April 30 2007 Employment Law Enews

Welcome to the latest edition of steeles employment law e-newsletter.

No avoidance of TUPE in share sale

The Transfer of Undertakings (Protection of Employment) Regulations 1981 and 2006 ("TUPE") apply only to the transfer of an undertaking, which would commonly occur either on the sale of a company's assets or to an outsourcing situation. One transaction to which businesses are usually confident TUPE does not apply is the sale of the shares in a company, but a recent decision by the Court of Appeal suggests that companies cannot necessarily assume that TUPE will not apply to a share sale.

The claimant, Mr Millam, worked as a lithograph printer for FP Ltd. The shares in this company were sold to MC Ltd in 1999, after which MC Ltd started to make a large proportion of the management decisions and began to pay Mr Millam's wages, although he was still employed by FP Ltd. The two companies remained as separate legal entities and produced separate accounts, although they held combined board meetings. Mr Millam was dismissed in 2005 when both companies went into administration. MC Ltd was purchased by TPF Ltd, and Mr Millam sought to establish that his employment had transferred under TUPE from FP Ltd to MC Ltd at the time of the share sale (meaning that his employment had subsequently transferred to TPF Ltd).

The employment tribunal held that TUPE did apply to the transfer of the shares to MC Ltd. It took into account the fact that Mr Millam was expressly told that his employment would be continued "under the TUPE regulations" and that it was MC Ltd's intention to fully incorporate the business of FP Ltd into its own. After the sale, work had been transferred between the two businesses and at the date FP Ltd went into administration, some 50% of its work was being carried out for MC Ltd. MC Ltd paid Mr Millam's wages and the tribunal found that MC Ltd was effectively controlling the activities of FP Ltd.

The tribunal's decision was overturned by the Employment Appeal Tribunal (EAT), but has since been reinstated by the Court of Appeal which agreed that there had been a transfer of an undertaking at the time the company's shares were sold. Lord Justice Buxton said that whilst the legal structure is important (the fact the two companies remained as separate legal entities), he said "it cannot be conclusive in deciding the issue of whether, within that legal structure, control of the business has been transferred as a matter of fact".

What is clear from this decision is that companies can no longer rely on the use of a share-based transaction to avoid any suggestion that TUPE will apply. Where, following a sale of its share capital, a company continues to operate autonomously (whether or not within a group structure), there will still be no question of TUPE applying. However, where the purchaser intends to integrate the acquired company into its own business there is a real risk following this decision that tribunals will be prepared to look beyond the corporate structure to discover the true position. This could have significant implications for both vendor and purchaser, who have obligations under TUPE to inform and consult the workforce in advance of the transfer. The purchaser will also have an obligation to maintain their existing terms and conditions. The financial penalties for ignoring TUPE can be considerable and prospective buyers should be alert to the risk that TUPE could apply to their transaction.

Smoking ban gathers pace

With the smoking ban taking effect in Northern Ireland today and due to take effect in England in just two months time on 1 July 2007, guidance and publicity about the ban is increasingly evident.

ACAS has issued a new Q&A guide on the employment implications of the smoking ban, and last week the National Institute for Clinical Excellence (NICE) issued its own guidelines for employers on steps they can take to assist their employees to give up smoking. The NICE guidance recommends the most effective ways to encourage and support employees to stop smoking. These include providing information on local stop smoking services and allowing workers to attend stop smoking clinics during working hours without loss of pay. According to NICE, employers who provide support could reduce the risk of non-compliance with the law and by promoting healthy living will benefit from reduced sickness absence and increased productivity. It should be noted, however, that employers are under no legal obligation to provide support to employees who want to give up smoking, and similarly have no duty to provide smoking facilities to those who continue to smoke.

For further information about the smoking ban, see our factsheet or download the latest steeles podcast free from our website: http://www.steeleslaw.co.uk/steelesPODcast.aspx

Changes to Religion or Belief Regulations

With effect from 30 April 2007, the definition of what amounts to a religion or belief under these Regulations has been amended with the consequence that more people will potentially be able to claim protection from discrimination.

The amended definition has been introduced under the Equality Act 2006. Previously, the definition referred to any "religion, religious belief or similar philosophical belief", meaning that any philosophical belief had to be akin to a religious belief. That requirement has now been removed and any philosophical belief will now be covered. Whilst this may appear to be a very minor amendment, it is likely to re-open the debate about whether political beliefs are protected. A claim brought by a member of the BNP party was struck out in 2005 on the basis that fascism was not a "similar philosophical belief", but arguably as a result of the broader definition claims brought by people with any genuine philosophical belief, including political beliefs, will be allowed to proceed with their claim.

The new definition will also make it clear that an absence of a particular religion or belief is also protected under the Regulations. This was always thought to be the case but the Regulations will now make this explicit.

Further provisions of the Equality Act 2006 taking effect on 30 April include a new prohibition on discrimination on the grounds of sexual orientation and religion or belief in the provision of goods, facilities and services in education and the execution of public functions.

Immigration update

The Border and Immigration Agency

On 2 April the new Border and Immigration Agency (BIA) replaced the Immigration and Nationality directorate. The name itself is intended to create a public perception of tighter immigration control in an attempt to make the "border" less penetrable for illegal immigrants. Indeed, according to the Home Office website, there will be a "visible border" and "Immigration Agency presence at all ports with uniformed immigration officers". Home Office Minister Liam Byrne said that the Agency was the "next step in the Home Secretary's shake-up of the Immigration Service".

Whilst the new Agency will remain a part of the Home Office, in a move designed to counteract general public opinion that the Government has lost control over immigration, there will be greater public accountability for the service the Agency provides. There will be published targets to enable the public to see whether the Agency is delivering.

Increased Application Fees

New immigration fees were also introduced from 2 April for both those seeking to enter the UK to stay, work or study and for those making applications to the Home Office in the UK. The fees have been set at a level designed to ensure that the UK "remains competitive in a global market".

The increases are quite substantial with the fees for Work Permit applications rising from £153 to £190, Highly Skilled Migrant Programme applications rising from £315 to £400, and the fee for a postal application for settlement rising from £335 to £750.

Introduction of Life in the UK test

In December's Enews immigration update we reported that new rules would be introduced for those applying for settlement in the UK (Indefinite Leave to Remain) which would require them to show that they have a sufficient knowledge of language and of life in the UK in order to qualify.

The new rules were introduced on 2 April 2007. All immigrants wishing to apply for settlement in the UK (indefinite leave to remain) after this date will now have to pass either the Life in the UK test or an English for Speakers of Other Languages (ESOL) course, which includes citizenship information. The Government has introduced this requirement in order to encourage those wishing to immigrate to the UK to learn English and to find out about the structures, laws, and democratic processes of the UK.

For further information regarding any of the above topics, or indeed any other immigration or nationality issue, please contact the steeles immigration team at immigration@steeleslaw.co.uk or by telephoning Mark Barnett on 020 7421 1720.

This article copyright © 2007 Steeles Law llp. All rights reserved.