TUPE - Minor changes with major implications?
The Transfer of Undertakings (Protection of Employment) Regulations 2006 ("TUPE") is a piece of UK legislation which deals with the transfer of employees upon the sale of a business or a service provision change. The application of TUPE is viewed by lawyers and non-lawyers alike as being far from straightforward, although in our favour there has only been one major revision of this legislation in the past three decades (namely during 2006). This means that the current iteration of TUPE is at least familiar, even if unpopular.
Over recent years, however, there have been arguments raised that TUPE goes further than was originally intended by the European legislation that prompted it. For this reason the Government commenced a public consultation exercise which closed in April 2013 to seek views on whether TUPE worked in practice and if it could be improved in any way. This involved obtaining opinions on whether any "gold-plating" could be removed.
At long last, the Government has released the outcome of its consultation and also drafting for new TUPE regulations which, at the time of this article, are anticipated to come into force during January 2014.
Some of the key changes proposed by the new drafting include:-
Service Provision Change ("SPC") - SPC transfers are here to stay (e.g. those which can be triggered by outsourcing arrangements or when services are taken back in-house). However, the new regulations state that in order for a SPC TUPE transfer to be triggered the service provision after the transfer must be "fundamentally" the same as the activities carried out prior to the transfer.
TUPE and Redundancy Consultation - Up until now, it was a grey area whether a Transferee (i.e. a party receiving staff due to a TUPE transfer) could commence collective redundancy consultation (i.e. regarding proposals to make 20 or more employees redundant) before a TUPE transfer took place. The new TUPE regulations seek to set out a process by which a Transferee can now safely commence such consultation before a transfer so that redundancies can be completed as soon as possible after staff are inherited.
Post-transfer changes to terms and conditions - Currently, TUPE states that such changes will be unenforceable if the reason for them is the TUPE transfer itself or a reason "connected" to the transfer that is not an "economical, technical or organisational reason" entailing a change of the workforce" (an "ETO" reason such as a redundancy situation). The Government is proposing to tweak the TUPE regulations so that now a change to terms and conditions will only be void if the reason for the variation is the transfer (so the express reference to reasons "connected" will be removed). Whilst on the surface this could be viewed as a minor drafting change, it remains to be seen whether Tribunals will interpret this as affording greater flexibility to employers who change terms and conditions post-transfer. The new regulations also suggest that terms and conditions can be changed after a transfer so long as the relevant employee’s contract of employment allows for the relevant change.
Collective Agreements - Changes to terms which arise from a collective agreement with a Trade Union will not be viewed as void if made at least a year after the date of a TUPE transfer and if, overall, the new terms and conditions of the employees in question are no less favourable than those which applied before the transfer. Also, the new regulations confirm that any terms and conditions derived from collective agreements will be frozen as at the transfer date (so that any later changes to a collective agreement which the Transferee is not involved with will not apply).
Employee Liability Information - Specific information about employees who are to TUPE transfer will have to be provided to a Transferee no later than 28 days before a transfer (rather than the current 14 days).
Change in Location - Previously it was uncertain whether any dismissals or changes to contracts arising from the relocation of staff after a TUPE transfer could be enforceable. The new regulations state that such changes can potentially come under the scope of an ETO reason meaning that any changes or dismissals relating to the same (e.g. redundancies) will not automatically be void or unfair (however the normal rules relating to how to carry out a fair dismissal will still apply).
Micro Businesses - Those businesses with less than 10 employees will have the ability to inform and consult directly with affected employees about proposed TUPE transfers. The current requirement is to liaise with Union or employee representatives irrespective of the number of employees involved. However, this change will not come into effect until six months after all of the other above amendments.
On the whole, the Government’s aim is to try and make TUPE transfers clearer for businesses, whilst at the same time maintaining the protection offered to employees. However, only time (and a few Tribunal judgments unfortunately) will tell whether the above will achieve this objective.
Whilst on the surface the changes appear to be straightforward, they have entailed redrafting TUPE which will undoubtedly lead to disputes on interpretation/application between lawyers and Courts as to what the changes actually mean in practice. For this reason, we suggest that those who may have to deal with a TUPE transfer in the coming months make sure they are familiar with the proposed changes and double check whether they will affect their plans. Naturally, BPE’s Employment team are happy to answer any TUPE related queries.
These notes have been prepared for the purpose of an article only. They should not be regarded as a substitute for taking legal advice.