Category Archives: TUPE

When the music stops…

shutterstock_20212843The Government has published its response to the TUPE consultation.  They intend to change the TUPE regulations with effect from January 2014.  No draft regulations have yet been published.  This leaves a lot of sales teams and HR teams with a dilemma.

What will the TUPE regulations be when the work we are gaining today comes up for rebid?

There are transfers that were TUPE transfers under the current regulations which will not necessarily be TUPE transfers under the new ones.  The clear intention is to reduce the scope of service provision changes that fall within TUPE.  The new regulations are not yet written, and when they come into force it will take several years to get case law on what they actually mean.

The extended uncertainty period

I always think of this as the extended uncertainty period – a sort of Heisenberg’s law of legal change.  That is nothing new for HR. 

Make a plan for uncertainty

We need a plan that integrates with the rest of the business.

Selling/pitching

Is your sales team going to pitch/cost on the basis that:

  • TUPE does not apply to new incoming service contracts
  • TUPE may apply
  • TUPE will apply

The costs of each of these options are different, and so is the price to the customer (who may want the lowest possible price).  Are you going to be working on the basis of ‘costs plus’ where the customer pays if you have to pay off staff?  Who pays when the music stops?  Can you afford it to be you?

Losing/changing

If you are losing contracts that came in as TUPE contracts, are you going to treat this as:

  • TUPE does not apply (and make appropriate redundancy payments where necessary)
  • TUPE may apply and deal with it on a case by case basis (and schedule the time to decide)
  • TUPE will apply and try to persuade the successor organisation to agree

What are your plans for consulting with employees affected by these (non)TUPE transfers?

We will all be writing learned articles once the regulations are published – but there are live contracts due change service provider during the extended uncertainty period.

There are real people with jobs and mortgages to pay who are going to be asking – what happens to me?

Our job is to provide an answer, which means starting to plan for those changes and the uncertainty period.

Review existing contracts

Knowing how the land lies is always useful if you don’t know which way things are going to move.  It means you are not trying to process a vast amount of data when the final facts become clear.

Service provision

Now is a good time to review your contracts with clients or potential clients.  What do they say about:

  • who pays for what (indemnities and charges)
  • and who does what at that point
  • where the contractual obligations are tied into to specific TUPE regulations, and where they are free standing

What effect do they have?  Do your contracts with clients need changing or updating?

Employment contracts

What do your contracts, policies and agreements say?

  • Do you have a TUPE policy?  Will it need updating?
  • Do you have FAQs, or other TUPE related documents, to review
  • Do your contracts of employment give you the flexibility you need

Freelancers and sub-contractors

Calling someone self-employed, or paying them on invoice, doesn’t mean they are not an employee.  Do the sub contractors and freelancers you use pass the right tests for being in a business themselves?  If not, you could find some of them are really employees and covered by the TUPE regulations (more on that in my next blog).

  • Do you have written agreements with your freelancers and sub contractors?
  • Do they reflect the reality of the arrangement, or are they out of date?
  • Does the reality show that you are controlling them?

With the changes due to come into effect in early January 2014, some HR people are going to have a miserable Christmas sorting out end of year TUPE transfers – let’s hope it won’t be you and you will be fully prepared.

Click here to join our free Conversation on TUPE and the service sector.

Annabel Kaye is Managing Director of Irenicon Ltd, a specialist employment law consultancy.
Tel: 08452 303050                  Fax: 08452 303060
www.irenicon.co.uk
www.koffeeklatch.co.uk
www.balancingthebump.com
You can follow Annabel on Twitter

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A tale of two TUPEs

shutterstock_20212843“It’s a far better thing I do now than I have ever done before…”

Today I am going to tell you a story. Listen and pay attention, children, because there will be a test at the end.

Once upon a time a group of people in Europe thought it wasn’t fair that staff got fired when a business was sold. They also thought staff ought to be told in advance what was happening and what it would mean for them.

This resulted in the Transfer of Undertakings (Protection of Employment) Regulations 1981 (TUPE). This was a GOOD THING because lots of people didn’t get sacked. This was a BAD THING because the new boss couldn’t  just cut everybody’s pay.

It can be hard to tell a GOOD THING from a BAD THING, so you are going to have to pay attention.

