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Esther Smith

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An analysis of the latest TUPE amendments

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TUPE has been a thorn in the side of businesses and lawyers for over 30 years, and there has been on going consultation by the Government in relation to the current TUPE regulations, almost since their implementation in 2006. This is despite the fact that they were implemented with the intention of remedying some of the defects in the previous 1981 TUPE regulations.

The Government has recently reported on the outcome of its consultation and whilst some changes it proposed are to be adopted and implemented in 2014, others have fallen by the way side during the process. Below we have considered just some of the confirmed changes, and some of the proposals that have been rejected. This is not intended to be a full appraisal of all changes considered in the Government’s consultation exercise.

What is changing?

One of the main practical issues in the application of TUPE is the intransigent approach the legislation takes to the variation of terms and conditions of any employees who transfer. Not only does this arguably inhibit the sale or purchase of entities, or the commercial attractiveness of some tendered contracts, it also has a detrimental effect on business rescue situations.

The Department of Business Innovation and Skills has confirmed that it will bring in a provision allowing employers to renegotiate changes to terms and conditions. Good news, I hear employers collectively cry! However this is not as a great as it sounds – it only applies to those terms and conditions of employment set out in collective agreements, which excludes a massive proportion of employees affected by TUPE transfers. Also, even where it does apply, the new provision will not allow changes to be negotiated during the first year post transfer, and the fact that this is only a right to "negotiate" changes rather than implement them also limits the practical impact of this development.

For the vast majority therefore, the position under the current TUPE regime will remain unchanged, and employers, and possibly more importantly administrators, will be faced with the familiar intransigence regarding terms and conditions.

Another practical problem that commonly arises following a TUPE transfer is where the transferee wishes to relocate the operation, and the employees, it has inherited under TUPE. The employer may need to undertake collective consultation for redundancies, in compliance with its obligations under the Trade Union and Labour Relations (Consolidation) Act 1972 (“TULRCA”), but historically it has had a problem relying on consultation for this purpose (as opposed to consultation regarding the transfer itself) prior to it becoming the employer on the point of transfer. 

Helpfully the Government has confirmed that it will amend the provisions of TULRCA to make it clear that pre-transfer consultation by the transferee will count in discharging its obligations to conduct consultation regarding collective redundancies. This is a positive move for employers, although transferor employers may want to take particular care to remain party to any pre-transfer consultation, to ensure that no misrepresentations are made which may expose it to potential liability.

One point worth noting here is these provisions relate only to collective consultation, and it remains unclear what the position is regarding pre-transfer consultation by the transferee with employees regarding non-collective redundancies – would pre-transfer consultation by the transferee effectively discharge liability under unfair dismissal provisions? It remains uncertain.

Tied in with this development on collective consultation is the confirmation that dismissals resulting from a change in location, which under a non-TUPE situation would be regarded as redundancies, will be deemed to amount to an ETO (economic, technical or organisational reason). One of the basic premises of the TUPE regulations is that any dismissal for a reason relating to the transfer itself is automatically unfair, unless that dismissal is for an “ETO reason entailing a change in the numbers of the workforce”. What the Government has confirmed it will do is amend the regulations to confirm that the term “entailing a change in the numbers of the workforce” expressly includes a change in the location of the workforce. This should give employers greater ability to handle relocation exercises with confidence, and to manage and assess the risk of claims.

What isn’t changing?

Despite expectations, the Government has confirmed that it will not be implementing changes to the application of TUPE to “service provision” situations. Under TUPE 2006 a transfer is deemed to occur where “a client engages a contractor to do work on its behalf, engages a different contractor to do that work in place of the first contract or brings the work ‘in-house’”. This was not a feature of the original 1981 TUPE regulations, but was implemented to reflect and confirm the position established by case law arising from the interpretation of both the 1981 regulations and the European Acquired Rights Directive (ARD) from which our domestic provisions stem.

In the consultation exercise the Government floated the idea of changing the definition of a transfer to align it with that in the ARD, effectively reversing the earlier case law decisions under TUPE 1981. Following strong arguments against repeal of these provisions, the service provision rules are to remain.

This has to be a good thing as it provides employers, and those contracting for or outsourcing services, with some certainty. Although some recent cases have opened up the debate about the extent to which service provision situations sit comfortably within TUPE, the provision of some certainty by the existing TUPE regulations is better than none.

Consultation was also conducted regarding the newly introduced provision in 2006 TUPE regarding the provision of employee liability information. Under the old TUPE regulations there was no obligation on a transferor employer to provide any information regarding employees who were to be affected by a transfer to the transferee. This was of little consequence where there was a direct contractual relationship between the transferor and transferee but where the parties were not connected, or were in direct competition with each other, such as in a second generation contracting out situation, it caused massive practical difficulties.

Gladly the Government has been persuaded not to repeal the provisions of regulation 11(2), and whilst there is some criticism of the current obligation, particularly in relation to the fact that TUPE provides that the information only need be provided 14 days before the transfer, the general consensus is that an obligation to provide is better than no obligation to provide.

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Esther Smith

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