UK and EU Law on Business Reorganizations and Its Effect on the Employers and Employees

THE EUROPIAN UNION (EU):

The European Union arose out of the 1957 treaty of Rome. It was established by just 6 nations. It created the common market comprising the nations of Belgium, France, Italy, Luxembourg, the nether lands and West Germany. Later on many nations joined the European Union which is all together a total of twenty seven European nations today, some of which have changed their sovereignty to European Union, they are:

• • Austria
  • Belgium
  • Bulgaria
  • Cyprus
  • Czech Republic
  • Denmark
  • Estonia
  • Finland
  • France
  • Germany
  • Greece
  • Hungary
  • Ireland
  • Italy
  • Latvia
  • Lithuania
  • Luxembourg
  • Malta
  • Netherlands
  • Poland
  • Portugal
  • Romania
  • Slovakia

On 1st November 1993 when the Maastricht treaty came into force, the European Union was formally created. European Union has its own governing authorities by a series of treaties. Different institutionslike the council of ministers, which coordinates economic policies and includes one representative from each nation, carry out the work of the European Union. The European Union has its own court of justice, which is the eventual authority of EU law, which review’s each nation’s judicial decisions.

To govern the member nations the commission and council which are creating new law issues regulations, or directives that define European Union law in various areas.

EUROPEAN UNION EMPLOYMENT LAW:

EU law protects the rights of the workers across the European Union by way of employment law. The directives of the European Union are to be implemented in the member states within the time specified. Every member state is bind by the directives although they have a flexible choice of implementation it.

The European Union Employment Law covers the rights of the workers in the areas of:

• • Terms and conditions of employment like equal pay, working time, part term, discrimination, pregnant working women protection.
  • Providing information to the workers at the time of redundancy and business transfers.
  • Protecting the personal data of the workers.

EUROPEAN UNION LEGISLATION:

EU legislation has been contributing a lot for lifting United Kingdom’s working conditions. “There are three basic types of legislations:

1. 1. Regulations
   2. Directives and
   3. Decisions/Framework agreements.

A regulation is similar to a national law with the difference that it is applicable in all European Union countries.

Directives set out are general rules which are to be transferred into national law by each country as they deem appropriate.

A decision only deals with a particular issue and specifically mentioned persons or organisations.”

European Union social charter consecrates the fundamental rights of association, information and collective bargaining which make meetings of European labour laws and United Kingdom national laws. “Social Chapter Article 138-139 EC refers to the European social model where institutions such as the ETUC (European Trade Union confederation), Employer Associations UNICE (Confederation of European Business) and CEEP (European Centre of Enterprises with Public Participation and of Enterprises of General Economic Interest) contribute towards all policy aspects of EU legal instruments.”

UNITED KINGDOM EMPLOYMENT LAW:

The European directive has a lasting effect on UK law. If some relevance is found in EU law the UK tribunals will consider it. For example in the case of Paterson v commissioner of police of the metropolis, the employment appeal tribunal said that, for how the directive should be interpreted the ECJ decision is binding on the courts of UK.

Inorder to bring the UK law into the path of the EU directive and reflect this directive some changes were made by Equality Act 2010.

Since the original amendments were made to bring UK legislation into line with the directive, it has now been accepted that some further changes are required. Accordingly some of the amendments being made by the Equality Act 2010 are in order to reflect the directive(see next heading).

So, the United Kingdom employment law is mainly taken from the European law, particularly in the areas of equal pay and equal treatment. Even most of the statutory rights in employment law are taken from European legislation. The employers and employees rights and obligations are taken mainly from three sources. They are:

• • Common law- this law governs any type of contracts made between employer and employee,
  • UK legislation,
  • ECJ.

When the employer gets into a contract with the employee, they are free to agree on the terms they want following the minimum statutory rights. The common law also implies certain general terms into contracts of employment.

The employees while working have certain minimum statutory rights, e.g. right to get minimum wages and protection of their health by the employer. The Employments Rights Act 1996 is the main employment legislation in UK.

The common/general legal issues under the employment law are:

• • Workplace discrimination and harassment.
  • Unfair and constructive dismissal.
  • Redundancy.
  • Employment tribunals.
  • Employment rights like working hours, maternity rights etc.

IMPORTANT UK AND EUROPEAN UNION EMPLOYMENT LAW LEGISLATIONS:

EU legislation:

1. ANTI-DISCRIMINATION:

The laws relating to discrimination in work place on the grounds of race, religion, sex, age, disability did not come into existence until the end of the third millennium.