It turned out that the Dutch have ways of doing business, like renting a business, that don’t really exist in the UK. The Germans had their own way of doing things, and so it went on.

Workers complained to the judges, saying they should keep their jobs when the business hadn’t been sold but their employer had changed. The judges said that even one part time cleaner could keep their job when their employer changed if they were an ‘organised grouping’.

Even the Germans, who are very good at being organised, were surprised. Everyone had to scratch their head about TUPE. This was a GOOD THING because it was fairer that all these business transfers were covered in the same way. This was a BAD THING because it meant it was hard for the boss to come up with a way of getting out of it all.

Bosses in the UK wanted certainty and ‘a level playing field’, although nobody had any as they had already been sold off years ago. The Government made new TUPE Regulations in 2006 which made it clear that the judges had been right.

All sorts of service industries from facilities management to PR were covered by the ‘service provision changes’ (SPC). This was a GOOD THING because people could stay in their old jobs without being sacked or having pay cuts. This was a BAD THING because the new boss couldn’t cut everybody’s pay.

A new Government arrived. They said it would be a GOOD THING for the bosses to be able to fire people more easily or cut their pay. Sacking people would reduce unemployment, and cutting their pay would encourage them to spend more money in the shops. Reducing unemployment and improving the economy are a GOOD THING.

The Government is asking for comments on making TUPE apply to some transfers and not others. This might be a GOOD THING because some bosses would make more money and might be a BAD THING because it would increase uncertainty.

Some service providers will find they are left with liabilities when their contracts end, since the ending of ‘gold plating’ (which was a BAD THING) means they will have to pay off workers they otherwise would have passed on to the new contractors.

This is a ……… THING – well work it out for yourself. Another round of TUPE changes is always a GOOD THING for employment lawyers (who wear wigs and not tupes at all).

Now here comes the test I promised. You need to make up your own mind and respond to the consultation documents by 11 April 2013. This is really important for anyone who is contracting out services, taking them back in house, providing services under a contract on an ongoing basis.

Click here to join the conversation on TUPE and the service sector and join our free teleseminar.

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Talking about complexity

Update.  The new TUPE rules coming into force progressively in 2014 will make this unambiguous – this post is now out of date. 

It’s been really interesting talking to people about my blog posts around TUPE and redundancy.   A number of serious legal practitioners assert that in a TUPE scenario the current employer cannot initiate consultation regarding post-transfer redundancies since they have no intention of implementing them.

It took a while to track down where the “current employer’s intention” came into it, and as far as I can see this comes from the idea that consultation is a conversation with a view to reaching/seeking agreement (1)   — and thus if the person initiating the conversation has no intention of implementing the project, then there is no such intent and so consultation has not been started.

Any consultation process, regardless of TUPE, can be challenged if there is no intention to try to reach agreement (and thus consultation is a sham). It is possible for the current employer and future employer in a TUPE scenario to sit down jointly with the employee representatives and start consultation with a view to reaching agreement on post-transfer redundancies.

There is a view that the TUPE regulations specify that the consultees must be employees of the person consulting them. (2)   The whole of TUPE is constructed around the legal fiction that anything done by the current employer is deemed to have been done by the future employer. (3)    So at the point of transfer earlier consultations, if properly conducted will be deemed to have been done by the future employer.

If the transfer is ‘hostile’ (as changes of contractor can often be), the situation is made more difficult for the future employer because TUPE does not allow them to insist that the current employer allows early access to the transferring staff.

If the future employer’s statement of measures is simply handed to representatives by the outgoing employer (current employer), the act of distributing the paperwork does not initiate ‘consultation’, since there is no dialogue and no attempt to reach agreement.

But, provided the ’statement of measures’ is properly worded, surely the future employer can say that they have started a process of consultation with people who are not yet their staff, as they are engaging with them (albeit at second-hand) “with a view to reaching/seeking agreement”.

If the current employer is being deliberately obstructive to the future employer and will not pass on contact details for the future employer so that a direct dialogue can be established, then subtler strategies to open the lines of communication with transferring staff will have to be adopted — but they are available.

The world of law, where we argue the equivalent of how many angels can we fit on a pin, and the world of men and women, where we are much more concerned with who is going to get hurt by the pin, do not naturally coincide.

