Gold Plated TUPE 2006
We highlight the Government’s response to its consultation on the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE). We set out further details in this briefing.
Employers have been dealing with the vagaries of the Transfer of Undertakings (Protection of Employment) Regulations (‘TUPE’) since the regulations first came into force in 1981. At its most basic, the effect of TUPE is to protect employee’s rights when the business or part of the business that they work for, changes ownership, from transferor (the old business) to the transferee (the new business).
TUPE exists in the UK because of a European Union law Directive. The last Government reviewed TUPE and decided that simply reflecting the European Directive did not go far enough, TUPE needed to be ‘gold-plated’.
Gold-Plated TUPE 2006
The result was the introduction of the 2006 TUPE Regulations. This introduced the now familiar concept of a ‘Service Provision Change’, applying TUPE when contracting in and out for services: that is where organised groupings of employees switch from one employer to another. The 2006 TUPE Regulations also included the rules that you will be familiar with:
- Requiring the transferor organisation to provide the transferee organisation with Employee Liability Information 14 days prior to the transfer;
- The duty to inform and consult with employee representatives about the transfer;
- Specifying that changes to an employee’s terms and conditions could be made, after a transfer as long as they were for economic, technical or organisational reasons entailing changes in the workforce;
- Specifically allowing employees to claim constructive unfair dismissal where there had been a substantial and detrimental change to their working conditions, even if there was no repudiatory breach.
Since 2006, the UK has been hit by a substantial economic downturn and the current Government thought it necessary to consult about changes to TUPE to make it more practical and user-friendly. In its consultation, the Government asked whether the ‘gold-plating’ added on by the 2006 Regulations should be almost completely peeled off and revert to a back to basics approach.
The Government also asked whether TUPE could be amended to allow:
- Changes to be made to a workforce’s location post transfer;
- Consultation on collective redundancies before the transfer takes place; and
- Very small businesses the chance to inform and consult with employees directly rather than through representatives.
The most interesting points of the Government’s recently published response to the consultation are:
A. Permitted changes to employees’ terms and conditions:
The Government plans to make it easier to make changes to employees’ terms and conditions after a transfer. It has not published any proposed wording yet, but says that it aims to ensure that contract changes will only be void where the reason for the change is the ‘transfer itself’, rather than a reason connected with the transfer, as is currently the case. In a similar way, the Government is proposing to make it easier to dismiss employees fairly in connection with a transfer, so that dismissals on a transfer will only be unfair if the reason is the transfer itself, whereas at the moment, a dismissal is unfair if it is for a reason connected with the transfer.
The Government has also said that a change in the location of the workforce can be within the scope of the type of changes that will be permitted after a transfer has taken place, which is not the case at the moment. So, for example, where AntCo.’s business (primarily based in Oxford) is transferred to BeeCo, BeeCo. can decide to move AntCo.s transferring employees to its premises in Reading, without much difficulty.
Further, the Government’s plans to allow post-transfer contract changes, where the change would have been permitted had there been no transfer at all. This would allow, for example, the transferee business to make use of an employee’s mobility clause as if the employee were still employed by the transferor.
B. Employee Liability Information:
although the Government had originally wanted to remove this obligation completely, organisations responding to the consultation paper persuaded it otherwise: in circumstances where the two parties are not part of any transfer contract and the situation is not amicable, it can be useful for a transferee to receive some information about the staff that they will be taking on, before the transfer takes place.
The Government took this on board. It has decided that the obligation to provide Employee Liability Information should remain but that it should be provided 28 days prior to the transfer, rather than the current 14 days. This means that transferees will have more warning about what’s due to arrive on their doorstep.
C. Service Provision Changes:
Whilst the Government had envisaged that Service Provision Changes would no longer be covered by TUPE, they listened to those responding to the consultation, who said that the introduction of Service Provision Changes had avoided a significant amount of uncertainty about what would happen to staff at the end of a contract, so that contractors no longer had the costs associated with routinely consulting lawyers about the application of TUPE each time they changed contracts.
The result is that TUPE will continue to apply to Service Provision Changes but only in very specific circumstances: that is where the activities carried on after the change in service provider are fundamentally or essentially the same as those carried on before it.
For example, AntCo provides facilities management services for BeeCo. However, BeeCo decides that it no longer needs full facilities management. Instead it contracts with CleanCo for cleaning services only. Under the new version of TUPE it would be clear that TUPE would not apply to the change in services.
D. TUPE and Collective Redundancy Consultation:
One proposed change that is likely to be popular is that the Government has decided that it will amend the relevant legislation to make it clear that where the transferee plans on making more than 20 people redundant when it takes over the contract, it can start the collective redundancy consultation process before the transfer actually takes place, and this will count for the purposes of fulfilling the transferee’s statutory collective redundancy consultation obligations, enabling the transferee to get ahead with making changes.
So, for example, where AntCo.’s business is transferring to BeeCo, but BeeCo decides that it will need to make 30 of AntCo.s employees redundant as soon as it takes over the contract, BeeCo. can get a head start on the collective consultation by starting the consultation process with employees, before the transfer goes ahead.
However, there will be no obligation on transferees to start consultations before the transfer, and in some cases, it will not be practical in any event.
E. Changes for Micro Businesses:
TUPE 2006 obliges transferors and transferees to inform and consult with employees via elected representatives. Many small businesses have found this to be cumbersome and the Government has responded by saying that it will amend the regulations to allow micro employers (those with 10 employees or fewer) to inform and consult employees directly where the business neither recognises a union, nor has any existing representatives in place.
Watch this space…
… Whilst the Government has now set out its plans, we have yet to see the final wording of the new TUPE. However the proposed changes have the potential to help organisations dealing with TUPE issues on a daily basis by providing greater clarity and consistency.
If you have any questions, please contact Sejal Raja on email@example.com.
This briefing is for guidance purposes only. RadcliffesLeBrasseur LLP accepts no responsibility or liability whatsoever for any action taken or not taken in relation to this note and recommends that appropriate legal advice be taken having regard to a client's own particular circumstances.