HL Deb 08 March 1999 vol 598 cc1-3

Baroness Turner of Camden asked Her Majesty's Government:

Whether it is possible for companies intent upon merging to avoid the obligations in the Transfers of Undertakings (Protection of Employment) Regulations by conducting a "merger" by way of share transfer, and, if so, what further steps should be taken to protect employees' interests.

The Minister of State, Department of Trade and Industry (Lord Simon of Highbury)

My Lords, the regulations are designed to safeguard employees' interests when the business in which they work is transferred to a new employer. They do not apply in cases of takeover by share transfer as these involve no change in the employer's legal identity or contractual relationship with the employees. The employees' rights are unaffected and the employing company, if it wishes to seek changes to terms and conditions or to make redundancies, is in exactly the same position after the takeover as it was before.

Baroness Turner of Camden

My Lords, I thank my noble friend for that Answer. Is he aware of the situation in which employees have been affected by a merger as a result of share transfer and the superior rights which exist under the regulations referred to in my Question have not applied? As a result, their union is pursuing the matter in the courts. It appears that a loophole exists

which should be closed; otherwise the union is likely to pursue the matter beyond the courts in this country, possibly to Europe, involving a great deal of time, energy and money. Would it not be better if the regulations were suitably amended?

Lord Simon of Highbury

My Lords, I am aware of situations in which share transfer has led to redundancies. However, I would make it clear that there are two separate circumstances. In the first, the legal ownership changes; in the second, it does not. In the latter case of share transfer, there is the collective redundancies directive under which recourse could be taken for unsatisfactory dismissal. That remains the most effective recourse to justice.

Baroness Gardner of Parkes

My Lords, will the Minister confirm that when two companies merge in this way the redundancy provisions favour the employees to the extent that considerable consultation must take place and the larger the firm the more extensive the degree of consultation? Will he also confirm that the Government do not support the view currently expressed by London Underground, as opposed to every other employer, that employees should be guaranteed their jobs for 15 years?

Lord Simon of Highbury

My Lords, I confirm the noble Baroness's contention that under normal circumstances there is extensive consultation by companies, as is required under merger conditions. That is well protected by the existing law and frequently takes place. However, there are circumstances in which it does not, which is why a sound and effective law must stay in place. I make no statement about London Underground because I am not aware of the circumstances.

Lord Tebbit

My Lords, is it the case that such regulations and laws do not exist in the United States? Is not that part of the reason why, as the Prime Minister explained, the United States is far more effective in creating jobs and expanding the economy than our sclerotic economies in Europe? If there is a loophole, would it not be correct for the Prime Minister to ask Ministers to expand it so that we can become more like America? After all, that is his policy.

Lord Simon of Highbury

My Lords, I point out again that there is no loophole. There are two different legal circumstances; change of ownership, which is a takeover circumstance, and share transfer, which is a merger circumstance. They are differently treated in law and that is successful. Although we are consulting, at this time we see no reason to change the basic legal principle which applies. As regards differences between Europe and the United States, I know that the noble Lord, Lord Tebbit, is fully aware of the different circumstances which apply in the markets.

Lord Brookman

My Lords, does the Minister agree that the 1980s was a most unfortunate period for working people in the United Kingdom, being unregulated and unfair? Are not the Government trying to be fair to employers and employees?

Lord Simon of Highbury

My Lords, I thank my noble friend for that question. It is exactly the spirit which lies behind our new Bill which will soon come to this House. I hope that it is received in exactly the spirit which I then detected in the air.

Lord Razzall

My Lords, without going into the hyperbole of the previous question, does the Minister agree that there is no evidence whatever that the Transfer of Undertakings (Protection of Employment) Regulations have had the remotest influence on unemployment, as was suggested by the noble Lord, Lord Tebbit?

Lord Simon of Highbury

My Lords, we agree.

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