Transfer of Undertakings Regulations 2006 - IMPORTANT changes

Important changes to The Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE)

TUPE is designed to protect employee rights when the business or undertaking for which they work transfers to a new employer (the transferee).

For many employers, however, TUPE is perceived as too bureaucratic and responsible for slowing the growth of their businesses and the economy. In light of these employer criticisms, and following a lengthy consultation process, the Government has just announced its draft changes to TUPE which are expected to come into force in 2014. The main proposals are considered below:-

Service provision change

Many businesses contract out services such as IT, cleaning or catering to specialist providers. The Government’s amendments clarify that where there is a change in the provision of such services, TUPE may apply only where the activities carried on before and after the change are ‘fundamentally the same’.

Restrictions on varying contracts

As noted above, TUPE is designed to protect employee rights. As a result, an employee’s terms and conditions can currently only be changed in the following two limited sets of circumstances:

1. where the change is made for a reason unconnected with the transfer; and / or
2. where the change is made for a reason connected with the transfer which is also an economic, technical or organisational (ETO) reason ‘entailing changes in the workforce’. ‘Entailing changes in the workforce’ is currently defined as entailing changes in either the numbers or functions of employees.

The Government’s recent consultation unsurprisingly revealed that many transferees find their limited ability to harmonise employment contracts a burden. The definition of ‘entailing changes in the workforce’ will therefore be broadened to include changes in location. In addition, the range of circumstances in which variations of employment contracts are permitted will be widened to include:

1. variations of terms or conditions incorporated from a collective agreement which take effect more than one year after the date of the transfer and are no less favourable to the affected employees; and
2. unilateral variations by an employer where the existing terms of the contract being varied permit the employer to make such variations.

Unfair dismissal

The extended definition of ‘entailing changes in the workforce’ will also apply to dismissals connected to the transfer. This will cover the existing gap in the law created when the transferee intends to carry out the business and/or service provision at a different place to the previous employer’s (the transferor’s) place of work.

Collective agreements

The Government proposes to amend TUPE to expressly provide that only collectively agreed terms in existence at the date of the transfer (if any) will be binding on a transferee. Employees who transfer under TUPE will therefore not benefit from collectively agreed terms where such terms are agreed after the date of transfer and where the transferee is not a party to the collective negotiations for those

terms. This amendment should be particularly welcomed by those businesses who receive employees from the public sector.

Employee liability information

The usual deadline for notification of employee information will be increased from not less than 14 days before the transfer to not less than 28 days before the transfer.

Micro businesses and consultation

The proposed amendments acknowledge that in small companies the nature of employee relations is more likely to be personal. Businesses that therefore employ fewer than 10 employees will be entitled to directly inform and consult the employees affected by a proposed TUPE transfer where there is no recognised independent union or existing employee representatives.

Collective redundancy consultations pre-transfer

Transferees who propose dismissing as redundant 20 or more employees within a period of 90 days or less will be entitled to elect to consult, or entitled to start to consult, about the proposed dismissals before the TUPE transfer. However, this will only be possible where the transferor agrees to such pre-transfer consultation.

If these issues are likely to affect you, please contact a member of our employment team for further advice.