The government has recently introduced new statutory
amendments to further promote the economic revival by making regulations that
affect businesses and employees more flexible and easier to navigate. One such
change relates to The Transfer of Undertakings (Protection of Employment)
Regulations 2006 (TUPE), which
determines what happens to existing employees on the sale of a business or
change in services. TUPE has been amended by the Collective
Redundancy and Transfer of Undertakings (Amendment) Regulations 2014 which came
into force on 31 January 2014. I have laid out below those amendments that
businesses should be most aware of.
‘Service provision
change’ simplified
If a business decides to out-source, take in-house or
re-tender a service that had previously been conducted by an ‘organised
grouping of employees’ (which can constitute one person) whose ‘principal purpose’
was the provision of those services, then this would constitute a ‘service
provision change’ under TUPE.
The amendments have narrowed the definition of ‘service
provision change’. Now there will only be a TUPE transfer of employees in
relation to a service provision change if the relevant activities remain
‘fundamentally’ the same as those carried out previously. Thus, any fundamental
changes to the method or nature of the new services in question may not trigger
a transfer of employees. This means that the planning of any such service
provision change must be carefully considered so as not to trigger a transfer
of unwanted employees. Altering the method or nature of the new service is one
possible solution to safeguard against any such transfer, and businesses should
bear this in mind at the planning stage.
Automatically unfair
dismissals curtailed
Previously under TUPE, a dismissal could be deemed
automatically unfair if it was ‘connected’ to a transfer. This was a wide
interpretation which has now been narrowed so that a dismissal can only be
considered automatically unfair if it can be proved that it was ‘by reason of’
the transfer. The government have introduced this change in order to bring it
in line with EU law, although the facts of each case shall ultimately be the
determining factor. Thus, businesses should be clear as to the facts relating
to any dismissals that could be potentially linked to a transfer and should
take legal advice in this regard before such dismissals are approved.
Relocation no longer
caught by TUPE
Under TUPE, a dismissal by reason of a transfer is not
unfair if it can be found to be an ‘economic, technical or organisational (ETO) reason entailing changes in the
workforce’. However, under the old
regulations, an ETO reason did not include relocation of employees. The
amendments have now allowed relocation to be an ETO reason which allows
businesses further scope to relocate employees on a business transfer without
being caught by TUPE. This is a pragmatic change that all businesses will
welcome.
Changing contractual
terms
Previously under TUPE, harmonisation of employees’
contractual terms between the transferring businesses was not permitted if it
related to or was connected with a transfer, unless it was an ETO reason and
the employee consented.
This has now been narrowed to not include harmonisation of
terms ‘connected to’ the transfer but rather only to harmonisation of terms
‘related to’ the transfer (as is the case with the service provision change
mentioned above). Another important change is that a variation to the terms of
an employee’s contract will be permitted if the contract already had a
mechanism which allowed for such a future variation. This is significant and
businesses should make sure that all new employment contracts have a clause
that allows for such a future variation of terms in order to avoid triggering
TUPE.
Collective agreements
and pre-transfer consultation
Another new amendment means that if a post-transfer employer
was not involved in pre-transfer collective bargaining with a trade union that
led to changes in employees’ contractual terms (via a collective agreement),
then this new employer will not be bound by these terms. Moreover, if an
employee’s contract is drawn up from a prior collective agreement then a
post-transfer employer will not be bound by those terms unless such terms do
not take affect for 12 months after the transfer itself and those terms are no
less favourable.
The new amendments also allow an employer who wishes to make
collective redundancies to start the consultation process pre-transfer.
However, the transferring company needs to agree to this consultation and can
withhold its consent. Business should be aware of the consultation periods
depending on the amount of employees they wish to make redundant and how such
periods may overlap with a transfer. Adhering to these periods could prove
problematic if the transferring company refuses to give its consent to
pre-transfer consultations, in which case it may be necessary to delay any such
redundancies.
Employee liability
information period extended
Only one of the recent changes to TUPE does not come into
force on 31 January 2014, and this is the change relating to employee liability
information, which comes into force on 1 May 2014. On a business transfer the
company transferring the employees needs to provide certain information to the
new employer relating to those employees. This information will need to be
provided no later than 28 days before the transfer rather than the previous
rule which was 14 days before the transfer.
In light of this change, transferring companies must make
sure that they have all the relevant employee liability information ready to
send at least 28 days before the transfer and the new employer should consider
delaying the transfer if the transferring company is late in providing this
information as such information could affect the purchase price.
Micro-businesses
relief from transfer consultation
A final change relates to ‘micro-businesses’, that is,
business of less than 10 employees. Such businesses will be excused from
needing to consult with a trade union or employee representatives in relation
to a TUPE transfer that will affect such employees. It is enough for the
micro-business to consult with each employee individually. This is a welcome
measure which will help small, growing businesses avoid the red-tape which can
often tangle their progress.
