Analysis of The Various Legal Provisions - Research Paper Example

INTRODUCTION: "Employment law is something which affects most of us at sometimes during our lives, and it is the area of law that is probably the most complex and the most changed and added to. It can be said that it is also the area of law most often ignored or overlooked by employers in small to medium businesses".1 This is possibly due to the changing priorities and the lack of a separate department to look into the employment legal aspects. The ignorance or overlooking of some of the provisions of the employment laws sometimes may lead to unnecessary consequences resulting in unwanted litigations. However dealing with employment laws is a day to day affair for any business or industrial undertaking irrespective of the size and magnitude of the operations. Hence it becomes very essential that the employers understand and appreciate their legal obligations under the employment laws especially when the employers are keen of making changes in the working place or in the terms of employment of the workers in order to be competitive and efficient. This paper envisages bringing out a comprehensive review of the various legal provisions governing the restructuring of the work place as a result of either changes in the business due to various reasons like mergers or acquisitions or changes in the employment contracts due to decision by the employer to change in working hours and to outsource some of the workloads. RECENT TRENDS IN UK EMPLOYMENT LAWS: As a matter of fact, "United Kingdom [UK] employment law has mushroomed in the recent years. Modern UK employment law first saw huge changes during the 1970's. Several Acts of Parliament introduced new and complex legislation in areas such as Equal Pay, Sex Discrimination, Race Discrimination, and Health & Safety. Since then there have been even further extensions to UK employment law, particularly brought about by UK's membership of the European Union which required changes to the UK employment Law. Changes to the UK employment law have included areas such as the Transfer of Undertakings, Disability Discrimination, National Minimum Wages and Working Time regulations. Year after year UK employment law continues to extend in all areas of working life."2 In UK the main employment legislation is the Employment Rights Act 1996. Labour legislations like Redundancy Payments Act 1965 in UK and the Acquired Rights Directive 1977(ARD) concerning the employment regulations of EU are examples of the development of the legal face of the employment legislations. Similarly every year tens of thousands of UK companies fall foul of UK employment law, many due to lack of knowledge of the legal obligations they face. As a result many face huge compensation and legal costs.3 RESTRUCTURING OF THE ORGANISATION: During the progress of the business, there may be occasions when the management may decide to alter the structure of the organization by resorting to various methods of restructuring. New developments in technology, changes in the needs of the customers as also the rapid changes in the economy due to globalisation may necessitate the changes in an organisation. As a result of these changes and also to become more efficient and competitive in the business, an employer would like to restructure his organisation. (The reason for restructuring the organization is because of changes in technology, in customer expectation and alterations in the economy proves that the world is a different place from what it was.4 As a result of these changes the employers of any company wishes to restructure their organization, in order to meet the changing demands of the society and also to be efficient and competitive. { please check this whether right to put in or wrong]) delete this typed in red. I have changed. The way in which the organization decides to restructure depends on the circumstances of the individual cases and also the profitability of the organization. Such restructuring may be through internal or external changes. The internal changes may include variation in the contractual terms. In order to increase the profitability of the company, most of the times, the firm would like to increase the working hours or would make employees to work throughout the 24 hours on shift basis all through the year. The company may also buy and install new machineries which may necessitate longer hours to be put in by the workers. In all these cases, since there are major changes in the existing conditions of employment, the employers are bound to take into account the relevant provisions of various statutes governing the protection of the employee's rights. At times, when a company feels that by acquiring another business or by merging itself with the other entity, it can take the competitive advantages of economies of scale and better distribution and marketing set up it may decide to take the course of merger or acquisition which is known as external changes. Apart from other legal considerations of merger or acquisition scheme, there are bound to be legislative barriers of employment laws which come in the way of such mergers or acquisitions. This part will be explored later on. INTERNAL CHANGES - the Contractual position: With the view to improve the profitability of