Surely it can never be a wrong thing in employment law (with the exception of announcements governed by the Official Secrets Act, or Stock Exchange rules) for parties to sit down as early as possible to discuss what is being planned and see what can be agreed. The intention of the Business Transfers Directive 2001 (4) was always to encourage consultation and dialogue, not to prevent it. It would be an unusual employment tribunal that took the view that a real dialogue could not be initiated at the earliest possible stage provided the intention is there.
—————————————————————————————————————————————————
(1)   The TUPE reg 13(6) wording is that consultation is with employee reps “with a view to seeking their agreement”. The collective redundancy wording [TULR(Consol)A 1992, s 188, is “with a view to reaching agreement with the appropriate representatives”.
(2)  TUPE reg 13(6) provides that the employer of an affected employee who envisages he will take measures shall consult reps with a view to seeking agreement to the intended measures.
Prior to the transfer, the transferring employees are NOT employees of the transferee. The transferor’s obligation is to pass on the transferee’s measures statement [TUPE reg 13(2)(d)].
(3)  TUPE reg 4(2)(b) provides that any act or omission before the transfer is completed…..shall be deemed to have been an act or omission of or in relation to the transferee……….
(4)  A consolidation of the 1977 Acquired Rights Directive and intervening amendments

See our previous  blog

Annabel Kaye is Managing Director of Irenicon Ltd a specialist employment law consultancy

Tel: 08452 303050 Fax: 08452 303060
www.irenicon.co.uk
www.koffeeklatch.co.uk
www.balancingthebump.com
You can follow Annabel on Twitter

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Measure for Measure . . . TUPE and redundancy

We must not make a scarecrow of the law,
Setting it up to fear the birds of prey,
And let it keep one shape, till custom make it
Their perch and not their terror.
(Wm Shakespeare, Measure for Measure, Act II, Sc I)

The TUPE regulations are too dynamic for the comfort of those advising their employer (or their clients), with caselaw often changing between taking on a service contract and losing it again.   This is very anxiety-provoking for most HR practitioners, since ‘getting it wrong’ can mean their employer is taking on liabilities they otherwise need not, or, worse still, on the losing end of several employment tribunal claims.

This is particularly so when a TUPE transfer involves potential headcount changes and redundancies.

The legislation on redundancy and TUPE intertwine and interleave, and it can be tricky working out who needs to be consulted about what, in what format, over what period of time, and by whom.   So let’s have a go.

Consultation TUPE consultation Redundancy consultation
Statutory obligation to inform or consult with appropriate representatives Always, no threshold of employee numbers 20 plus redundancies at one establishment within 90 days
Appropriate representatives Reps from recognised trade union; or employee reps appointed or elected by affected employees for another purpose; or specially elected/appointed employee reps Reps from recognised trade union; or employee reps appointed or elected by affected employees for another purpose; or specially elected/appointed employee reps
Statutory Timescales No defined statutory minimum period of consultation Information about transfer given to reps long enough before the transfer to enable consultation (with a view to seeking agreement) to take place on the ‘measures’ to be taken by either employer Less than 20 redundancies  – no specified timescale20+ redundancies at least 30 days before first dismissal takes effect100 +plus redundancies; 90 days Consultation ‘in good time’
Description of employees covered by the consultation Anyone who may be affected by the transfer (not just those transferring) Anyone at risk, and those who  may be affected by measures taken in connection with those dismissals
Duty to inform Inform, in writing: fact of transfer, date, reasons, implications for affected employees, measures envisaged in relation to affected employees Inform, in writing: reasons; numbers and descriptions of employees proposed to be redundant, and total number of employees of each description at the establishment; proposed method of selection, and proposed method and timing of dismissals; proposed redundancy payments; number of agency workers working for employer, where in the business, and doing what
Duty to consult With a view to seeking agreement to intended measures, considering representations, and stating reasons if proposals rejected With a view to reaching agreement, about ways of avoiding the dismissals, reducing the numbers, and mitigating the consequences
On whom duty is placed Transferor to consult; transferee to provide ‘measures’ statement Employer
Penalties Up to 13 weeks’ pay (statutory maximum not applying) Protective award up to 90 days’ pay

The Government made a call for evidence on ways to improve TUPE, which closed on 31 January 2012.  No draft legislation has been published.

