Will the Government’s changes to TUPE make a difference for businesses?
At the time of giving my talk, there was a hope that changes would be proposed to TUPE to make it more flexible and commercial, in particular to enable an employer, taking on new employees following a transfer, to harmonise the terms and conditions which pre-2014 changes, was not permitted. Fast forward to 2014 and The Transfer of Undertakings (Protection of Employment) (TUPE) Regulations 2013 will come into force on 31st January 2014. But will the changes make a difference? Will our expectations be met or not?
Set out below are thoughts on some of the new provisions and their actual impact.
Variations: the new regulations do amend the restrictions on varying terms and conditions and the Government considers that they will give transferees (the new employers) more flexibility to vary transferring employees’ terms. But do they?
For TUPE transfers taking place on or after 31st January 2014, contractual variations to employees’ terms and conditions will be permitted if the reason for the variation (a) is an economic, technical or organisational reason (ETO), or (b) is the transfer, but the terms of the contract permit the employer to make such a variation. If the changes do not fit into either (a) or (b) and are by reason of the transfer itself, then those changes will be void.
A new test will be applied, so current case law is unlikely to be much help, but the Government will be releasing much needed guidance on this.
Under part (b) of the new regulations a transferee can unilaterally vary a contract of employment, provided the contract allows it (for example, a mobility clause in the existing contract). This would not really be a variation, but a change made pursuant to the existing contract. It will be interesting to see how this will be interpreted by the Courts in light of existing case UK law, where a transferee was entitled to rely on a transferred employee’s mobility clause to move their place of work, but only in relation to the old employer’s geographical location, which was different to the transferee’s. This was because the clause must be construed in view of the facts and circumstances at the time the contract was entered into.
So this change may not be as helpful as the one wanted or even wished for. Although the mobility point may not be such an issue because of the changes to the ETO defence (set out below) there are other changes that businesses wish to make post-transfer which may not come under the new provisions and so will still be void (for example, post-termination restrictions). It is not unusual for a transferree company to wish to tie transferring employees into new restrictions which protect the new employer’s clients and not just the clients of the business which transferred. These changes pre-2014 were void and it seems unless there is a clause in the contract which expressly allows an employer post-TUPE transfer to vary the restrictions (which is unusual) then they are likely to still be void post-2014.
Change in location: currently a dismissal for a reason connected with the transfer is automatically unfair, unless for an economical technical and organisational reason entailing a change in the workforce (ETO reason). The ‘change in workforce’ requirement is viewed as a change in job functions or numbers and does not cover mere change of location. The new regulations retain the ETO defence, but extend it to include changes to workplace location which will be more in line with the redundancy definition. If a workplace location is changed that can be a dismissal for reason of redundancy. Therefore, under the new regulations if on transfer an employee’s place of work is changed (which is a usual occurrence on a TUPE transfer) which results in a dismissal for the reason of redundancy this would not be an automatic unfair dismissal, but would still have to be implemented in a fair way.
Service provision change: TUPE applies to service provider changes i.e. contracting out, contracting in or retendering exercises and is commonly seen where a business wishes to do something such as outsource its IT function or change its cleaning staff. Under the new regulations, for a service provision change to come under TUPE, the activities carried on after the change must be ‘fundamentally or essentially the same’ as those carried on before. This may mean that an incoming provider who offers their services in a novel or innovative way may not be caught by TUPE. But the reality is that this will make little difference to businesses; after all, how innovative can you be in providing cleaning services?
Employee Liability Information: the time for supplying this will be extended from 14 days to 28 days. This is generally seen as a positive step as the 14 day window gave little time for the transferee (new employer) to prepare for the transfer. The Government have also retained some flexibility here by keeping the ‘special circumstances’ exemption (i.e. that if special circumstances mean it is not reasonably practicable to comply, then the information must be given as soon as reasonably practicable thereafter)
Consultation – micro businesses: businesses with 10 or fewer employees can inform and consult with employees directly. The need to elect employee representatives will not be necessary where there is no recognised trade union or any existing employee representatives. This may make little difference in practice, as many smaller businesses tend to inform and consult directly with employees anyway even though pre-2014 this was a technical breach of TUPE. The reason was that it felt more natural to discuss what could be substantial changes to an employee directly with them and an employee would respond better to the personal touch. The difference now is that companies will have the reassurance that they will not be exposed to a protected award claim if they act in this way.
Consultation – collective redundancies: currently if a business proposes to dismiss as redundant 20 or more employees within a period of 90 days or less, they must consult with representatives of those employees affected by the redundancies. In the past where there has been a TUPE transfer prior to the redundancies, pre-transfer consultation has taken place, but it was not clear whether this would comply with the collective redundancy rules. The new regulations allow for the transferee to begin pre-transfer consultation, provided that both the transferor and transferee agree and consultation is meaningful.
The new regulations seem to legitimise some practices which already happen, but with a few more interesting changes. We would have wanted to see more dramatic changes allowing businesses to harmonise the terms and conditions of employees, which is regularly an issue.
So, have our expectations on changes to TUPE been met? Not really, but this is a start.