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July 31, 2013

TUPE Reforms

Earlier this year, the Government concluded a consultation about possible changes to the TUPE (Transfer of Undertakings – Protection of Employment) Regulations.

It believes that the current provisions “gold plate” the European Acquired Rights Directive; this underpins the UK legislation. It wants to introduce amendments as part of its “maximising flexibility – protecting fairness” agenda.

The Regulations were last changed in 2006 and there has been significant criticism of them since then.

TUPE currently applies in a number of circumstances:

  • When a business is sold.
  • When a service is outsourced for the first time.
  • When a service changes hands subsequently.
  • When a service is brought back in-house.

In such situations, employees’ employment and their associated rights transfer from the old employer to the new employer.

The Government believes that TUPE provisions are too complex and can be an unwelcome surprise for the unwary employer. Duties of the old employer (the transferor) include the need to inform and consult staff about the transfer and any implications – such as possible redundancies.

They must also provide the new employer (the transferee) with information relating to potential employee liabilities. In the consultation, small businesses in particular said they found such obligations very burdensome.

The difficulty for a transferee trying to introduce efficiencies and operate more cheaply than their predecessor.

The Regulations being a barrier to reducing the size of the workforce or transferred employees’ pay levels.

Difficulties harmonising terms and conditions to bring the newly acquired workforce in line with existing employees.

The lack of clarity about making changes to the workforce for “economic, technical or organisational” reasons. Court decisions have given the provision a very narrow meaning.

The increasing practice of dividing service contracts among a number of service providers, which complicates the application of TUPE.

There are currently between 25,000 and 50,000 TUPE transfers in the UK each year. With the Government keen to outsource more public sector services, this figure is only likely to increase.

What changes are being considered?

The Government’s response identified a number of changes to TUPE which they intend to consider. These include:

  • Repealing the provision which places most “service changes” within scope of the Regulations. This could affect outsourcing, insourcing and retendering situations.
  • Repealing the specific requirement regarding notification of employee liability information BUT making it clear that the transferor should still disclose information to the transferee so that each can fulfil their duties to inform and consult employees. Varying the provisions restricting changes to contracts so that they more closely reflect the Acquired Rights Directive and European case law.
  • Changing the wording giving protection against dismissal to reflect the wording of the Acquired Rights Directive and European case law.
  • Changing the wording of the provisions that regulate substantial changes in working conditions to the material detriment of employees so it more closely reflects the wording of the Acquired Rights Directive.
  • Changing the meaning of “entailing changes in the workforce” so that dismissals for “economic, technical or other reason” match UK redundancy provisions. This would mean that dismissals arising from a change in the place of work following a transfer would not be automatically unfair.
  • Ensuring transferee consultations on collective redundancies with staff due to transfer count as part of the obligation to consult on collective redundancies. At present it’s unclear whether there are two separate obligations to consult.
  • Allowing micro-businesses with less than ten employees to consult direct with employees rather than through elected representatives in most circumstances.

It remains to be seen which of these possibilities find their way into redrafted Regulations. Although the consultation was completed in April 2013, it is not envisaged that the Government’s response will emerge until September of this year at the earliest. Only at that stage will the detail of the new draft provisions become clear.

The revisions to TUPE were originally expected to be implemented in October 2013. This would now appear unlikely given the Government’s response to the consultation has been delayed until at least September.

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