the organization the management may decide to engage any of the following measures in order to be efficient: Change in the working hours Introduction of new equipment or machinery to improve the efficiency of the workforce which may result in the change of the working hours Any such change in the hours of work may be viewed as a variation in the existing terms of employment, whether it is an individual contract or a collective agreement made with the recognized trade unions of the company. In such cases it is obligatory for the company to get the consent of the worker or the union concerned for the change in the working conditions. The contract of employment is the foundation of the legal relationship between employer and employee5 .It is one of the most dynamic of agreements, changing frequently during its course as circumstances alter. Any variation in contractual terms however requires the assent, express or tacit of both parties and be supported by consideration". This tacit consent may be represented by the employee by carrying on working under altered conditions.6 Therefore if a change is made without consent of the individual employee, then this will amount to a breach of contract and entitles the employee to make a claim for breach of contract. There are rules which appear to apply in employment contracts and they are as follows:- * A change will only amount to a breach if the contract does not expressly or impliedly provide for a change. A signed written contract that states that changes to terms will take place in a specified way are usually adequate to provide that a change is a not a breach. A contract that is merely evidenced by a written statement of terms, but it is not signed does not have the legal status of a written signed document. Evidence of custom and practice can be introduced that may have the effect of curbing the intention of the employer.7 * If the contract contains an express term, for instance flexibility of hours, making relevant changes will not breach the contract, providing there is no evidence of breach of the implied term of trust and confidence caused by the manner of activating the term.8 However "It is fairly difficult in the ordinary way to imply a variation of contract and it is very necessary, if one is to do so, to have solid facts which demonstrate that it was necessary to give business efficacy to the contract that the contract should come to contain a new term implied by way of variation." [Horrigan v Lewisham]9 *Courts and tribunals can also conclude that there was an implied term in the contract permitting changes to work to be made. This is especially the case where there are technological changes, re-organization of work schedules, management changes etc, where it is judged that some types of changes are part and parcel of a modern workplace. In Cresswell v Board of Inland Revenue10, it was held that the defendant employer's introduction of computers did not change the nature of job. However the employer unilaterally enforces a variation without active consent, he repudiates the contract of employment and the employee is put to his election whether to accept the fundamental breach and resign to or to carry on working and seek damages.11 Therefore employers who wish to change terms and conditions should give proper notice to terminate one contract and offer another; otherwise there is a risk that the employee can claim in the courts or tribunals. Exhaustive provisions have been made in the various UK Employment legislations to deal with the situations arising out of changes in the terms of employment. But however it is difficult for employers to make vital changes because of the risk that the employee may claim for breach of contract or unfair dismissal. [ this is o.k. I have changed the font colour: delete this portion of your note. Correct this one marked with red if any wrong English and check whether its right to draw such problems of employers.] Trade Unions:- "An employer with more than 20 workers is obliged to recognise a trade union where there is majority support among the workforce for recognition. Where an employer does not recognise a union voluntarily, the union can follow a statutory procedure to obtain recognition. Recognition obtained through the procedure entitles the union to bargain collectively on pay, hours and holidays. The employer and trade union may enter into a collective agreement covering matters such as terms and conditions of employment, disciplinary procedures, and hiring and removing employees" 12. Collective agreement is a treaty between social powers. It is a peace treaty and at the same time a normative treaty.13 Collective agreements are generally not legally enforceable. However under S 179[1] of Trade Union and Labour Relation Consolidation Act 1992 provides that a collective agreement shall be conclusively presumed not to have been intended by the parties to be a legally enforceable contracts unless the agreement is in writing, and contains a provision which states that the parties intend that agreement shall be a legally enforceable contract. A collective agreement which satisfy those conditions shall be conclusively presumed to have been intended by the parties to be a legally enforceable contract.14 Most complex case law has concerned the situation where