Feldman has explained, “discrimination becomes ‘morally uncapable’ when it takes the form of treating a person less favourably than others on account of a consideration which is ‘morally irrelevant.”

i. WORK PLACE DISCRIMINATION:

In the Directive 2000/78/EC anti-discrimination relating to belief, religion, age, sexual orientation and establishment of general frame work for equal treatment in employment is mentioned.

There are 21 articles spread in 4 chapters in this directive. The Articles from 4 to 8 in chapter one are important in this directive as they deal with the occupational requirements, accommodation for disabled persons, Justification of differences of treatment on grounds of age, positive action and minimum requirements in the work place for the workers. Chapter two deals with the remedies and enforcement like burden of proof, victimisation etc.

This equal treatment in work place is adopted as to protect the employers and employee rights, and see that no direct or indirect discrimination is done.

ii. RACIAL AND ETHINIC DISCRIMINATION:

On 29th June 2000, the council of European Union implemented the “principle of equal treatment between persons irrespective of racial or ethnic origin”, by the Directive 2000/43/EC. This directive protects the workers in the areas of education, supply of goods and services, self employment, healthcare and social protection. Under this directive all forms/types of discrimination i.e., direct or indirect discrimination are prohibited on the grounds of race or ethnic origin.

Indirect discrimination may sometimes be neutral, but may have a hostile effect for a person or for a group of people. The discrimination based on nationality is not covered in this directive.

UK legislation:

The UK anti discrimination law is taken from the European employment law directive 2000/78/EC, which concentrates on three main discriminations:

• • “The sex discrimination Act 1975”-this act protects the employers and employees from the discrimination of sex, education and marital status.
  • “The race relations Act 1976”-this act prohibits the discrimination on the grounds of race, nationality, colour and ethnic origin.
  • “The disability discrimination Act 1995”-this act prohibits the disabled works discrimination in the fields of employment, education, facilities and services.

The above three acts are amended accordingly, whenever required. In relation to employment the above acts applies to England, Scotland, Wales and Northern Ireland.

2. EQUAL TREATMENT OF MEN AND WOMEN IN THE WORKPLACE:

EU legislation:

The European Union for getting equality between men and women at the course of employment has passed a legislation guaranteeing equality by implementing three kinds of European Union legislations which covers:

• • The admissions to employment, which also includes promotion of the workers,
  • Giving vocational training if required,
  • Working conditions of the employers, along with their pay and social security arrangements.

It is the duty of the employer to pay his/her employee equal pay for the work done or should make the workers do the amount of work they are being paid. Generally pay means not just paying the wages or salaries of the workers but also includes the pay for the overtime work done or the benefits agreed to be given to the workers by the company e.g.: health insurance or a house or a car.

There may be some local variations as the member states implemented the European Union law into their own legislation.

iii. THE EQUAL PAY DIRECTIVE:

The European Union under the “council directive 75/117/EC of 10 February 1975 on the approximation of the laws of the member states relating to the application of the principle of  equal pay for men and women.”

The directive prohibits all kinds/sorts of discrimination in all aspects relating to the pay on the grounds of sex. It also states that the pay for the workers should not be differed on the grounds of their sexual orientation, and also the criteria of pay should be based on the type or classification of the job but not on the basis of men or women.

iv. THE EQUAL TREATMENT DIRECTIVE:

The European Union under the directive 76/207/EC implemented the equal treatment for men and women relating to employment, vocational training and working conditions.

This directive lays down the equal approach to all types of vocational guidance and training under the equal working conditions, which also includes dismissals. One of the important rules in this directive is that a woman cannot be removed or dismissed from the work on the grounds of maternity or pregnancy. Both the directives i.e., the equal pay and the equal treatment states that all the member states should take necessary measures to protect the employees who have filed a complaint of unfair treatment against their employer against dismissal.

v. THE EQUAL SOCIAL SECURITY DIRECTIVE:

The directive 86/378/EEC explains about the equal treatment for men and women in social security system, which also includes the self employed persons whose work may be stopped by their illness, accident, disabled workers and maternity. This directive does not apply to the contracts of the people who are doing their business individually.

