On 5 September the government published its response to the consultation it has undertaken on changes to the Transfer of Undertakings (Protection of Employment) Regulation 2006 (“TUPE”).
What is TUPE?
TUPE implements the EU Acquired Rights Directive. The purpose of the legislation is to provide protection for employees in the event of either a transfer of business or on an outsourcing. Employees transfer between the companies involved, with their terms and conditions and length of service preserved. All accompanying liabilities also transfer to the new employer. Employees (or their representatives) must be provided with certain information and consulted with. Currently, the transferor must provide the transferee with certain “employee liability information” at least 14 days before the transfer. The transferee may not dismiss employees or make changes to their terms and conditions of employment unless there is an “economic, technical or organisational reason entailing changes in the workforce”.
In its consultation paper, the government had been proposing to remove the “Service Provision Change” test, which was introduced in 2006 to provide certainty that TUPE would apply in the event of an outsourcing, as the government felt that this “gold-plated” the EU legislation.
However the government has made a u-turn on this proposal in its latest response. This is welcomed by outsourcing practitioners, as removal of the service provision change test would only have created further uncertainty and legal cost for those involved in outsourcings. This is because if the service provision change test had been removed, the more complicated “multi-factorial” test would need to have been applied instead. This test involves looking at a wide range of factors and all of the surrounding circumstances, including whether there is a transfer of assets, in order to determine whether TUPE applies. It is very fact-specific and case law in relation to this test can be inconsistent, particularly in an outsourcing context.
The government has also had a change of heart about the removal of the requirement on the transferor to provide “employee liability information” regarding the affected employees. Instead, the government is now proposing that such information must be provided 28 days before the transfer, rather than 14 days at present.
Other changes include:
- Confirming some of the recent changes to TUPE from the case law, including that in order for there to be a service provision change, the activities which are the subject of the outsourcing must be “fundamentally or essentially the same” both before and after the transfer.
- Allowing “microbusinesses” to inform and consult directly with employees, rather than having to elect employee representatives, where there is no recognised trade union. This is welcomed by HR Managers of small businesses, although we say that this should extend to any transfer involving only a small number of employees, whether or not the employer is a “microbusiness”.
- Allowing transferees to renegotiate terms derived from collective agreements one year after the transfer (even if the reason for the change is the transfer itself), provided that any changes are no less favourable to employees. No doubt this will lead to lots of arguments about whether renegotiated terms are “no less favourable” than the previous terms.
- Enabling the transferee (in certain circumstances) to consult with the transferring employees on collective redundancies prior to the transfer. Again, this change is to be welcomed by HR Managers as it avoids certain practical difficulties in making redundancies following the transfer whilst also ensuring employees’ rights are protected.
The government currently envisages that draft regulations will be put before parliament in December and the new legislation will come into force in January 2014.
For further information and comment, please contact Kathryn Dooks or David Williams at Kemp Little LLP.