The Government has published its much awaited consultation on reform of the Transfer of Undertakings (Protection of Employment) Regulations 2006 (known as “TUPE”). Just before Christmas saw proposals for the reform of redundancy consultation and, today, proposals for amending the rules on employment protection in the context of business change are revealed.

Philip Davies, Partner at global law firm Eversheds comments:

“The launch today of formal consultation over TUPE reform reinforces the Government’s conclusions from its earlier Call for Evidence that current regulation – in the form of the Transfer of Undertakings (Protection of Employment) Regulations 2006 – requires improvement. Few working with the existing regime would argue. More importantly, however, today’s paper finally reveals the Government’s thinking on the likely way forward.

“The outcome of the Call for Evidence exercise, which was published in September 2012, had already highlighted areas perceived by the Government to be of greatest concern or confusion. One of the most controversial is the concept of “service provision change”, which many have argued should be repealed as an unnecessary burden on business and a gloss on the UK’s obligations under the EU Acquired Rights Directive. It would appear from the consultation paper that the Government is persuaded by this point of view and is proposing withdrawal of these provisions.

“If the service provision change rules are indeed repealed after the conclusion of the consultation exercise in April 2013, that will not mean that an outsourcing can never give rise to a TUPE transfer. Rather, we will be back to how things worked pre-2006, when there was often quite extensive legal debate (and litigation) regarding whether a transaction satisfied the multi-factorial test used to determine whether the transfer of an economic entity which retained its identity had occurred. The withdrawal of the service provision change rules is therefore by no means a panacea and is unlikely to bring an early end to dispute. What the Government surely hopes it will achieve, however, is a reduction in costs on the change of contractors, generating greater competition and influence of market forces.

“One of the most significant case law developments of last year concerning TUPE was that of Abellio London Limited v Musse & Others EAT/0283/12 where a change in location on transfer was found to result in automatically unfair dismissal, leaving employers in a seemingly indefensible position. The Government is considering amending the Regulations so that a change on location constitutes an ETO reason, aligning it with redundancy situations, something which will be welcomed by employers.

“Less encouraging is the apparent climb-down by the Government when it comes to issues such as the inability of employers to harmonise terms and conditions of employment as between transferring and existing employers, regardless of effluxion of time. Acknowledging the severe restrictions which European law places on any such change, the Government has merely pledged (for now at least) to align more closely the wording of UK regulation to that of the European Directive and case law, so that maximum advantage (such as it is) can be taken.”