Your contract to manage a property is ending - what does this mean for your employees and any contractors that you engage? Furthermore, if you’re the newly appointed agents, do you know what you need to do?
As managing agents, you’re likely to be carrying out specific services on behalf of your client which may include providing an on-site property manager, caretaker or receptionist. You may also work with contractors to provide security or cleaning services. The Transfer of Undertakings (Protection of Employment) Regulations or ‘TUPE’ as it is more commonly referred as, may apply in these situations and must be considered in order to avoid claims by employees.
What is TUPE?
TUPE is designed to ensure that employees are protected and the terms and conditions of their employment preserved when the whole of part of the business that they work in is taken over by another business.
TUPE applies where there is either a "business transfer", when a business, or part of one, is transferred as an economic entity that retains its identity after the transfer, or a "service provision change", when a contractor takes on a contract to provide a service for a client, either to replace an existing contractor or to take over services that have previously been dealt with in-house.
In both types of transfer the following rules apply:
· Employees of the out-going business automatically transfer to the incoming business on all the existing terms and conditions of their employment unless they formally object to the transfer itself.
· The incoming business steps into the shoes of the outgoing and inherits all employment-related liabilities.
· Both businesses have obligations to inform and consult representatives of their employees or their employees directly.
· All employees have special protection against dismissal and changes to their terms and conditions of employment.
What do you need to consider?
For there to be a service provision change and TUPE to apply, there are several elements that must apply immediately before the transfer including:
· The employees must be in an identifiable team that has been deliberately organised that way by the employer to provide the particular services for their client.
· The employees that transfer will need to take account of a number of factors including how much time is spent on the activities, whether they work at other properties and whether their contract states that they are employed to work at a particular site.
· There can only be a change in the identity of the person carrying out the activities – the client to whom the services are being provided should remain the same.
· The activities should remain fundamentally the same before and after the transfer.
What to look out for in property management agreements
When reviewing an agreement to manage a property, be sure to check how employees will be dealt with, particularly in relation to making sure that:
· The employees of the managing agent in the period leading up to the end of the contract are “ring fenced” so that changes cannot be made to their terms and conditions of employment or employees moved internally. This will avoid out-going managing agents from “cherry picking” their best staff by moving employees on to the contract that it would be happy to lose.
· Employee Liability Information is provided as soon as possible so that you can assess the employment-related liabilities and factor in these costs. The earlier you have this information, the better.
· If an employee is going to remain with their current employer and not transfer, there will need to be confirmation that they were not assigned to the particular services at the property in question and an indemnity provided should the employee later claim to have transferred or is deemed to have transferred automatically under TUPE.
Final thoughts
The application of TUPE in relation to property transactions and in particular for managing agents is complex. Although derived from EU law, it is not expected that there will be a wholesale change in the regulations after Brexit but we may see changes in relation to the requirement to inform and consult with employees and the way in which terms and conditions can be harmonised after a transfer. Certainly for the foreseeable future, TUPE will remain and will need to be considered as part of all commercial property transactions to avoid the risk of unexpected employees and claims.
Julie Edmonds – Senior Associate and Employment Specialist, JPC Law