UK legislation:

Most of the UK acts and regulations are taken from the EU directives. The guidelines of equal pay directive of EU have been implemented in the United Kingdom law by implementing different regulations and acts such as:

• • The sex discrimination Act 1986, Equality Act 2010-under these Acts the workers (men and women) are protected equally from different discriminations like: dismissals, training, terms and conditions of employment etc.
  • The Equal Pay Act 1970-this act is implemented to see that no discrimination is done between male and female workers and they are paid equally for their work done. This legislation has been amended several times inorder to amalgamate equally to the EU law.
  • Occupational and pension schemes regulations 2005-the equal treatment of men and women at work is taken from the EU directive by sex discrimination Act 1975 and it was first implemented under different regulations. Later after several amendments the directive is included into this regulation.

3. FIXED AND PART TIME WORK INCLUDING EMPLOYMENT CONTRACTS:

For the organisation of the working time there are three directives on EU.

vi. WORK TIME DIRECTIVE:

EU legislation:

To protect the workers safety and health, certain rules are implemented in the form of directives in the EU member states. The directive 2003/88/EC associates with the working time directive 93/104/EC and the directive 2000/34/EC which is amended.

This directive explains about the minimum rest that is to be taken by the workers and protects their health and safety by not allowing them to work for long hours. The directive establishes the following benefits to the workers:

• • Any person should not work more than 48 hours per week, including overtime.
  • A minimum of eleven consecutive hours of rest should be given in a day.
  • A minimum of one day rest should be given per week.
  • Extra protection or care should be given to the nigh workers.
  • The workers have a right to four paid annual week leaves.

The directive also protects the small sectors like sea fishing workers, training doctors etc.

vii. PART TIME WORK:

The EU by implemented this directive 97/81/EC to remove all the inequalities and discriminations between the part time workers and provide them flexible working time, which is agreed and finalised by UNICE, ETUC and CEEP.

This directive also states that the part time workers should also be treated equally as full time workers.

UK legislation:

The working time (amendment) regulations 2003 SI NO 1684,explains about the time the employees or the employers should work per week, maximum night working hours and special conditions, protection of health and safety of the workers etc. It is amended several times before the amended regulations came into existence.

The fixed term employees (prevention of less favourable treatment) regulations 2002, SI NO. 2034 came into existence on first October 2002. This regulation interprets the meaning of the employer, fixed term contract, permanent employee, pro rate principle etc., and explains about the right of the fixed term contracts such as right to holidays, sick leaves, equal/same pay and benefits to the employees.

The part-time workers regulation 2000, SI NO1551 explains the meaning of the part time-worker and full-time worker. It provides the right to equal treatment of the part-time worker as that of the full-time worker, any discrimination done the worker has the right to receive a written statement for the reason of discrimination or not favourably treated.

4. MATERNITY RIGHTS:

EU legislation:

viii. PREGNANT WORKERS:

The main objective of implementing the directive 92/85/EEC is to protect the health and safety of a working pregnant woman or the worker who just gave birth or a worker with a baby who is still breast feeding. Under this directive the pregnant woman is not supposed to work in any dangerous place or situation.

UK legislation:

On 6th April 2003 new rights for pregnant women are introduced under the maternity and parental leave (amendment) regulations 2002, SI NO 2789, which allows the pregnant workers to take 26 weeks of leave though they have not worked for long. The women if worked continuously for 26 weeks can take extra leave for which she is not paid. Under the statutory maternity pay regulations 2006, all the pregnant woman can take leave upto 52 weeks. This regulation is originally taken from the EU directive 92/85/EEC which is known as the maternal and parent leave regulations 1999, SI NO 3312.

5. PARENTAL LEAVE:

The objective of the directive 96/34/EC is to give equal rights of parental leave to men and women who have adopted or given birth to a baby, on the conclusion of the agreement between UNICE, CEEP and ETUC.

This directive also protects the rights by providing three months of parental leave and provides rules which protect the workers if dismissed for taking the parental leave. It also protects the parental workers to come back to the same or equivalent job.

6. PROTECTION OF PERSONAL DATA:

The directive 95/46/EC is implemented to protect the rights of the individual workers in accordance with the processing of their personal data protection and on passing on such data to others, individuals, companies, public authorities etc., the main aim for implementing this directive is to protect the individual rights and their privacy.

According to this directive the data collected should be correct and lawful which fulfils the purpose. Under this directive the individual has the right to correct the data provided and can object to certain information/data being refined. Any person or an authority whilst collecting the data should inform the individual.

7. TRANSFER OF UNDERTAKINGS (TUPE):

EU legislation:

The directive 2001/23/EC is implemented to protect and safeguard the rights and obligations of the employees from the employer, when he is transferred to a new place or job. This directive is amalgamated with the directives 77/187/EEC and 98/50/EC which applies to both public and private undertakings.

