The UK Government consults on proposed changes to the TUPE Regulations

by Pillsbury Global Sourcing Practice
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In a previous post, TUPE: Service Provision Change, we discussed that the UK Government had issued a Call for Evidence to review the current Transfer of Undertakings (Protection of Employment) Regulations 2006 ("TUPE 2006") as part of its wider review of reforms to UK employment laws. The Call for Evidence concluded in 2012 and the UK Government has now launched a consultation on its proposal to amend TUPE 2006, which it believes will improve and simplify the regulations for all parties involved.

The Proposed Changes
The Government's proposed changes to TUPE 2006 include:

1. Removal of the Service Provision Changes ("SPC"). As a result, outsourcing, in-sourcing and re-tendering would not be brought expressly within the scope of TUPE.

2. Removal of the requirement to provide Employee Liability Information at least 14 days before a transfer and replace this with an obligation that the parties disclose information necessary for the parties to comply with their duties under TUPE.

3. Enabling pre-transfer consultation under TUPE to count towards collective consultation on redundancies and to allow smaller businesses to inform and consult with employees directly where there are no recognised trade union or existing employee representatives.

4. Allowing greater flexibility for employers to make changes to terms and conditions of employment post transfer. However, the Government will not introduce an express provision allowing parties to agree changes in order to harmonise terms and conditions of employment .Changing the wording of the provisions giving protection against dismissal so that dismissals will only be automatically unfair where they are by reason of the transfer itself. As a result dismissals for a reason connected with the transfer (which is currently automatically unfair) may potentially be fair, subject to the employer satisfying the normal test for a fair dismissal.

5. Limiting an employee's right to resign in response to a material detriment to their working conditions or to claim unfair dismissal as a result.

6. Expanding the definition of Economical Technical and Organisational (ETO) reasons to include changes in the location of the workforce. This would benefit employers who, depending on the facts, might be able to argue a broader range of ETO reasons for making a fair dismissal. The Government is also seeking views on whether a transferor can rely on the transferee's ETO reason to legitimise pre-transfer dismissals.

The effect of the proposed changes
Some of the proposed changes will be welcomed and will ease the burden on business, such as greater flexibility in making changes to terms and conditions of employment post transfer or being able to make employees redundant where there is a change in the location of the workforce. On the other hand, there is likely to be a wave of new legal challenges if the proposals are implemented. The repeal of the SPC provisions is a likely hot button. The UK Government view is that the SPC provisions impose unnecessary burdens on businesses and go beyond the requirements of the ARD. Supporters of the SPC provisions argue that they give needed clarity that TUPE applies to outsourcing, insourcing and re-tendering and thereby provide a level playing field. Businesses have also embraced the general assumption that TUPE will apply to service provision changes and factor the costs into their pricing model. The proposed elimination of the SPC provisions would once again bring unwanted uncertainty, much like the uncertainty that surrounded the application of TUPE 1981, with multiple criteria being applied inconsistently in European case law.

Next steps
The consultation will end on 11 April 2013 and any reforms (with the exception of the repeal of SPC provisions) are expected to come into force in October 2013. Although the Government has indicated that there will be a significant transitional period before the SPC provisions are repealed, when negotiating contracts going forward, it will be prudent for businesses to bear in mind that TUPE may not automatically apply on exit.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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