Government proposals for reform of TUPE

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The government has today published a response to the consultation on reform of the TUPE Regulations which it carried out earlier this year. Having taken account of the 178 consultation responses, the reforms which the government is now proposing are considerably less radical than those which it was originally considering. In particular, there has been a u-turn on the proposals in relation to the service provision change rules which will not be repealed because, "the responses to consultation presented a clear rationale for retaining the current rules". For details of the matters addressed in the January 2013 consultation, see our previous Be Alert.

Proposals for reform

The key proposals emerging from the response to consultation are as follows:

  • The service provision change rules will not be repealed in view of the certainty which these rules provide to business. The Regulations will be amended, however, to reflect the case law approach, namely that for there to be a TUPE service provision change, the activities carried on after the change in service provision must be "fundamentally or essentially the same" as those carried on before it.
  • The rules about employee liability information are also to be retained and the time before the transfer when this information must be given to the transferee will be extended from 14 to 28 days.
  • Transferors will not be permitted to rely on a transferee's "economic, technical or organisational reasons" to dismiss an employee prior to transfer. However, the collective redundancy consultation legislation will be amended to clarify that consultation which begins pre-transfer can count for the purposes of complying with the collective redundancy rules, provided that the transferor and transferee can agree and where the transferee has carried out meaningful consultation.
  • Renegotiation of terms derived from collective agreements will be allowed one year after the transfer, even though the reason for seeking to change them is the transfer, provided that overall the change is no less favourable to the employee.
  • Where terms are derived from a collective agreement, only those in existence at the date of transfer, and not any subsequently incorporated into the collective agreement, will be binding on a transferee.
  • The Regulations will be amended to provide that changes in the location of the workforce following a transfer can be within the scope of "economic, technical or organisational reasons entailing changes in the workforce". This will prevent genuine place of work redundancies from being automatically unfair.
  • Changes will be made to the wording of the Regulations which restricts changes to terms and conditions and which protects employees against dismissal because of a transfer to bring it closer to the language of the underlying Acquired Rights Directive. The Government wants to make it clear that the requirements of TUPE are no wider than those of the Directive.
  • Micro businesses will be able to inform and consult directly affected employees when there is no recognised independent union, nor any existing appropriate representatives.

The government intends to publish revised TUPE Regulations in December 2013. The consultation response does not indicate when these will come into effect. Informally, BIS has suggested January 2014 but this may well slip to April 2014.

Implications

The impact of most of the proposed changes will be fairly limited but they will bring more clarity and commercial sense to business transactions. In particular, for example, despite the associated risks, pre-transfer consultation on post-transfer redundancies already often takes place. Formalising that this is an acceptable practice will enable cost-cutting measures to be implemented more efficiently post transfer. Similarly, the extended time period for provision of employer liability information, will be welcome in out-sourcing situations where contractors (particularly those at second-generation) have, to date, often struggled to obtain information about the liabilities they will acquire on contract transfer.