TUPE caselaw is developing all the time.  Where redundancies are to take place in a TUPE scenario, then both sets of regulations and caselaw have to be considered and applied.

The redundancy consultation process and timing requirements are currently the subject of consultation which ends on 19 September  (http://www.bis.gov.uk/assets/biscore/employment-matters/docs/c/12-808-collective-redundancies-consultation.pdf).  It is proposed to shorten the consultation period for 100+ redundancy exercises.

Many of the toughest issues around TUPE, economic technical or organisational dismissals (ETOs) and collective redundancies (or finding alternatives to them) are most effectively resolved by having a good consultation process.

Having clear organisational and commercial objectives does not mean that the way of achieving these is set in stone, and there is a real difference between the aftermath of a well constructed and well consulted process, and the fall-out from a  rushed compliance exercise.

As long as the law applies to what employers can do to employees at work, there is always going to be an area of ‘grey’.  It is simply not possible to arrive at a system that is both predictable and clear and also flexible and fair (https://irenicon.wordpress.com/2011/06/10/red-tape-and-fairness/) .

If we accept this as a fact and work within it, then it becomes obvious that the way to deal with the ‘grey’ areas is to have a conversation – in other words, to consult.   If you do this in a TUPE context you will quickly discover that some people:

  • don’t want to TUPE through and would be happy to be made redundant (whether or not a genuine redundancy situation exists)
  • are not willing or able to change location/work base if that is what is needed
  • are not willing or able to learn new working methods and techniques

and by way of comparison some people

  • are keen to expand their skill base
  • are keen to change location
  • have unused skills in their current role that would be useful in a new structure
  • will do just about anything to keep a particular job

I have often sat down with HR teams and Directors who have said “X will never do this, Y will never agree to that”.  Sometimes they are right, but equally they can be wrong.  Flexibility can be as much influenced by circumstances as by personality.  We don’t know what people are keen to do until we ask them, and lay out the options for them.  Good consultation can have useful individual results, as well as improving the atmosphere at a challenging time.

For regular free teleseminars on TUPE, redundancy and more check our events page.  We are running a new seminar on how to handle the two processes simultaneously.

Click here for more about this

Annabel Kaye is Managing Director of Irenicon Ltd, a specialist employment law consultancy.
Tel: 08452 303050 Fax: 08452 303060
You can follow Annabel on Twitter
www.irenicon.co.uk
www.koffeeklatch.co.uk
www.balancingthebump.com

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TUPE or not TUPE

. . . or The slings and arrows of outrageous fortune

In Eddie Stobart v Moreman the Employment Appeal Tribunal (EAT) decided that, for there to be a TUPE (Transfer of Undertakings (Protection of Employment) Regulations 2006) “service provision change” the group of employees had to be deliberately organised to service the particular  client. The EAT decided that, in the Stobart case, the fact all the employees happened to work on a shift that provided services to that client was not enough. The TUPE regulations define a service provision change transfer as applying when there is an:

“organised grouping of employees”, which has
“as its principal purpose the carrying out of the activities … on behalf of the client.”

The EAT decided where a combination of circumstances (largely shift patterns and working practices) meant that a group of employees were as a matter of simple fact working mostly on tasks which benefitted a particular client did not meet this test.

The EAT pointed out that TUPE does not say merely that employees should in their day-to-day work in fact principally carry out activities for the client in question – TUPE requires that the activities are the principal purpose of the organised grouping of employees to which the individual belongs.

Whether an individual employee works 50% or more for a particular client is not any part of the test under TUPE 2006. It was part of the test under the 1981 version of TUPE, but that wording did not continue into the current 2006 version of the Regulations.

There are still a number of grey areas left in TUPE – as it seems there have always been. For example – could an “organised grouping” have more than one “principal purpose”? It might be that the “time proportion” test is relevant here – applying to the whole grouping. Or perhaps “principal purpose” is to be judged by the priority of the work?

The world of work streams and dotted line reports has yet to be fully explored in the context of TUPE. Does work streaming mean no group has a principal purpose? Or should we be tempted to say that work streaming means no-one is part of an organised grouping of employees?

What difference does it make in real terms if a transfer is, or is not, covered by TUPE?

A)     If there is no TUPE transfer, then any workers who were working on the project/task/service will not go through to the new contractor as the new contractor’s employees.