most of the terms of the employment contract are derived from a collective agreement. For those terms to be part of an individual's contract the terms of the collective agreement must have been incorporated in the contract.15 Collective bargain can be incorporated into the individual contract in three ways. Firstly, it is often done by way of express incorporation in the actual contract or in the written statement of terms16. Secondly the union representatives can be the agent of an employee to make the contract17. Thirdly, collective bargains are implied into individual contracts by way of conduct18. Collective bargains are not however, automatically incorporated into the individual contract merely because the employer is a member of an employer's association which is party to the collective agreement in the absence of a custom in the trade that such terms would be observed [Henry v London General]19. However where a collectively bargained bonus scheme has been incorporated into the individual contract of employment, the employer cannot unilaterally determine the scheme20. On a transfer of an undertaking, whether by sale or some other disposition or by operation of law, the transferee company is obliged to observe the terms of any collective bargain negotiated by the transferor. Hence it can be assumed that the incorporation of collective bargaining into individual contract creates problem for the employer to vary the contract of individual contract since they have to observe the terms of collective bargaining. [ correct. I changed the font colour delete this part of your note. Can you please edit this part written in red colour] Is this right or wrong to draw this kind of assumption. Please check it by reading collective bargaining from above or check it in book whether right or wrong. CORPORATE MERGERS AND ACQUISITIONS: Through a process of stock or asset purchase two companies can merge or a business can be acquired. In such an eventuality, proper attention must be paid to the employee benefit plans and executive compensation agreements of the company which is proposed to be taken over (known as target in merger or acquisition schemes). "Particularly in a merger or a stock acquisition, the surviving entity or buyer will generally become responsible for the benefit plans of the target, and any liabilities associated with those plans."21 Broadly speaking there is a greater protection available to the employees in the UK in any scheme of restructuring. Legislative protections generally include: Right to be informed Right to be consulted in some cases of asset purchases Right to a statutory redundancy payment (or severance) Protection against unfair dismissal. It may be noted that these rights are in addition to any union arrangements or collective bargaining agreements. On the acquisition of a business as a going concern the employment contracts of employees working in the business immediately prior to the acquisition will transfer automatically to and be binding on the acquiring firm. The obligations of the employer and the rights of the employees in a merger scheme are handled by the Transfer of Undertakings (Protection of Employment) Regulations (TUPE) which became effective form 6th April 2006. A detailed study on these regulations is dealt with at a later part of this paper. BUSINESS OUTSOURCING AND UK EMPLOYMENT LAW: "The Department of Trade and Industry (DTI) announced in December 2003 that it will study the impact of off shoring on call centers to debunk the "myth" that UK jobs are being lost overseas."22 This is the order of the day and in view of availability of low cost technicians and call centres employees more and more UK firms are interested in finding out a reliable outsourcing supply sources either within the home country or in overseas countries. With the continuing migration of thousands of Western jobs, it is easy to see why off shoring is one of the most contentious issues in business today. Such offshore outsourcing usually result in large scale of job redundancies and countless white collar workers are made jobless due to the shifting of the contracts to offshore outsourcing. Till the TUPE Regulations came in to force from 6th April 2006, there was nothing to prevent a company making staff redundant in the UK and paying a supplier to recruit overseas. TRANSFER OF UNDERTAKINGS (PROTECTION OF EMPLOYMENT0 REGULATIONS (TUPE) 2006-SALIENT FEATURES: The Transfer of Undertakings [Protection of employment] Regulations 2006 SI 2006/246 [TUPE 2006] governing business transfers were eventually laid before Parliament on 7 February 2006. For many years, there has been considerable uncertainty for businesses and litigation surrounding the application of the Transfer of Undertakings [Protection of Employment] Regulations 1981 SI 1981/1794[TUPE 1981]. The Government's aim in enacting TUPE 2006 is to clarify the law and to help the employers and employees know where they stand when a business changes hands. The new Regulations also put on a statutory footing various principles which have been developed by the courts in recent years.23 It is not possible to contract out of TUPE. TUPE does not apply to the sale of shares in a company or to a simple transfer of assets that is not a transfer of a business24. The 2006 Regulations apply where there is a relevant transfer of an undertaking business or part thereof situated in the UK. Reg. 3[1] [a] provides that the Regulations apply where there is a transfer of 'an economic entity which retains its identity'. 