the agreement.

Effect of relevant transfer on trade union recognition

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• (1) This regulation applies where after a relevant transfer the transferred organised grouping of resources or employees maintains an identity distinct from the remainder of the transferee’s undertaking.

• (2) Where before such a transfer an independent trade union is recognised to any extent by the transferor in respect of employees of any description who in consequence of the transfer become employees of the transferee, then, after the transfer—

• (a) the trade union shall be deemed to have been recognised by the transferee to the same extent in respect of employees of that description so employed; and

• (b) any agreement for recognition may be varied or rescinded accordingly.

Dismissal of employee because of relevant transfer

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• (1) Where either before or after a relevant transfer, any employee of the transferor or transferee is dismissed, that employee shall be treated for the purposes of Part X of the 1996 Act (unfair dismissal) as unfairly dismissed if the sole or principal reason for his dismissal is—

• (a) the transfer itself; or

• (b) a reason connected with the transfer that is not an economic, technical or organisational reason entailing changes in the workforce.

• (2) This paragraph applies where the sole or principal reason for the dismissal is a reason connected with the transfer that is an economic, technical or organisational reason entailing changes in the workforce of either the transferor or the transferee before or after a relevant transfer.

• (3) Where paragraph (2) applies—

• (a) paragraph (1) shall not apply;

• (b) without prejudice to the application of section 98(4) of the 1996 Act (test of fair dismissal), the dismissal shall, for the purposes of sections 98(1) and 135 of that Act (reason for dismissal), be regarded as having been for redundancy where section 98(2)(c) of that Act applies, or otherwise for a substantial reason of a kind such as to justify the dismissal of an employee holding the position which that employee held.

• (1) Where either before or after a relevant transfer, any employee of the transferor or transferee is dismissed, that employee is to be treated for the purposes of Part 10 of the 1996 Act (unfair dismissal) as unfairly dismissed if the sole or principal reason for the dismissal is the transfer.

• (2) This paragraph applies where the sole or principal reason for the dismissal is an economic, technical or organisational reason entailing changes in the workforce of either the transferor or the transferee before or after a relevant transfer.

• (3) Where paragraph (2) applies—

• (a) paragraph (1) does not apply;

• (b) without prejudice to the application of section 98(4) of the 1996 Act (test of fair dismissal), for the purposes of sections 98(1) and 135 of that Act (reason for dismissal)—

• (i) the dismissal is regarded as having been for redundancy where section 98(2)(c) of that Act applies; or

• (ii) in any other case, the dismissal is regarded as having been for a substantial reason of a kind such as to justify the dismissal of an employee holding the position which that employee held.

• (3A) In paragraph (2), the expression “changes in the workforce” includes a change to the place where employees are employed by the employer to carry on the business of the employer or to carry out work of a particular kind for the employer (and the reference to such a place has the same meaning as in section 139 of the 1996 Act).

• (4) The provisions of this regulation apply irrespective of whether the employee in question is assigned to the organised grouping of resources or employees that is, or will be, transferred.

• (5) Paragraph (1) shall not apply in relation to the dismissal of any employee which was required by reason of the application of section 5 of the Aliens Restriction (Amendment) Act 1919[^f00010] to his employment.

• (6) Paragraph (1) shall not apply in relation to a dismissal of an employee if the application of section 94 of the 1996 Act to the dismissal of the employee is excluded by or under any provision of the 1996 Act, the 1996 Tribunals Act or the 1992 Act.

Insolvency

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• (1) If at the time of a relevant transfer the transferor is subject to relevant insolvency proceedings paragraphs (2) to (6) apply.

• (2) In this regulation “relevant employee” means an employee of the transferor—

• (a) whose contract of employment transfers to the transferee by virtue of the operation of these Regulations; or

• (b) whose employment with the transferor is terminated before the time of the relevant transfer in the circumstances described in regulation 7(1).