The government recently published its response to the consultation on proposed changes to the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE).
Service provision changes to remain
Most striking is the government’s decision not to proceed with the proposed removal of the concept of service provision changes as enshrined in TUPE legislation by the new regulations that came into force in 2006 (replacing the previous 1981 regulations).
The proposed removal of these provisions in TUPE had surprised many commentators since most considered that these provisions had brought welcome clarity and certainty to the application of TUPE to outsourcing, insourcing and retendering (as opposed to business sale) situations. This had followed 25 years of convoluted case law in the ECJ and UK’s upper appellate courts regarding the application of the European Acquired Rights Directive and TUPE in the UK to such situations.
It therefore seemed ironic that the government proposed repealing the parts of TUPE dealing with service provision changes due to the perception that they imposed unnecessary burdens on businesses and created uncertainty. Fortunately, common sense has prevailed and the government seems to have taken on board the views of most respondents to the consultation who believed that there had been a welcome increase in the certainty of the application of TUPE to outsourcings and changes of service provider as a result of the 2006 changes.
Of course, the issue of service provision changes will still remain a sometimes contentious and complex issue in certain situations, for example where there is a fragmentation of services between more than one service provider, but in our view scrapping this part of the TUPE regulations would have been a retrograde step.
Other changes
The government has also confirmed in its response that it does intend to proceed with other proposed changes to TUPE, including the following:
- The TUPE provisions relating to protection against dismissal will be narrowed so that the protection only extends to circumstances where the TUPE transfer is the reason for the dismissal. Dismissals for a reason “connected with” the transfer will no longer be covered.
- The variation of terms and conditions will only be prohibited where the transfer is the reason for the variations. Unfortunately for employers, this will still not allow for post-transfer harmonisation of terms and conditions which is often a major practical concern for transferees. However, a further amendment will expressly permit transferees to make variations that are permitted under a contractual provision. This may lead to some interesting case law if employees seek to claim that such as contractually permitted variation also involves a substantial change in working conditions to their material detriment (which can allow them to treat their contract as having been terminated under a separate provision in the 2006 TUPE regulations).
- The requirement for transferor employers to provide “employee liability information” has been extended from 14 to 28 days before a TUPE transfer. The government considered, but decided against, repealing the obligation to provide this information, apparently taking into account the views of respondents to the consultation.
- Redundancies arising from a change in the employees’ place of work, arising on a TUPE transfer will now fall within the scope of “economic, technical or organisational reasons entailing changes in the workforce” . This solves another difficulty which sometimes arises for transferee employers which is that “place of work” redundancies which may arise where the transferee employer is located in a different region to the transferor will no longer be deemed to be automatically unfair under TUPE.
- It will be possible to renegotiate terms that are derived from collective agreements one year after a TUPE transfer, although this will only be the case where the changes are no less favourable to the employee overall. Employers would have welcomed a similar change to the position regarding individual contracts of employment and harmonisation exercises, though there is still plenty of scope for dispute regarding claims from employees who argue that collective agreement changes made under this provision are not “favourable overall” – even if agreed by their trade union.
- Micro-businesses (those with ten employees or fewer) will be able to inform and consult directly with affected employees, rather than having to elect employee representatives, where there is no recognised independent union or existing appropriate representatives. This is a very welcome change for employers and employees alike, reflecting practical reality and avoiding the need to go through an unnecessary nomination/election process when information and consultation can be dealt with far more effectively in a direct manner with the affected employees.
TUPE interaction with collective redundancy consultation
Another related change, which will be welcomed by employers in solving what has often been a tricky issue to deal with in practice, is that the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA) is to be amended to make it clear that collective redundancy consultation that begins before a TUPE transfer can count for the purposes of complying with collective redundancy rules, as long as both the transferor and the transferee can agree and the transferee employer has carried out meaningful consultation.
The transferee will continue to be responsible for consultation and the subsequent costs of redundancy. There will be no obligation on the transferee to consult before the TUPE transfer, so the fact that a consultation under TULRCA does not begin until after a TUPE transfer will not, in itself, affect the fairness of a dismissal or lead to a protective award against the transferee.
Conclusion
In our view the changes to TUPE which the government has confirmed it intends to implement will bring clarity and provide some practical solutions to a number of issues that have cause difficulties to employers in TUPE transfer situations, whilst balancing the interests of employees. It is also welcome that whilst the original proposals to scrap the service provision changes provisions were misguided, the government has listened to the views of respondents to the consultation and responded accordingly. However, the thorny issue of harmonisation of individual employment terms following a transfer is not going to be solved by the revised TUPE regulations and will remain a challenge for employers.
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