'Economic entity' is defined in Reg.3 [2] as an organised grouping of resources which has the objective of pursuing an economic activity, whether or not that activity is central or ancillary'. The salient features of TUPE Regulations are:- A widening of the scope of the Regulations to cover cases where services are outsourced, insourced or a assigned by a client to a new contractor described as 'service provision changes'. A new duty on the old transferor employer to supply information about the transferring employees to the new transferee employer [by providing what is described as 'employee liability information']. This can be done by writing or by making it available to him in a readily accessible form. Special provisions making it easier for insolvent to be transferred to a new employer. Provisions which clarify the circumstances under which it is unfair for employers to dismiss employees for reasons connected with a relevant transfer. Provisions which clarify the ability of employers and employees to agree to vary contracts of employment in circumstances where a relevant transfers occurs. 25 The transferor and transferee must inform and consult elected employee representatives or trade union representatives in relation to the transfer. 26 Apart from these protections TUPE has laid down other exhaustive provisions protecting the rights of the workers. BRIEF COMMENTARY ON THE TUPE REGULATIONS: "With domestic outsourcing, the so-called TUPE Regulations will often apply to give staff the protection of an automatic transfer of employment to the external service provider, with preservation of existing employment benefits. However, it is less clear if TUPE applies to offshore outsourcing, in part because it would be uneconomic to transfer staff overseas."27 Nevertheless the regulations are highly protective for the interests of the workers in general, wherever there is a relevant transfer of business. The regulations have made the position of the employers difficult as they have to comply with a number of procedural requirements of intimating the workers union and get their consent about the proposed transfer of undertaking. It is really a tough task to make the unions understand the benefits arising to the company out of any scheme of restructuring, as any change is always subject to resistance. However it may be argued that "provided a company follows the proper redundancy procedures, with the required consultation, notice periods and payments it is largely free to shed domestic jobs."28 The problem lies exactly in making the consultations and to follow the redundancy procedures where the companies would find it difficult to convince the Unions about the changes the company proposes to make. CONCLUSION: The effect of the TUPE regulations is to preserve the continuity of employment and terms of and conditions of those employees who are transferred to a new employer when a relevant transfer takes place. "However, the Regulations provide some limited opportunity for the transferee or transferor to vary, with the agreement of the employees concerned, the terms and conditions of employment contracts for a range of stipulated reasons connected with the transfer."29 As per this statement, there is very limited opportunity given to the employer to change the structure of his undertaking in a positive way to maximize the profits of the organization. "As TUPE only governs asset and not share sales no similar provisions exist for a sale of shares and employers are free to amend the terms and conditions of employment of employees (provided that they obtain the employee's consent). It is hard to rationalise such a distinction and it is certainly an aspect that a purchaser will need to take into consideration when deciding whether to acquire a business in the United Kingdom by way of its assets or by way of its shares"30. These provisions are sure to create confusion in the minds of both the transferor and the transferee to decide on the course of action to be followed for the intended transfer of an undertaking. "The new Regulations bring with them both advantages and disadvantages. The main advantage is that they clear up a great deal of uncertainty, particularly in relation to outsourcing, and also encourage greater levels of communication between sellers and buyers of businesses. The major downside, however, is that they are likely to create a more restrictive environment for business transactions as TUPE extends its reach to a wider range of business transfers and outsourcing situations".31 Hence it may be concluded that the recent changes in the UK Labour Law Legislations provides adequate protection for the workforce. But at the same time the current legal rules have restricted the freedom and movement of the employers and also have made it far too difficult for the employers to make vital changes to ensure they remain efficient and competitive. And all other part that you think is repeating or wrong language try to correct where possible. Please don't delete any of the words that I have added unless and until it is wrong. Read More