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This Government Response outlines a package of changes (I wont use their term improvements) that will modify how the TUPE Regulations work.

The Government will :

  1. amend the TUPE Regulations to allow renegotiation of terms derived from collective agreements 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.
  2. will amend TUPE to provide expressly that the transfer of terms derived from collective agreements remain fixed (changes the status quo from dynamic approach to static) .
  3. amend TUPE so 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, thereby preventing genuine place of work redundancies from being automatically unfair.
  4. amend Regulation 4 and Regulation 7 to bring them closer to the language of the Acquired Rights Directive.
  5. make an amendment to reflect the approach set out in the case law, 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.
  6. amend the Trade Union and Labour Relations (Consolidation) Act 1992 to make it clear in statute that consultation for (20plus) redundancies that begins pre-transfer can count for the purposes of complying with TUPE. 
  7. amend the collective redundancy rules, provided that the transferor and transferee can agree and where the transferee has carried out meaningful consultation.
  8. improve the TUPE process for micro businesses (less than 10 employees) by allowing such businesses to inform and consult directly affected employees when there is no recognised independent union, nor any existing appropriate representatives.
  9. extend the time before the transfer when the transferor must provide employee liability information to the new employer to 28 days (up from the current 14 days).
  10. improve TUPE Guidance (a communal groan)

Employee bodies were mooting the use of restructuring (redundancies) prior to the change was to be allowed but they have indicated that HMG  will not allow a transferor to rely on a transferee’s economic, technical or organisational reasons to dismiss an employee prior to a transfer.”

Service companies

Many businesses contract out services such as cleaning, catering or IT support to specialist providers. Changes to the provision of these services can occur frequently. Currently, changing a service by re–tendering, insourcing or outsourcing is likely to amount to a transfer under the TUPE Regulations following changes made in 2006. These changes are called service provision changes (SPCs).  It is a relief to many that certainty has returned now that HMG have announced the service provision changes will not be repealed, but new guidance is to be issued.

One current test that helps define where a TUPE service provision change occurs is whether the activities carried on after the alleged transfer are “fundamentally or essentially the same” as those carried on before it.  This arise from case law [Metropolitan Resources Ltd v Churchill Dulwich UKEAT/0286/08] and is to be enshrined in the revised legislation.

Changes to employee contracts

The aim of the TUPE Regulations generally is to ensure that employee terms and conditions should not be
changed because of a transfer from one employer to another, even if the employee and the new employer agree (or even if both parties want) to change the employment contract.  This being part of case law (Daddy Dance Hall et al) and at the core of the EU Directive.

Recall the CJEU case law (the Martin case) where employers tried to argue a difference between ‘by reason of the transfer’ and ‘connected to the transfer’?  The Government suggest brushing this up to term to “transfer itself” being the “reason” for the variation.

The new amendment will seek to provide that unilateral variations to contracts are permissible “where they are pursuant to a contractual provision (for example, a mobility clause) and where such a change would be permitted had there not been a transfer. Given the case law it remains to be seen if this is will be a natural mess or a disaster.  However, how that will impact breach of contract (repudiation) claims even if they balance the redundancy  ETO. If genuine hardship arises it is hard to see how a dismissal can be fair in purely TUPE these circumstances.

Recall the CJEU case law (the Martin case) where employers tried to argue a difference between ‘by reason of the transfer’ and ‘connected to the transfer’?  The Government suggest brushing this up to term to “transfer itself” being the “reason” for the variation.   Hmm, not  a lot of change there but perhaps more closely allied to the wording of the Directive.

Redundancy prior to Transfer

In some cases firms downsize as part of their natural change, this can result in redundancies. The Government consulted on proposals to legislate to enable pre-transfer consultation to count towards collective redundancy requirements – i.e. the transferee in a TUPE situation can start consulting transferring staff in the transferor’s employ about likely dismissals (20 or more) before those staff become employees of the transferee’s company.  The Government will change the Trade Union and Labour Relations (Consolidation) Act 1992 to makes this inclusion as on a “voluntary” or more likely negotiated basis.

Given the host of legal issues that arise over what defines consultation, I suspect the term voluntary will be a legal magnet!

Collective agreements

The Government will amend the TUPE Regulations so that after one year  the restriction on variations to contracts will no longer apply in respect of changes to terms derived from, or incorporating, provisions of collective agreements, provided that any change (which is by reason of the transfer) is no less favourable overall.

The restriction in Regulation 4 will remain in respect of other terms and conditions (i.e. those not derived from collective agreements, nor the individual term incorporating them).

For many of us, on an academic point, what happens to collective agreements which are modified by the original employer? The CJEU judgment in the Parkwood Leisure v Alemo-Herron (C-426/11) decided that the Directive precludes Member States from providing for situations where the transferee does not have the possibility of participating in the negotiation process of collective agreements concluded after the date of the transfer.  This is still being considered by  the Supreme Court and may well have further impact on this area.

Micro companies

To date the obligation on employers to negotiate has been with to negotiate with “elected” bodies.   This is being amended to allow for individual negotiation which will save be a simplification for Micro employers (those with less than 10 staff).  That said, if the Micro business has an Agreement with a Trade Union or representative group, then those arrangements will continue.

Oddly  Acas has been written out of this aspect process and the Government will provide their own  advice to employers!!

What’s next?

There will be a lead–in period but the Government’s intention is to lay the new Regulations before Parliament in December 2013. Don’t rest on your laurels!