This directive is very flexible. If the member states laws are more favourable to the employees, it is not required to adopt/implement these rules into their laws. The undertakings intricate the employee for the reason of their transfer and their legal, economical and social entanglement transfer for the employee.

UK legislation:

Transfer of undertakings regulations 1981 SI NO 1794 are taken from the EU directives and implemented in the UK by doing several amendments in 1987, 1995, 1999 and 2006.

The transfer of undertakings (protection of employment) regulations 2006, SI NO 246 is the latest amended regulation in which main changes were done and implemented new regulations widening its scope. The final amendments till date give more clarity on the regulations which apply to different contracts in different situations. Under this regulation one of the important regulations is that the employer cannot dismiss the employee because of his transfer without proper reason and explanation.

BUSINESS REORGANISATION:

Every business is started to make profits, but depending  on certain circumstances it may sometimes incur losses, due to which the company want to reorganize its business rather than running into insolvency. It is with the acceptance and interest of the shareholders the business reorganisations take place.

Apart from the above mentioned reason, a company when attains profits and wants to expand its business and enter into the new market it may opt for business reorganisation.

TYPES OF BUSINESS REORGINASATIONS:

The business can be reorganised in different ways based on:

Product:

The business can be divided into different parts and can be focused and worked depending on the product it relates to by everyone in the company, which reduces concentration of power in few hands and increases healthy competition between the departments.

Project:

This helps in developing the new product or dividing the staff members into groups to work on the project, which will bring new ideas to attain profits. The major advantage of this organisation is that it sees that the organisation of the business is done according to its activities.

Function:

The companies work is divided into different functions like financing, operating etc., which solves the company problems at different stages. This functioning helps in the efficient, effective, smooth and proper functioning of the business.

Geographical area:

Depending upon the area, population and the extent of need the business can be expanded or reduced, which helps in attaining more profits.

Other factors:

In order to maintain the standards in the market and, keep up to the demand and present technology, and to face the competition from the other competitors the business may be reorganised.

PROBLEMS FACED BY THE EMPLOYEES FROM THE EMPLOYERS DUE TO REORGINASATION AND THEIR PROTECTION:

The employee during or after the business reorganisations faces may difficulties or problems with the employers in the issues relating to- dismissal for making staff redundant, transfers, maternity leave, staff retirement, sickness absence, dealing with employees conflicts and stress. Among all these problems relating to transfers and dismissal/redundancy is very important as these are the most common faced problems by the employees.

Dismissal:

The employer inorder to cut the cost or to hire more skilled workers for his business may dismiss the employee on the grounds of redundancy. However it is on the employer to prove that he dismissed the employee on reasonable grounds with proper reason or else he has to pay for it.

The employer if dismisses the employee under what so ever reason, but if the circumstances fall under section 81 of the definition of redundancy of the EP(C)A 1978 this will be considered as redundancy dismissal.

If the definition is not satisfied then it the dismissal does not come under redundancy dismissal, where the right to carry on the same or equivalent work of the employee is not ceased. This kind of situation was observed in the case of Chapman v Goonvean and Rostowrack China Clay Co ltd. The employer in this case withdrew the transport facilities considering it uneconomic, in which three of ten men were dismissed on the grounds of redundancy reasons and other seven men were hired living near the work place to replace them. So, now it is to be considered that weather it was a redundancy dismissal or not as defined in the definition, as Lord Denning MR said in Johnson v Nottingham police Authority said that “if the change is due to redundancy situation, he is entitled to a redundancy payment. If it is not due to it, he is not.” So, the decision of the dismissal in the above case was made as a result of reorganisation but not due to redundancy.

The employee may be dismissed on other grounds of reorganisations/redundancy as certain criteria were applied for his dismissal. This happened in the case of Hindle v Percival Boats Limited, where an employee although his work was perfect got dismissed because he was working too slow which is not suitable for the nature of the work which was changing from building wooden boats to fibreglass boats. The employee asked for redundancy payment but the Divisional court held that he was dismissed for his deficiencies, rather than redundancy.

When a person claims for unfair dismissal, the same perception as that of redundancy dismissal does not apply.

There are many cases in which the satisfaction of the definition of redundancy is verified which are almost in the favour of the employer. Some of the situations are:

• • Associated employers
  • Voluntary redundancies
  • Impending redundancies
  • Leaving early
  • Misconduct
  • The date of dismissal.

