Latest News on TUPE reform
Earlier in the year the Government published a consultation document seeking views on proposed reform of the Transfer of Undertakings (Protection of Employment) Regulations 2006 ("TUPE"). One of the more controversial proposals suggested by the Government was the repeal of "service provision changes" ("SPCs") as a relevant transfer.
SPCs were introduced as a type of relevant transfer in the 2006 version of TUPE, and since then businesses working in the managed services sector (cleaning, catering, security etc) have become familiar with the transfer regime and generally happy to work within it. This is largely because of a greater degree of certainty as to the employment implications of securing a contract for the provision of services as well as the consequences of losing one. In turn this has largely provided employees with greater job security.
By proposing to abolish SPCs as a form of a relevant transfer, the Government's intention was to provide greater flexibility and remove a potential barrier to growth for businesses.
The Government has today (5th September) issued its response to the consultation document and has set out in its proposed changes to TUPE that will be introduced early in 2014.
The biggest point to report is that SPCs will be retained as a relevant transfer. We think this is good news for all concerned. The Government does propose to make an amendment to the definition to make it clear that an SPC will only be a relevant transfer governed by TUPE where the activities carried out after the change are "fundamentally or essentially the same". This still leaves some scope for dispute, and the possibility of litigation cannot be ruled out but in overall terms it seems that the Government has taken a sensible view and listened to the majority of respondents to the earlier consultation paper.
So, SPCs will remain largely unchanged. What are the other significant changes that will take place? The main ones are as follows:
- A "static" approach to the transfer of terms and conditions of employment governed by collective agreement – this will mean that employees who transfer with the benefit of terms that have been collectively agreed between their old employers (the transferor) and trade unions will not always be able to force their new employer (the transferee) to apply new terms and conditions which have been subsequently negotiated between the union and the transferor.
- Transferees will be allowed to seek to renegotiate collectively agreed terms from 12 months after the date of the transfer onwards, even where the reason for this change is the transfer itself. The only caveat to this is that the changes to be introduced by the employer will need to be in overall terms "no less favourable" to the employee. This change is welcome, and may give greater scope for employers to harmonise terms and conditions of employment post-transfer. However, we envisage there will still be disputes as to what changes are or are not "no less favourable".
- Changes to the location of the workforce following a transfer will clearly be an ETO reason, which will mean that genuine place of work redundancies arising following a transfer will not be automatically unfair, and will therefore be fair or unfair in accordance with usual principles.
- Pre-transfer consultation by a transferee about post-transfer redundancies it may be actioning may count as valid consultation for the purposes of the Trade Union and Labour Relations (Consolidation) Act 1992 – This means that where the transferee knows that it will have a redundancy situation at the point of transfer (e.g. because it will be moving the work function to a different location) it will be able to consult with representatives of the transferor's employees' pre-transfer and consult with them at that time, with a view to carrying out redundancies at the point of transfer or shortly afterwards with a much smaller risk of a claim for a protective award. This avoids potential consultation failures or an artificial situation where employment is continued post-transfer to allow for consultation which all parties know will happen in any event.
- Micro businesses (10 or fewer employees) will be allowed to consult with employees directly where there is no recognised union or otherwise elected employee representatives.
- Employee liability information will now have to be provided at least 28 days prior to transfer, rather than the current 14 days.
From our initial review of the Government response to the consultation papers, the majority of these changes should be welcomed by all employers who deal with TUPE transfer situations, although we anticipate that there will still be a number of areas where disputes will arise.
If you have any queries relating to TUPE then please do not hesitate to contact our head of employment, Paul Ball (firstname.lastname@example.org).
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