New draft TUPE Regulations published, in force January 2014

by DLA Piper

Following the response to consultation on proposed amendments to the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE 2006) (see Be Alert dated 5 September), the Government has now published draft Regulations which will implement the changes. The Regulations will come into force in January 2014.

The main changes implemented by the draft Regulations will be widening the scope for employers to validly vary contracts of employment post-transfer, changing the rules on dismissal and allowing transferees to commence redundancy consultation before the transfer.

The draft Regulations provide more detail on how these proposed changes will work in practice.

Consultation on redundancies pre-transfer

The aim is to make it possible for transferees who will be making collective redundancies after the transfer to commence consultation before the transfer. Although in practice many employers already take this approach, particularly where there will be a change in location post-transfer, pre-transfer consultation does not currently satisfy the legal requirements relating to collective redundancy consultation.

Under the new proposal, transferees and prospective transferees will be able to elect by written notice to carry out pre-transfer consultation provided the transferor agrees, in which case the consultation will count as fulfilling the legal requirements relating to collective redundancy consultation. The transferee can cancel their election at any time, in which case any pre-transfer consultation which has been carried out will be disregarded. The transferee can elect back into pre-transfer consultation following cancellation. The transferor will be required to allow access, accommodation and facilities to the employees' representatives.

There is potential for more than one prospective transferee to be carrying out pre-transfer consultation at any one time; of, for example, the transferor was in talks with more than one possible purchaser or service provider. However, the transferor is under no obligation to agree to pre-transfer consultation.

Varying contracts post-transfer

Currently, transferees are not permitted to make any changes to the contracts of employment of transferring employees if the sole or principal reason for the change is the transfer or a reason connected with the transfer which is not an economic, technical or organisational reason entailing changes in the workforce (ETO reason). This makes harmonisation of terms very difficult, even where the changes would not leave the employee in a worse position overall. The draft Regulations create three potential changes to that position which possibly give employers more scope to make changes:

  • The Regulations provide that an ETO reason includes a change to the place of work. Current case law provides that a location change will not be an ETO reason unless there is also a change to the number or functions of the employees.
  • Variation of terms and conditions incorporated from a collective agreement will be permitted from a year after the transfer, provided the overall terms and conditions are no less favourable.
  • Employers will be permitted to make variations which are permitted under the contract.

Dismissal of employees

At present, dismissals by reason of the transfer or for a reason connected with the transfer are automatically unfair unless there is an ETO reason. Under the new Regulations only dismissals by reason of the transfer will be automatically unfair unless they are for an ETO reason, and the definition of an ETO reason will include change of location.

Collective agreements

The draft Regulations reflect current case law which provides that terms and conditions of employment incorporated by collective agreement do not transfer if the agreement comes into force after the transfer and the transferee is not a party to it. This reflects the current case law.

Definition of activities

TUPE 2006 will be amended to provide that, in the case of a service provision change, there will be a transfer only if the activities carried out post-transfer are 'fundamentally the same' as those carried out previously. This reflects the current case law.

Other changes

The Regulations will implement other minor changes, such as extending the deadline for providing employee liability information from 14 to 28 days and removing the obligation to elect employee representatives for micro-businesses.

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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