The Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) protect employees when the business or undertaking for which they work transfers to a new employer by ensuring, amongst other things, that their contracts of employment are automatically transferred. TUPE implements the Acquired Rights Directive (2001/23/EC) (ARD) in the UK.
As part of its “Red Tape Challenge”, the government has decided to reform TUPE to improve its effectiveness and to align it more closely with the ARD. The Department for Business, Innovation and Skills has announced today (18 December) that the changes to TUPE will come into force on 31st January 2014. There follows a summary of the background to the proposals and an explanation of the main changes that will be made.
In November 2011 there was a call for evidence on the effectiveness of TUPE. It referred to concerns that TUPE “gold-plated” the ARD and is overly bureaucratic. In its response to the call for evidence, published on 14 September 2012, the government concluded that there was scope to simplify TUPE in order that business transfers would be easier for those concerned. The government therefore issued a consultation on a number of proposed changes to TUPE on 17 January 2013.
The most significant of the proposed changes was the repeal of the “service provision changes” provisions that had been introduced in 2006 in an attempt to clarify when TUPE would apply in such cases. The repeal of these provisions would align the definition of transfer with that in the ARD. The government planned to have a long lead-in period before repealing the provisions as many service providers would have entered into existing contracts on the assumption that TUPE would apply on termination. It sought views on how long this lead-in period should be.
The consultation closed on 11 April 2013.
On 5 September 2013, the government published its response to the consultation and set out the changes that it intends to make to the legislation. Some of its initial proposals were dropped, but the most significant changes to be made are:
• the current provisions relating to service provision changes will remain following strong arguments against repeal from respondents to the consultation. However, the legislation will clarify that, for there to be a service provision change, the activities carried on after the change must be “fundamentally or essentially the same” as those carried on before it.
• employee liability information will have to be provided 28 days before the transfer (rather than 14 days as at present).
• there will be a static-approach to the transfer of terms derived from collective agreements. Transferees will be able to change terms derived from collective agreements one year after the transfer, provided that the overall change is no less favourable to the employee.
• changes of location following a transfer will amount to an ETO reason entailing changes in the workforce, thereby preventing genuine place of work redundancies from being automatically unfair.
• the wording of the provisions restricting changes to terms and giving protection against dismissal will be amended to remove the “gold-plating”.
• the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA) will be amended to clarify that consultation which begins before the transfer can count for the purposes of complying with the collective redundancy rules, provided that the transferor and transferee can agree and the transferee has carried out meaningful consultation.
• micro-businesses will be allowed to inform and consult affected employees directly when there is no recognised independent union, nor any existing appropriate representatives.
The government also committed itself to improving the current guidance on TUPE so that businesses understand how to conduct a transfer fairly and in the most effective way. It will also ensure that the guidance reflects the changes that it is making.
Yet To Come
The Department for Business, Innovation and Skills has confirmed that the amendments will come into force on 31 January 2014 (subject to transitional and savings provisions, which will apply in relation to the change in the time limit for providing employee liability information and the relaxation of the information and consultation obligations for micro-businesses).
Given the government’s surprise decision not to proceed with the repeal of the service provision changes, the amendments to TUPE are far less significant than had previously been expected. It would seem that the introduction of pre-transfer collective consultation will have the most important practical impact for those involved in TUPE transfers. It is also interesting to note that the current wording includes the phrase “at one establishment”, despite the EAT decision in the “Woolworths case” (UKEAT/0547/12) that these words in TULRCA should be disregarded for the purposes of any collective redundancy involving 20 or more employees. Perhaps further reform will be on the cards pending the outcome of the government’s appeal against that decision…