  • It is the current employer’s job to find them alternative work, reassign them, or if necessary make them redundant.
  • Any liability for back pay or benefits remains with the current employer.
  • All unfair dismissal, discrimination, equal pay risks remain with current employer.
  • All contractual liabilities remain with current employer.

B)     If there is a TUPE transfer, then the same workers will (as a matter of law) become the new contractor’s employees (with their full service and contractual entitlements – save for pensions – intact).

  • It is the new employer’s job to find alternative work, reassign or if necessary make them redundant.
  • All the other liabilities under A) transfer to the new employer

Where an argument breaks out between the employers about whether TUPE applies, individual employees may feel lost in the no-man’s land of litigation between two employers who are having some kind of custody battle where no-one wants the kids.
HR on both sides can do a lot to make sure that the original tender documents (where they exist), pitches for business,  take on board the statutory TUPE obligations. HR can go beyond that, if allowed into the negotiating process early enough, and can help shape a contract for services that incorporates thinking about employees and service levels from the start.

Don’t forget the TUPE regulations are a set of minimums not a set of maximums.

Annabel Kaye is Managing Director of Irenicon Ltd, a specialist employment law consultancy.
Tel: 08452 303050 Fax: 08452 303060
You can follow Annabel on Twitter
www.irenicon.co.uk
www.koffeeklatch.co.uk
www.balancingthebump.com

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TUPE or not TUPE

. . . or The pangs of despised Love, the Law’s delay

For the last year or so I have been talking about TUPE on a regular basis, both in teleseminars and in person. So far, no employee engagement, talent management or onboarding specialist has turned up.

Is TUPE seen as a completely unrelated discipline or as a simple compliance exercise? This may be why so many of the questions I deal with are around “What do we have to do?” instead of “This is what we need to achieve…”

Consultation

The consultation elements of TUPE are key to success or failure. There are two employers – the current employer (transferor) and the future employer (transferee). The law treats the two for most purposes as if they are one employer, but not at this moment. The transferor has to give elected employee reps information about the transfer, and to state what measures it is proposing to take (sometimes known as a “measures statement”), and the ‘measures’ it expects the transferee to take. The transferor is required to consult the employee reps about its ‘measures’ – with a view to seeking employee agreement to them.

Misconceptions

Often that the transferor fails to organise TUPE reps, believing that there is a ’20 person’ threshold to this requirement. That threshold is a redundancy one – it does not apply to TUPE. There is no statutory timetable for TUPE consultation unless more than 20 employees are at risk of redundancy and the redundancy thresholds are triggered. It can be tricky to do a good consultation exercise in no time at all whatever the law says. Many HR departments think they have to consult only on proposed changes to contracts (most of which would be difficult under TUPE anyway) whereas the ‘measures statement’ should cover changes to the contractual terms (such as pension schemes so far as TUPE permits) but also to non contractual arrangements (e.g. discretionary sick pay and bonus schemes).

Measures

The transferee is required by TUPE to provide their ‘measures statement’ to the transferor in good time so that the transferor can pass it on to the employee reps. Sometimes the transferor will even allow the transferee access to staff to begin their own consultation process. But there is no requirement for the transferor to allow personal contact or meetings with staff prior to the transfer date. If the two parties are rival contractors (rather than a situation of client outsourcing), there can be little practical motivation for the outgoing employer to invest a lot of time in the consultation process for outgoing employees. Some employers simply make an announcement and say “your new employers will tell you everything when you turn up to work for them”.

Compliance is not much of a goal

The real problem for the transferee is not legal compliance, which can be fairly easily achieved in most circumstances. Difficulties arise because the incoming employees are bringing with them the whole psychological contract they had with their existing employer, along with their own personal set of misunderstandings about their contractual and legal entitlements, their expectations of how they should be treated, and their memories of how they were. They will be adding to that psychological contract how they are treated during this process – by the transferee and by their soon to be ex-employer, the transferor It’s a potent mix that can result in three way tribunal claims, disaffected employees and a lot of wasted time and effort.

If the transferee is “allowed in” prior to the transfer, the consultation process can be a wonderful way to start to understand these issues, and to arrange to bring those individuals into their new employment relationship with a better basis for working together. At any point consultation can also be the time when a mini ‘skills audit’ is done to see what training is needed to properly induct the new team members. It can be a ‘getting to know you’ process and a ‘checking we understand the data’ process. Alternatively, you can make this process into: ‘This is where we tell you what we want you to know, and you just listen and obey’.