ALTERNATIVE EMPLOYMENT OPTIONS:

The employer should look for alternative employment options for the employees as a part of the redundancy process, otherwise which may lead to the consideration of unfair dismissal. These are laid down under the statutory provision under sections 82 and 84 of the EP©A 1978. Under this act if the employee refused the alternative job offered, number of factors like age, working hours, mobility, personal reasons, salary, place of work, duration etc., are to be considered for such refusal.

Transfer:

The employees are protected by under the TUPE when he is being transferred to another place or work or a company under the protection of employment regulations 1991. The regulation does not apply to the any person who provides services under the contract of services, where he is not considered as an employee. This was explained in the case of Cowell v Quilter Goodison Co Limited.

A transfer is covered by this regulation (TUPE) only when there is:

1. 1. A sale
   2. A transfer by some other disposition
   3. A transfer by operation of law.

REMIDIES FOR UNFAIR DISMISSAL AND REDUNDANCY:

I. Unfair dismissal:

The employer who has got more powers than employee can dismiss the employee at any time of the employment. In, English common law, upon accepting the dismissal the contract comes to an end if the dismissal is just and fair. Otherwise it ends only when the employee accepts it.

In Sections from 68 to 76 of the EP(C) A 1978, the remedies for an employee for unfair dismissal are set out.

II. Reinstatement and re-engagement:

The tribunal under section 69(1) decides for an order of reinstatement and re-engagement.

a. Reinstatement:

The tribunal when making an order for reinforcement under section 69(5), should consider the factors like:

• • “Whether the applicant wishes to be reinstated.
  • Whether it is possible for an employer to comply with an order for reinstatement.”

b. Re-engagement:

Re-engagement is defined in s 69(4). The tribunal decides to make re-engagement order, if it does not decide to make reinforcement order considering the following points according to section 69(6):

• • When the order is made, if the complainant makes any wish or
  • Check whether it is possible for the employer or other associated employers to abide an order for re-engagement
  • Should check that the dismissal made may be caused or contributed to make such an order.

III. Compensation for unfair dismissal:

When the employee files a suit against the employer for unfair dismissal and wins the case, usually the court passes the order for compensation. Before passing such compensation award the tribunal checks whether the employee made an appeal to the court to resolve the dispute using the employers appeal procedures or not. This is divided into three awards:

a) Basic award:

The Section 73 explains about the basic award compensation. Taking into consideration the employee’s age, his years of service-maximum consideration would be twenty years and his weekly pay-not more than £400, the basic award is calculated.

The tribunal will deduct the amount from the basic pay if the employee himself is partly blameable for his dismissal or if the conduct of the employee is not good or the employee already received the redundancy payments for which he is dismissed or the connection of the ex gratia payments to the basic award.

b) Compensatory award:

Under the compensatory award the maximum amount an employee can be awarded as compensation for his financial loss relating to the dismissal including loss of benefit according to sections 74(1), 74(2) and 74(3) is £68,400.

The employment tribunal considers the following matters in awarding compensation to the employee:

• • Loss of wages
  • Future loss of wages
  • How he is dismissed and
  • Loss of employment protection including pension rights.

c) A specific award/ an additional award:

This type of compensation is awarded if the loss is incurred from the dismissal. Apart from the basic award and compensatory award the employee is granted this additional award if the tribunal asks the employer to re-engage or reinstate the employee but he refuses it, for which he has to pay the maximum compensation up to £400 per week.

IV. Claim in time:

When an employee gets unfairly dismissed or redundancy or in accordance with the employment rights statutes set out in EP(C)A 1978, he claims to the tribunal, which limits the period of claims which can be brought. There are two exceptions where time can be extended:

1. 1. If the employee shows that it was not ‘reasonably practical’ to claim in the time given.
   2. The other exception for the employee to claim beyond the given time is when the tribunal considers it as ‘just and equitable’ to do so.

CONCLUSION:

It is obvious that if a company wants to improve or expand its business or wanting to enter into a new or a large market, business reorganisation is done. During this process it may affect the employers as well as the employees causing several problems as mentioned above.

Considering the above problems and the remedies offered to the employers and employees under the employment law in United Kingdom and European are to a certain extent more favourable to the employees than the employers restricting their freedom on a positive side so, that it does not cause injustice to the employees.

It can also be observed that inspite of its favourableness to the employees, the EU and the UK employment law does not completely protect the employees and cannot give the job guarantee also, because the employer if not satisfied or has more workers or for any other personal reason like revenge,