TUPE changes u-turn: evolution not revolution

TUPE changes u-turn: evolution not revolution

Published:

Author: Simon Fennell

The Government has confirmed that amendments will be made to the TUPE Regulations early next year. However, the service change provisions will not be repealed as had previously been expected.

Two years on from announcing its intention to overhaul the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE), the Department for Business Innovation and Skills (BIS) has finally confirmed the changes it intends to make to the legislation in its response to the public consultation.

Much against expectations but, to the relief of many, the service change provisions imposed by TUPE will be retained despite the Government's view previously expressed that these represented unnecessary "gold plating" of European law.

Main changes

The main changes to TUPE announced on 5 September 2013 are:

  • allowing the renegotiation of terms derived from collective agreements 12 months after the transfer, provided that any changes are no less favourable to the employees;
  • following the case of Alemo-Herron, expressly providing for a static approach to the transfer of terms derived from collective agreements;
  • bringing a change in the employer's location post transfer within the scope of an economic, technical or organisational reason entailing a change in the workforce;
  • recognising pre-transfer consultation for the purposes of complying with collective redundancy rules (in specific circumstances);
  • allowing micro businesses to inform and consult directly affected employees when there is no recognised independent union, nor any existing appropriate representatives; and
  • extending the time by which employee liability information must be provided by the transferor to the transferee to no less than 28 days (from the current 14 days).

The Government will also improve the TUPE guidance available.

Service change provisions

Although these will not be repealed, the Government has said it will make an amendment to reflect the approach set out in the case law, namely that for there to be a service change under TUPE, the activities carried on after the change must be "fundamentally or essentially the same" as those carried on before it.

Background to the changes

The Government launched its consultation on changes to TUPE on 17 January 2013 with the stated purpose of better aligning TUPE to the European Acquired Rights Directive and removing what BIS considered to be unnecessary "gold plating". It was felt that this inhibited innovation, increased costs to employers and prevented more businesses from engaging in transfer related activity.

However, many commentators felt that the proposal to repeal the service change provisions (SCP) from TUPE in particular would result in more uncertainty and greater costs for companies.

Thankfully, the Government has listened and accepted the arguments made through the consultation that the SCP rules provide much needed certainty and clarity to businesses in a complex area of law. Arguments were also made and accepted in relation to the potentially catastrophic impact of redundancy costs on business currently engaged in contracts entered into in the anticipation that a SCP would apply at the end of the contract.

Next steps

The draft legislation amending TUPE is expected to be placed before Parliament towards the end of the year and BIS has informally suggested that the new regulations may be implemented as early as January 2014.

Comment

It appears that the Government had a very last minute change of heart regarding repealing the SCP in TUPE and this will undoubtedly be welcomed by contractors and their lawyers who were apprehensive about the consequences of significant change to the law in this area creating unwelcome uncertainty. Other changes announced look to be helpful streamlining of the informing and consulting process which can currently cause practical difficulties for all parties.