The spirit of consultation is often overlooked in the rush to compliance, and many highly motivated and resourceful individuals start working for their new employer confused, angry and resentful. It is an extremely hard thing for some people to be sent to work for someone they have never met, never applied to work for or indeed wanted to work for. We need to recognise that, and build our processes accordingly. This is the first opportunity you have to show them how your ’employer brand’ really works – are you going to fail?

Annabel Kaye is Managing Director of Irenicon Ltd, a specialist employment law consultancy.

Tel: 08452 303050 Fax: 08452 303060
You can follow Annabel on Twitter
www.irenicon.co.uk
www.koffeeklatch.co.uk
www.balancingthebump.com

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TUPE and the Big Society

Charities who are tendering to provide services that are currently provided by local authority, civil service or quangos find themselves caught in the Transfer of Undertakings (Protection of Employment)  Regulations –  TUPE  which may apply where a change of service provider is taking place.

TUPE has the effect of putting the new employer in the legal situation they would have been in if they had employed the transferring staff from the day they started with their original employer (the transferor).  Outstanding liabilities under the contract will transfer through to the new employer – anything from accrued holiday, to back pay, equal pay claims as well as unfair dismissals relating to the transfer.

Government itself has created an extra problem for charities by agreeing with unions a set of protocols that go beyond the basic legal provisions of TUPE.   For example, under TUPE there is no obligation on an employer to create a final salary pension scheme, or to honour discretionary termination payments.  But the Cabinet Office Statement of Practice concerning Staff Transfers in the Public Sector sets out “there should be appropriate arrangements to protect occupational pensions, redundancy and severance terms of staff in all these types of transfer”.  Whilst this guidance has been revoked for local authorities, it has not been revoked for all of the public sector.

There is a significant difference between the redundancy entitlements of ordinary employees and civil servants.   An ordinary worker is entitled to statutory redundancy pay at a maximum allowable weekly pay of £430 whereas the civil service redundancy scheme has no limit and even has a minimum.  Statutory redundancy is calculated on age related multipliers of a week (or a week and a half, or half week depending on the age of the worker) whereas the Civil service scheme is calculated with multipliers of months at full pay.

Whilst charities do not always pay their existing employees at the statutory basics when it comes to contractual benefits, few charities are well enough funded to have staff on the same terms as civil servants.

For example:

Statutory entitlement Typical local government/civil service
Holiday 5.6 weeks including bank holiday 6.6 weeks including bank holiday
Sick pay SSP only 6 months full pay, 6 months half pay
Redundancy Statutory only maximum allowable weekly pay £430Years of service multiplied by weeks (or 1.5 weeks or 0.5 weeks, age dependant) No maximum weekly pay (minimums apply)Years of service multiplied by months
Pensions Stakeholder/NEST Final salary

Charities who are receiving staff via TUPE transfers find themselves paying higher benefits than they normally pay, with much higher termination payments if they cannot afford to keep the staff on.  Charitable funding is often  quite short term, often project by project, or year by year at best.  Such higher benefits and termination payments can risk the viability of the Charity itself if they are not foreseen and budgeted for.

Charities who intend the service to be provided by volunteers may be able to work around the TUPE problem if their existing delivery model is long standing and pre dates the transfer.  The situation is changing, but it is still a high risk scenario for many Charities to simply ‘pitch’ to provide services that are currently provided by salaried staff.

My experience of working with social enterprises and charities and helping them plan TUPE transfers is that much of the advice they are given encourages them to take on obligations beyond the ones they are obliged to in law (or even by the government’s own standards) and leaves them very vulnerable if there are changes in funding at a later stage.   A well planned tender to outsource work needs to properly evaluate the TUPE situation and prepare for it.

See our previous blog

To be continued

Christopher Head is qualified as a barrister.  He edited Harvey on Industrial Relations and Employment Law and  a director of Irenicon Ltd a specialist employment law team.  To join the conversation about TUPE you can join our free KoffeeKlatch teleseminar on TUPE by registering via http://koffeeklatch.co.uk/category/tupe/

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