Certain aspects of the revised Transfer of Undertakings Regulations could cost companies dear

The long-awaited revised Transfer of Undertakings (Protection of Employment) Regulations 2006 (Tupe 2006) have finally been published – and come into force on 6 April 2006. They will replace the 1981 version in its entirety.

Some of the changes are welcome, such as the clarification of the position on changes to terms and conditions and transfer-related dismissals; and some are sensible, such as introducing joint and several liability for failure to inform and consult. However, certain of the new provisions seem somewhat impractical. I am talking, in particular, about the requirement to provide ’employee liability information’.

Employee liability information has been defined to include the identity, age, written particulars of employment, applicable collective agreements, details of grievances raised or disciplinary action taken in the preceding two years, and claims brought against the transferor in the past two years, or which the transferor has reasonable grounds to believe might be brought. This information has to be provided, or made available, in most cases two weeks before the date of the transfer.

In its impact assessment, the Government suggested it would take a manager half a day to gather this information together. That might be the case if only 20 or 30 employees were transferring, but what if there are 1,000, or even 10,000? You might hope that most of the information would be on an employee’s personnel file – but not all of it will be. In particular, as any HR practitioner will know, HR best practice suggests that notices of disciplinary action are removed from an employee’s file after 12 months. Transferors will therefore be under an obligation to provide information that previous best practice suggests they should no longer have. In order to comply in future, employers will have to keep a separate note of all expired disciplinary notices for a further year.

Second, is the poor manager (in that half day) going to feel that they have to check everyone’s file to make sure the information is there? Alternatively, will they simply use that time to crate up those 10,000 personnel files and dump them on the transferee – with fingers crossed either that everything is there, or that by the time the transferee has had the chance to go through all of the files and discover whether anything is missing, the three-month time limit for bringing a claim will have expired?
On the basis of the previous draft of the new regulations, the practitioners I have spoken to, at least, were proposing simply to ignore the requirement on the basis that, where you have a transaction with a set of negotiated warranties, the parties could be left to agree between themselves what they regarded as key information and the penalty for its inaccuracy. This was because the previous draft suggested that it would be possible to contract out of the obligation, and in any event the penalty for failure to comply was limited to £75,000.

However, the guidance notes now state that the transferee and transferor will not be able to contract out of the requirement because this would “disadvantage the employees involved”. In addition, the penalty for failure to provide the information has changed to a minimum of £500 per employee (paid to the new employer, not the employee) unless the tribunal considers it just and equitable to award a lesser sum. Where there are agreed warranties between sophisticated parties with legal representation, you might hope that any award would be nominal. However, all the new regulations seem to suggest is that the commercial bargain will be taken into account to avoid double recovery – if neither the warranties nor the warranty threshold is breached, it seems an award will be made. In that case, our manager is looking at a potential minimum £5m bill for the HR files not being up to scratch.