The Transfer of Undertakings (Protection of Employment) Regulations 2006 (“TUPE”) – the notoriously complex rules which require employers who take over a business, or take over certain contracts from another employer, to take on the employees who worked in the business or the contract acquired – have recently been amended (again).
The changes, enacted by the snappily-titled Collective Redundancies and Transfer of Employment (Protection of Employment) (Amendment) Regulations 2013 came into force on 31 January 2014.
The main changes are:
Service provision changes
For TUPE to apply, the activities carried on after a “service provision change” (broadly, where there is a contracting-out, a second-generation outsourcing or a contracting-in) must be “fundamentally or essentially the same” as before in order to qualify as a service provision change, and consequently for TUPE to apply. This codifies recent case-law and re-opens the door to potentially being able to avoid the application of TUPE where the contracted services are provided in a different way by the new provider than they were by the old provider.
Employee liability information
The “transferee” – that is, the new employer, now has more time to consider the liabilities it will be taking on. “Employee Liability Information” (details of the transferring employees’ terms, contracts of employment, details of grievances and claims, etc.) now normally have to be handed over by the transferring employer (the “transferor”) at least 28 days before the transfer. Before January 31st the relevant period was 14 days.
Businesses employing 10 or fewer employees will from 31 July 2014 be able to inform and consult with affected employees directly, rather than holding elections for employee representatives, who are then consulted on behalf of the transferring employees, as is required for businesses with more than 10 employees. The obligation to inform and consult itself, however, remains.
Following a TUPE transfer, the new employer is now only bound by collective agreements that were in place at the time of the transfer. They cannot be bound by later changes which they were not involved in negotiating. This follows a recent European Court case and is helpful to the incoming employer, particularly when there is a TUPE transfer from the public sector (where terms such as pay are often collectively bargained) to the private sector – the new employer will not be held to changes such as pay rises which are collectively bargained after it takes over the employees. This seems fair if you consider that the new employer is unlikely to be entitled to take part in the collective bargaining process in such circumstances.
Also, terms agreed in a collective agreement can now be renegotiated by the employer. That is as long as the new terms are, overall, no less favourable to the employee and do not take effect until at least one year after the transfer.
Automatically unfair dismissal and variations to terms
Dismissals are now only automatically unfair where the transfer was the reason for the dismissal (and not as before, also where dismissal was for a reason connected with the transfer), unless an “economic, technical or organisational reason” applies.
It is fair to say that this change is obscure, even by TUPE standards and some of employment law’s finest minds have struggled to come up with an example of when it would make any difference.
A similar “change” affects employers’ ability to make alterations to employees’ contracts after a TUPE transfer. Previously, changes could not be made if the reason for them was the transfer itself or a reason connected with the transfer which was not an “economic technical or organisational reason entailing changes in the workforce” (known for short as an “ETO Reason”). As amended, a change is void if the reason for it is “the transfer” but changes can be allowed if: they are for an ETO Reason and the employer and employee agree or if the employee’s contract allows for such a variation. Again, it is perhaps unlikely that this will make much difference in practice.
Redundancies and relocation
A change of location, post-transfer, can now be an ETO Reason. This should make it easier, where a business sale involves a relocation, to make redundancies as a result of the relocation without acquiring liability for unfair dismissal.
Also, in certain circumstances, consultation carried out before the TUPE transfer could count towards any overall 30 or 45-day collective redundancy consultation period (i.e. where 20 or more redundancies are planned). The rules on this, however, are complicated.
BIS has published guidance on the amended Regulations (here:https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/271528/bis-14-502-employment-rights-on-the-transfer-of-an-undertaking.pdf) which will be of great interest mainly to TUPE anoraks and insomniacs.